Why did Albert Einstein think compound interest was the most powerful force in the universe?

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This is part of my homework. Please help.

6 Comments

  1. While the statement is true about economics, and exponential growth is important in many situations, please provide a citation for the statement by Einstein. I suspect that he probably thought that gravitation was more important than compound interest.

  2. What do you think compound interest is? Could you add additional notes to your message so I know you know what compound interest is?

  3. +I found this on the Internet. I leave the belief in the accuracy of this person’s opinions up to you. The link is below where I found it:
    ===============================================
    But a simple Google search shows that there are many versions of this quote floating around the internet and they don’t at all—even on their surface—say the same thing. And even if they did, without the original context, we have no idea what Einstein might have meant by it. It could very well have just been a joke, or a sarcastic remark about greed.
    Anyway, I’ve already found the variations that I’ll post below and I’d like help in sorting through all this and developing a definitive strategy for combatting this pernicious talking point. Here are my initial thoughts:
    No one, as far as I can see, can pin down the quote to any legitimate reference source.
    There are many variations which don’t at all mean the same thing. Further, there appears to be a process of inflation that takes the quote from “the most fascinating mathematical concept” to “the human race’s greatest invention” to “the ninth wonder of the world” to “the most powerful force in the universe.” The differences here are exponential!
    Even if Einstein could be pinned down to saying the last version, there’s no way to know how he meant it (ironically, jokingly, sarcastically, etc.) without the original context.
    Even if he said it and meant it seriously, the appeal to him as an authority figure is spurious. He’s a physicist, not an economist. His legendary “great brain” does not give him the power to transfer his authority in one field to another unrelated one.
    Most troubling is that the myth of Einstein as the iconic figure of god-like intelligence is being used to conflate economics with metaphysics. Snow, Army and others are using this meme to imply that compound interest is some kind of sublime, magical, transcendental force, capable of annulling the most basic kitchen-table conceptions of economics. The appeal is essentially to the “mystery” that is relativity theory. Here the resonance of that “mystery” is being transferred to the magical power of compound interest,which can supposedly make everyone rich without anyone paying the price.
    Does compound interest even relate to the privatization plan Bush is pushing?
    P.S. Can someone who understands the economics explain to me how compound interest can be viewed as some sort of benign force in the universe? It’s a social construct—your money only “grows” in value if the rest of the economy recognizes and enforces the investment and its terms—right? And why can’t the same principle be used to put people into ever-greater debt—-as with people holding credit card debt or the victims of the sharecropping system? Am I being economically naive? Am I missing something here?

  4. If he did in fact say that, he had to have been speaking metaphorically; referring to how large an amount of money you can get if you let it earn interest long enough. It is an amazingly large amount. For example $1 invested at 5% per year will grow to $131.50 in 100 years and $17,292.58 in 200 years and $2,273,996.13 in 300 years. But who has 300 years and where can you get 5% these days?

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