The Rule of 72

in money •  2 years ago 

Have you ever heard of “The Rule of 72”?

"In finance, the rule of 72, the rule of 70 and the rule of 69.3 are methods for estimating an investment's doubling time. The rule number (e.g., 72) is divided by the interest percentage per period (usually years) to obtain the approximate number of periods required for doubling."

Using this basic estimation principle, we can actually do the exact opposite and divide (instead of multiply) to get the estimated number of years it will take to "halving time".

With that being said, lets see how long it will take at the current inflation rate of the USD (2.1%) for the purchasing power to be cut in HALF.

72 / 2.1% = ~34.28


In about 34 years, every single dollar you hold will essentially be worth HALF the purchasing power of what it has today.

If you hold $100,000 today in a checking account, you could buy $100,000 worth of things right now.

If you hold that $100,000 for about 68 years, you will have essentially just lost the entire purchasing power of everything you held due to inflation (assuming no positive interest is incurred).




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Wow! When you put it into that perspective, I see things in a whole new light. I guess that is what happens when you establish a currency without pegging it to anything (including with Steemit).

I would imagine the inflation rate would get worse if the FED decides to have the US gov pay off its debt any time soon. A whole lot more money would be printed, lowering the value of our dollar in a way never seen before.

I also wrote an article about money, specifically how Wealth Inequality is Inevitable
. I address the wealth inequality heavily prevalent in Bitcoin. I would love to hear what you think?

Nice article. I could believe that wealth inequality is inevitable if it weren’t for the fact that 2016 made a lot of NEW millionaires and billionaires just from crypto.

The trickling down is changing directions somewhat, and will only keep changing in favor of blockchain and crypto in my opinion, so the ones getting in now will reap from a whole new status quo. There will always be a top and bottom, but I think the middle line is the one actually disappearing (there will eventually be more of a 50/50 split).

A world where wealth shifts to crypto would be very interesting! I am excited to live in such an exciting, transformative time.

Nice post! I will follow you from now on. I give you a vote!

Hope you are doing well Tyler. I know u moved. U havent been around. u cross my mind and just wanted to say hello

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