Einstein's General Theory of Investment
by Richard Benson
most powerful force in the universe is compound interest"
~ Albert Einstein
any more..." ~ Ben Bernanke
a genius known for his simple elegant expressions of complex natural
laws. Indeed, what is simpler than E=MC2? While it may be urban
legend that Professor Einstein was reputed to have said that compound
interest was the "eighth wonder of the world and the most powerful
force in the universe", the point is well taken.
interest is the eighth wonder of the world.
He who understands it, earns it ... He who doesn't ... pays it"
~ Albert Einstein
observations were perfectly accurate back then as he noticed that
the universe was expanding. Because growth is a natural phenomenon,
the human race, in general, and any man, in particular, can take
advantage of natural law by putting off consumption today and investing
in the future. This is the force behind compound interest. A seed
of corn not eaten but planted will multiply into a thousand seeds
at the future harvest; an acorn nurtured and planted can produce
a mighty oak; an olive grove cultivated now may take 40 years to
mature but it will take care of future generations. Thus, the moral
of the story is always the same: Save today, invest for the future,
and reap fabulous rewards. If you can invest at 7.2% for ten years,
your wealth will double!
of finance should be incredibly simple and elegant to watch in motion
but they're not, thanks to the efforts of the Federal Reserve.
to America during a time of great turmoil in Germany and Europe.
Germany was turning into a National Socialist Party with a dictator
and command economy. In a command economy, interest can be fixed
by the government at zero or even negative, and savings accounts
can be stolen and used to fund the wishes of the state. The river
of investment that runs forward creating capital can be forced by
state-created inflation to run in reverse, destroying capital. In
other words, seed corn rots if it's not eaten, and investment dries
up because saving is for suckers.
to 2012 America. The Fed has decreed interest rates at zero for
four years, and promised to keep them there for at least another
two. The Fed is still printing money out of thin air as well as
buying long term treasuries. By locking the yield of the 10-year
Treasury at 1.6%, it's well below the rate at which staples like
food, energy, utilities, transportation, education, and health care,
are rising in cost.
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© 2012 321 Gold