historically, compound interest (which is the phenomenon that leads to the loading of mortgage payments in interest rather than principal) first appears in the Code of Hammurabi, and is based on the yield on seed corn. If I lend you some of my seed corn over a period of ten years, I have to charge something like compound interest in order to equalise the return I get by lending it to you with the return I could have got by planting it myself.
dd -----Original Message----- From: PEN-L list [mailto:[EMAIL PROTECTED] Behalf Of David B. Shemano Sent: 29 March 2007 19:40 To: [email protected] Subject: Re: Financiers' activities and wealth creation Charles Brown writes: >> What is the logic supporting the idea that interest should be paid for money >> lent ? I believe many or most mortgages have more interest paid than >> principle. In part this is done by payments being allocated to interest >> payments before being allocated to principle payments. How is this >> rationalized by economics ? How is wealth created by the lending of money to >> buy a place to live ? You are asking an age-old question. Smart people going back to Aristotle have thought there is something wrong with interest on money lent. David Shemano
