The root of all evil: Compound Interest!!!!

posted by Jonathan Logan on 2009.01.09, under Blog, Just Stuff

A few days ago I sat in a bar talking to a drunken fellow next to me. He was all about that current banking and money system being evil (which I agree on). So I asked him what the main issue for him is:

Compound interest! It is the root of all our troubles. Because it means that you can never pay back your debt and that whomever you owe something will own everything sooner or later. If someone had lent only a cent to someone else in Jesus’ time, he would now own the whole world!

You can’t imagine how often I heard that line in the past. And it makes me cringe every time.

What is compound interest? It simply means that if you do not serve your interest payments you also have to pay interest on the interest, leading to your debt increasing exponentially (compounding) and you loose everything over time.

But mind you: This only happens if you don’t serve your interest payments. If you do, and even serve the original debt, you will be free one day.

The root of all evil is not compound interest, it is not serving your debt. Or more precisely: Wanting something for nothing.