any other instrument which compounds wealth is working in the same way as interest. you sacrifice wealth now to receive an increased amount at a future date.
^^
The difference is that now risk exists. it prevents people from simply investing away in loans knowing that they will earn a profit regardless on the (often doomed to fail) enterpreneur's business)
let me make this simple:
economy a) 0 interest bank accounts
average citizen with no financial background will have their wealth stored in an account earning no interest. as i'm sure you know over time their wealth will deteriorate. CORRECT higher wealth individuals who either a) are privy to financial markets or b) can afford financial advisors, will still accumulate and compound their wealth at the same rate. CORRECT
That's the thing. The average citizen needs to become education. That's the real problem happening throughout the world. Libya, Middle East, Asia ( Cheap labour exploitation with HORRIBLE work conditions), USA (buys every word the news Tube spins - Fox news I'm looking @ you) and generally around the world. (Copyright Litigation or something WTF for a patent that someone made a half-arsed attempt in making just to sue someone else in the future)
economy b) as it is now
the exact same situation as above except for the fact that the less financially informed individuals will not have this effect of time decaying wealth and the more wealthy individuals will still be in a similar situation.
^^ Incorrect, but not entirely.
The less income inclined citizen will have decaying wealth due to having to repay loans with compounded interest. Home loans in fact are inflating the real estate market; simply speaking taking a $250,000 loan for a $250,000 yet repaying $300,000 in the long run will incline those who cannot afford to repay these loans to sell the house at or beyond the average price in order to pay off the loan. What then happens is that The house (assumed) sells @ $275,000. this affects the statistics people refer to, real estate evaluators refer to and gives individuals the perception that their house has become worth more. This then increases the loan individuals require to purchase a house ($275,000+) and yet with the interest rate is STILL at the same rate, which leads to an estimated $320,000 total loan repayment total instead. The figures are being made up of course, but you can hopefully see what I'm getting at. The interest system DOES cause a greater wealth inequality; seeing as higher income individuals won't have to resort to loans as they already have such accumulated wealth.
