[was: RE: [PEN-L:27627] Equitable Life]
a lot of people have fallen for the fallacy of "the miracle of compound interest," including W.W. Rostow, who was a scholar before he became a warrior-geek. As Marx points out, interest has to be _produced_ by labor, so that the interest rate is constrained by the size of the surplus-product relative to the total product. When the rate of surplus-value is low, average interest for society as a whole will be limited, too.
JD
Tom posted:
Karl Marx on Richard Price: "The conception of capital as a self-reproducing and self-expanding value, lasting and growing eternally by virtue of its innate properties -- hence by virtue of the hidden quality of scholasticists -- has led to the fabulous fancies of Dr. Price, which outdo by far the fantasies of the alchemists; fancies, in which Pitt believed in all earnest, and which he used as pillars of his financial administration in his laws concerning the sinking fund. "'Money bearing compound interest increases at first slowly. But, the rate of increase being continually accelerated, it becomes in some time so rapid, as to mock all the powers of the imagination. One penny, put out at our Saviour's birth to 5 per cent compound interest, would, before this
time, have increased to a greater sum, than would be contained in a hundred and fifty millions of earths, all solid gold. But if put out to simple interest, it would, in the same time, have amounted to no more than seven shillings and four pence half-penny. Our government has hitherto chosen to improve money in the last, rather than the first of these ways."[1]
"His fancy flies still higher in his Observations on Reversionary
Payments, etc., London, 1772. There we read: "A shilling put out to 6% compound interest at our Saviours birth" (presumably in the Temple of Jerusalem) "would... have increased to a greater sum than the whole solar system could hold, supposing it a sphere equal in diameter to the diameter of Saturn's orbit." "A state need never therefore be under any difficulties; for with the smallest savings it may in as little time as its interest can require pay off the largest debts" (pp. XIII, XIV). What a pretty theoretical introduction to the national debt of England!"
Tom Walker
604 254 0470
