Compounding interest should be illegal

[Anonymous No.53859053]

Interest that grows exponentially should be illegal. There's no reason that lenders should earn interest on their interest. Essentially what this does is it defers the opportunity costs of defaults to future (interest compounded) payments. It doesn't matter if Mr. Shecklberg didn't get his $500 dollar payment from you for him to re-loan (and thusly earn interest on it asap), because you just pay the compound interest at a later date: you absorb the lenders opportunity cost.

This balances the playing field between lenders and borrowers more: it forces lenders to be more apprehensive about borrowers with poor credit, since poor-credit implies actual risk, rather than deferred risk, and it rewards users with good credit by allowing them access to more capital.

My theory is that it's the exponential nature of compounding rates that makes the economy so fucking volatile over long periods. That makes it so prone to bubbles, and huge boom and bust cycles, plus it's greatly contributed to subprime lending because it massively lowers risk for lending parties.

[Anonymous No.53859067]

>>53859053
Wait until you find out you yourself can use compounding interest. also nobody is forcing you to get loans

[Anonymous No.53859088]

>>53859067
Yes I know I can use it. I understand that, but that doesn't mean it's good for the stability of the system. Plus, the exponential nature of it means that people at a certain level of debt are basically doomed to be slaves. It also means that capital tends to flow to people with more capital, creating constant upwards pressure on wealth. Of course economies can't manage this sort of shit forever, which is why we see such huge crashes.

It's not that you couldn't lend your money in a system with linear interest, or maturities based interest, it just wouldn't favor the wealthy nearly as much, but still leave them with a sizable advantage.

[Anonymous No.53859118]

>>53859088
what if i told you that you could get away with what you think is damaging by creating an economical system that yields revenue based on it's usage and growth? only a sensible person would agree with the nature of compounding interest on loans being a scam. fair systems will dominate the future because they will become more accessible to the everyman luckily. compounding interest itself is not the culprit

[Anonymous No.53859627]

>>53859053
I read this several times and have no idea what you're saying. Explain it like I'm financially a retard

[Anonymous No.53859657]

>>53859627
snowball going down a hill shouldn't get bigger with more snow adding. It should be illegal
rawr xD

[Anonymous No.53859666]

>>53859088
You know, this could be solved by a transparent ledger where everyone can run analysis on transactions and contracts and determine the debt load of any given company. Then you could also analyze cross default risk and, over time, systems that take unbounded risk would lose out. You could also derive the leverage ratios and give a nice number like "our economy goes bankrupt or we have to hyperinflate if the property market/stock market go down 25%". It'd be a lot more meaningful than "X% GDP growth" or "GDP-to-debt is 110%", which is pretty abstract statement. You could also derive a number like "91% of our GDP growth is due to money creation". to make it even more clear what the deal is.
The problem this wouldn't solve is those of states that prefer short-term success ignoring these indicators and just start printing money to buying up all the good money, and to finance its subjugation of the others. Though you couldn't solve this with laws either, since you can't make laws for other states.

[Anonymous No.53859695]

>>53859053
https://m.youtube.com/watch?v=2nBPN-MKefA

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