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The biggest threat to interest compounding is inflation. Every time you see someone saying that by saving $X each month you can get $1M in 50 years, the questio

The biggest threat to interest compounding is inflation. Every time you see someone saying that by saving $X each month you can get $1M in 50 years, the question to answer is: what's gonna be the real value of $1M 50 years from now?

cheriot 6y ago
Only because you're talking about a bond with fixed payments. Operating companies (stocks) handle inflation better because they can raise prices.
- coliveira 6y ago
  But with companies you're not dealing with interest compounding, you're dealing with a company's growth prospects, which are largely unrelated to interest rates.
  - cheriot 6y ago
    I've not seen a context where people where strict about saying compound interest is exclusive to interest payments. Reinvested dividends and reinvested earnings also compound.
    - coliveira 6y ago
      You'll have a hard time finding companies that pay decent dividends and at the same time have high growth prospects.
      - cinntaile 6y ago
        He isn't saying that you'd have both at the same time. He's saying that high company growth is also compounding. And reinvesting dividends is yet another form.
  - deleted 6y ago
    [deleted]
markvdb 6y ago
This bond still yielding is an anomaly though. Instability will often manifest as inflation, but not always. Any idea which current countries have not experienced revolution, hyperinflation, annexation, and more intense events than just low or moderate inflation? https://upload.wikimedia.org/wikipedia/en/8/88/The_Hanke_Krus_Hyperinflation_Table.pdf https://upload.wikimedia.org/wikipedia/en/8/88/The_Hanke_Kru... is a good starting point. I started making a list of countries where you could reasonably be expected to have lost all your monetary savings at some point in the last 100 years. Not a full list yet, but quite impressive already. It's at https://imgur.com/a/gczjp4y https://imgur.com/a/gczjp4y .
- cinntaile 6y ago
  This would be even better if the cause as well as the time period for each country was included as well.

cheriot 6y ago

Only because you're talking about a bond with fixed payments. Operating companies (stocks) handle inflation better because they can raise prices.

coliveira 6y ago
But with companies you're not dealing with interest compounding, you're dealing with a company's growth prospects, which are largely unrelated to interest rates.
- cheriot 6y ago
  I've not seen a context where people where strict about saying compound interest is exclusive to interest payments. Reinvested dividends and reinvested earnings also compound.
  - coliveira 6y ago
    You'll have a hard time finding companies that pay decent dividends and at the same time have high growth prospects.
    - cinntaile 6y ago
      He isn't saying that you'd have both at the same time. He's saying that high company growth is also compounding. And reinvesting dividends is yet another form.
- deleted 6y ago
  [deleted]

markvdb 6y ago

This bond still yielding is an anomaly though. Instability will often manifest as inflation, but not always. Any idea which current countries have not experienced revolution, hyperinflation, annexation, and more intense events than just low or moderate inflation? https://upload.wikimedia.org/wikipedia/en/8/88/The_Hanke_Krus_Hyperinflation_Table.pdf https://upload.wikimedia.org/wikipedia/en/8/88/The_Hanke_Kru... is a good starting point. I started making a list of countries where you could reasonably be expected to have lost all your monetary savings at some point in the last 100 years. Not a full list yet, but quite impressive already. It's at https://imgur.com/a/gczjp4y https://imgur.com/a/gczjp4y .

cinntaile 6y ago
This would be even better if the cause as well as the time period for each country was included as well.