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Interest rates.
- Thread starter slider123456
- Start date
Quote from sjfan:
Quote from slider123456:
You are telling me you would rather work longer and longer hours for the same quality of life then work less for the same quality of life or the same hours for increasing quality of life. You would rather give banks huge percentages of your income to provide a service you could get for a much much lower cost.
The problem is you think the qualify of life per hours work has decreased. That's your preference. I'm not so sure the population at large would agree the quality of life has decreased. Compare, for example, the number of blue collar workers in the 50s doing dangerous jobs and that of today; Compare also the number of people dying from malnurishment in the 20s in third world countries and today.
There is no conspiracy theory go to a mortgage calculator and you will see $300,000 dollars in a 30 year $250,000 loan. If we did not pay interest all the money we have paid as interest would be in our economic system.
And the money is magically gone because it's interest? It's just not in your pocket. The money goes to pay interest on various instruments that filter into the pockets of other people. You don't want to pay the interest, then don't borrow.
Moreoever, if banks don't charge interest on risky propositions such as loans, aren't they doomed to fail? What will compensate them from all the defaults? If you say that these loans should have some sort of contract price, then that contract price is infact interest - just paid at once instead of in installments.
Is this still not getting through?
The interest we paid them is not gone it is the money they are lending back to us with interest. I have no idea how much all the banks lend out every year but I would guess it is astronomical.
The risks would be much much less than it is now because the economy would not be constantly busting and booming. If someone did default then assets would be recovered to make up the loss then sold back to the market just like today. If the asset did not recover the cost then everyone would split the debt just like now banks just make the difference by charging customers more.
The main problem is that the interest we on average pay to the banks is compounding on itself faster and faster now.
The fundamental problem here is interest and can be explained like this:
A bank lends the people $1000 the term is a year and interest is %5. The big problem is that when we go to pay we have $1000 and owe $1050. So the $50 has to be carried with interest compounding. If right now at this point in time we have borrowed collectively a trillion dollars and payed an average of %5 we would owe 1 trillion 50 billion how could we ever pay it back if the banks quit lending money. The bank does not quit lending money and the compounded interest catches up to us causing a bell curve where more and more people go broke until everything collapses. This takes hundred of years and gets exponentially worse at the end of the curve which is where we are now. The only way it can be brought back is if everyone consumes less and works harder to pay down the debt which is what has been happening for the last 40 years.
If you go and read about right after the depression you will see that there were newspaper articles where politicians were wondering what everyone would do with all their free time because they only had to work a few hours a day to live a good life. Since then we have continually carried more and more of this unrepayable debt which keeps compounding on itself. If you watch the news you will see that peoples wages are not keeping up with inflation on average and it keeps getting worse that is the definition of a lowering quality of life.
The fundamental problem here is interest and can be explained like this:
A bank lends the people $1000 the term is a year and interest is %5. The big problem is that when we go to pay we have $1000 and owe $1050. So the $50 has to be carried with interest compounding. If right now at this point in time we have borrowed collectively a trillion dollars and payed an average of %5 we would owe 1 trillion 50 billion how could we ever pay it back if the banks quit lending money. The bank does not quit lending money and the compounded interest catches up to us causing a bell curve where more and more people go broke until everything collapses. This takes hundred of years and gets exponentially worse at the end of the curve which is where we are now. The only way it can be brought back is if everyone consumes less and works harder to pay down the debt which is what has been happening for the last 40 years.
If you go and read about right after the depression you will see that there were newspaper articles where politicians were wondering what everyone would do with all their free time because they only had to work a few hours a day to live a good life. Since then we have continually carried more and more of this unrepayable debt which keeps compounding on itself. If you watch the news you will see that peoples wages are not keeping up with inflation on average and it keeps getting worse that is the definition of a lowering quality of life.
You still keep going on about interest rates being unnecessary (I have a vague feeling that you don't really know how compounding actually works; or what interest rates really are; and I'm certain you have no idea how the banking system really works) - but why haven't you accepted my offer to lend from you at zero interest? I did offer to pay for your legal bills to satisfy your due dilligence.
Quote from sjfan:
You still keep going on about interest rates being unnecessary (I have a vague feeling that you don't really know how compounding actually works; or what interest rates really are; and I'm certain you have no idea how the banking system really works) - but why haven't you accepted my offer to lend from you at zero interest? I did offer to pay for your legal bills to satisfy your due dilligence.
You might as well give up. He doesn't understand enough about how banks work to have a discussion on the topic, and it is obvious that he doesn't understand compounding interest on a bank loan.
He looks at your offer and knows that accepting it would be a bad thing, but if it's bad, then his system doesn't make sense. So he's trying to figure out why that 0% loan is bad. Sometime when he gets off the conspiracy theory websites and learns a bit more about banking, he'll realize that his "system" creates huge problems that cannot be overcome.
Quote from Cache Landing:
You might as well give up. He doesn't understand enough about how banks work to have a discussion on the topic, and it is obvious that he doesn't understand compounding interest on a bank loan.
He looks at your offer and knows that accepting it would be a bad thing, but if it's bad, then his system doesn't make sense. So he's trying to figure out why that 0% loan is bad. Sometime when he gets off the conspiracy theory websites and learns a bit more about banking, he'll realize that his "system" creates huge problems that cannot be overcome.
I have no idea about a conspiracy as I've said before. All I am saying is that the money we pay for interest equals out to paying very large sums of money in exchange for an efficient bartering system.
I am saying that the goods we make are the fundamental drivers of our economy not the paper that the banks give us.
The only reason for money is to make an efficient bartering system I am just saying this one with interest costs way way more than it is worth.
Quote from slider123456:
The only reason for money is to make an efficient bartering system I am just saying this one with interest costs way way more than it is worth.
Yes - you keep saying these things; But much like an elementary school student, you don't show your work and hope to pass on just your say so.
You still haven't answer the fundamental question of why, if you believe what you believe, you are not accepting my proposal for a loan?
Quote from slider123456:
I have no idea about a conspiracy as I've said before. All I am saying is that the money we pay for interest equals out to paying very large sums of money in exchange for an efficient bartering system.
I am saying that the goods we make are the fundamental drivers of our economy not the paper that the banks give us.
The only reason for money is to make an efficient bartering system I am just saying this one with interest costs way way more than it is worth.
I say conspiracy theory because the ideas you are presenting aren't new. They are plastered all over all the conspiracy theory blogs that plague the interenet. The ones claiming that our nation is run by the Rothschilds and other Bilderberg members.
Anyway, you are an overwhelming minority who think the trade-off isn't worth it. The vast majority of people think the cost of interest is absolutely worth it. That is why they keep taking out loans.
You are right in the statement that the driver for our economy is our production, but what you should also realize is that those same goods are what backs our currency.
I should also make one comment because you keep using anecdotal evidence to support claims that quality of life is lower than it used to be. That is simply not true. Take for instance your 1970s example. You claim that people now must work two jobs to afford the same lifestyle, when they only had to work one job in the 70s. That's pure nonsense! Allow me to use factual statistics rather than anecdotal evidence to demonstrate.
The median income of a family in the mid 70's without the wife in the workforce was $13,000 per year. If you adjust that for inflation it comes in at about $46,500 in today's buying power.
The current median family income without the wife working is $49,000.
The average square footage of a home in the 1970's was 1550. The average square footage now is about 2500 square feet. We have to work two jobs now to afford keeping up with the Joneses, not to afford the same lifestyle.
I could afford a 1970's lifestyle off of a job at a burger joint. No cable bill for TV or internet. No cell phone bill. Buy a car that is only expected to last 100,000 miles and can only handle speeds of about 70mph.
People are working two jobs now because the standard of living is increasing faster than their pay, not because inflation is increasing faster than their pay.
Sjfan you are making the wrong offer to Slider. You can reverse it and put him even more on the spot.
Slider a bank offers to lend you money for 5% annual interest rate for ten years. Inflation is expected to go up during that time resulting in negative real interest rates. Would you accept the loan offer? Explain.
Slider a bank offers to lend you money for 5% annual interest rate for ten years. Inflation is expected to go up during that time resulting in negative real interest rates. Would you accept the loan offer? Explain.