posted by Rahul Chimanbhai Mehta Rrg

How even interest rate as low as 1% per year on GOLD loan can cause extreme concentration of wealth OR large number of bankruptcies OR both !! . Lets consider an island of 10000 persons. Say each gold coin is 1 gram. . Say wealth men have 10 times gold then non-wealthy. . Say 100 wealthy men have 10 kg of gold each , and remaining 9900 men have 1 kg each. , i.e. number of persons on island = 10000 one coin = 1 gram number of wealthy persons on island = 100 number of non-wealthy persons on island = 9900 gold each wealthy person has = 10 kg total gold owned by wealthy = 10,000 kg gold each non-wealthy person has = 1 kg gold owned by all non-wealthy persons = 1 kg * 9900 = 9900 kg . Total gold on island = 10000 kg + 9900 kg = 19,900 kg . Now say wealth individuals lend 90% of gold at just 1% interest per year. Say there are NO bankrupties and all were able to repay the loans. . Then at the end of the year, . amount of gold with wealthy persons = 10100 kg amount of gold with non-wealthy persons = 9800 kg . Because new gold doesnt fall from sky . . So if there are NO bankruptcies, then gold owned by wealth individuals will grow at 1% per year and gold owned by non-wealthy will reduce by same amount. So at end of nth year, . amount of gold with wealthy persons = 10000 * (1.01)^N amount of gold with non-wealthy persons = 9900 - addition in above . So in some 72 years, all gold will be owned by wealthy individuals only !! . And if interest rate is 5% a year, then bottom 99% will become penniless in mere 14 - 15 years !! . And if interest rate is 10% a year, then bottom 99% will become penniless in mere 7 - 8 years !! . Today, we dont see massive bankruptcies even with 9% to 12% interest on loans charged by banks. Thats because, today, RBI manufactured new money at the rate of 15% a year !!! i.e. today, money does fall from sky. But gold doesnt fall from sky. . So just 1% interest on gold can make whole society penniless in just 70 years !! And interest of 2% to 3% per MONTH i.e. 24% per year on gold loans used to be common !! This can make society penniless in . So bankrupticies are imminent. . Now in ancient days, bankruptcies meant that borrower has to become slave of lenader !! And sometimes, his family has to become slave as well !! And in India, where slavery ended looong back due to goraksha , debt meant that children will have to work provide cheap labor till debt is paid which means for generations !!! . =-==== . This was a principal reason why Christianity / Islam banned even 0.01% interest on loans. . Alternative was partnership. But one can have 10-20 partners. So large ventures become difficult to create and manage. . The problem reduced only after Jury System came , where Jurors (1) started allowing interest (2) punishing lenders who charged excessive interest rate (3) ensured that bakruptcies do not cause slavery not long term binding. So countries which started practising Jury System got "non-repressive reasonable rate of interest on loans" and so commerce and industries n those countries grew at much faster rate then rest of the world. . But all in all, absence of Jury System , the "rate of interest on loans" concept alone is sufficient to ruin bottom 95% of the population. And we are seeing that across the world from USA to India, where Jury System is weakening or doesnt exist.

by Rahul Chimanbhai Mehta Rrg



from Right to Recall Group http://ift.tt/1DP0rTS