Compound Interest 8th wonder

Compound Interest is the 8th Wonder of the world.

Often we are told of the wonderful power of compound interest (earning money on both principal and previous interest). We are told how compound interest can make even a modest investment grow into a great amount. For example: If you invested $10.000 at 7% compound interest for 30 years; you’d expect your investment to grow to $76,122.52.

Sounds Great!

Compound Interest must truly make money Grow!

rabbitFor a moment, let’s step out of the dream world hype of banking, financial planning and Wall Street. Just HOW does MONEY GROW? Where does the interest come from when you put money into an interest-bearing account? Does it turn into something like rabbits that mate and quickly reproduce? What happens? The increase of money in your account had to come from someplace. To understand financial planning, economics, growing public and private debts, ever increasing taxes and prices, etc. we must learn and always remember What it is we now use for money and HOW ALL new money is created and put into circulation. When the economy grows and more money is needed, always remember that: “….the actual creation of money always involves the extension of credit by private commercial banks.” Source: U.S. Treasury

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If the private sector doesn’t borrow it, the government must or the money cannot exist! If you invest $10,000 and 30 years later get $76,122.56; somewhere, someone in the private sector or the government had to borrow $66,122.56 before it could get into your account. Now you have the money. They have the debt which can never be paid, only transferred because there is no way to create the money needed to pay the interest when money is created through the lending process. A loan only creates the PRINCIPAL of the loan not the interest.

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“Money is created when loans are issued and debts incurred. Money is extinguished when loans are repaid.” Source: John B. Henderson, Senior Specialist Price Economics, Congressional Research Service. Therefore, the debt must constantly grow. Many claim that money for interest comes from increased production (worker productivity.) But, when was the last time your personal production (goods and services) turned into money?

Did you wave a magic wand over a shoe, shirt, bushel of corn, a new car or an hour of labor etc. and see it turn into money?

There are only two ways to get money from what we produce.

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We can try to use what we produce as collateral for a
bank loan which creates the new money.

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22

We can sell our production to someone in exchange for
money that was created as a loan.

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Production NEVER turns into money.
Forcing people into debt to obtain money creates economic servitude.
Creating money as interest-bearing loans
ONLY CREATES THE PRINCIPAL, NEVER THE INTEREST!
The Interest must be borrowed too!

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“Money for paying interest on borrowed money comes from the same source as
other money comes from.” —Source: Russell L. Munk, U.S. Treasury
“Money that one borrower uses to pay interest on a loan has been created
somewhere else in the economy by another loan.”
—Source: John M. Yetter, Attorney-Advisor, U.S. Treasury

Like getting a loan at a bank, you can create money by using a credit card, signing the forms sent to you by the credit card company and promising to pay the credit (money/numbers) back in the future with interest. The bank uses your promise to pay as collateral to create the money as a loan the minute you swipe your card. The only difference is that credit card loans do not require meeting face to face with a loan officer.