Wednesday 28 May 2014

The madness of compound interest

According to Einstein it is the 'eighth wonder of the world'; compound interest certainly is a mathematical marvel – and a political disaster.
Let us imagine that in 3030BC the total possessions of the people of Egypt filled one cubic metre. Let us propose that these possessions grew by 4.5% a year. How big would that stash have been by the Battle of Actium in 30BC? This is the calculation performed by the investment banker Jeremy Grantham
Go on, take a guess. Ten times the size of the pyramids? All the sand in the Sahara? The Atlantic ocean? The volume of the planet? A little more? It's 2.5 billion billion solar systems.
Perpetual growth on a finite planet, etc. etc.