Compounding Interest and Compounding Inflation/Deflation
When a banker raves about of the power of compounding interest, what he or she fails to also tell you about is the power of compounding inflation - or in today's crisis, the power of compounding deflation.
Inflation and deflation are caused by governments and banks attempting to control the economy by printing and lending money out of thin air - that is, without anything of value backing the money other than the "full faith and credit" of the United States.
For years, people all across the globe have believed that U.S. bonds are the safest investment in the world.
For years, savers dutifully bought U.S. Bonds, believing that was the smart thing to do.
At the start of 2009, thirty-year U.S. Treasury bonds are paying less than 3 percent interest.
To me, this means there is too much funny money in the world, savers will be losers, and in 2009, U.S. bonds could be the riskiest of all investments.
If you don't understand why that is, don't worry.
Most people don't, which is why financial education (or the lack of thereof) in our schools is so important.
It is worth knowing, however, that what used to be the safest investments, U.S. bonds, are now the riskiest.
Related：
Inflation and deflation are caused by governments and banks attempting to control the economy by printing and lending money out of thin air - that is, without anything of value backing the money other than the "full faith and credit" of the United States.
For years, people all across the globe have believed that U.S. bonds are the safest investment in the world.
For years, savers dutifully bought U.S. Bonds, believing that was the smart thing to do.
At the start of 2009, thirty-year U.S. Treasury bonds are paying less than 3 percent interest.
To me, this means there is too much funny money in the world, savers will be losers, and in 2009, U.S. bonds could be the riskiest of all investments.
If you don't understand why that is, don't worry.
Most people don't, which is why financial education (or the lack of thereof) in our schools is so important.
It is worth knowing, however, that what used to be the safest investments, U.S. bonds, are now the riskiest.
Related：
