Imagine a world where money was destroyed. What would happen? We would barter. I might grow apples and trade them for you building a shed. Easy. This works, but not for long. Eventually, we will come up with a few problems. Maybe you don’t have what I need but you want apples. Maybe I don’t need anything now but my apples will go rotten if I don’t trade them now. Maybe you only...
This is really quite simple. People choose to save instead of consume. And then people use these savings to invest in new production. With more production, there is more to consume. The economy has grown. The market is a process that sees entrepreneurs using these savings to invest in what they believe people want. And as they learn more about what people want (or not want) they either invest...
No doubt you have received investment advice to start saving and investing as soon as you can. The reason for this comes down to a very simply yet powerful mathematical phenomena: compounding. The power of compound interest Imagine a world where the bank pays an interest rate of 10% in your savings account every year. You put $1,000 into the account and a year later there will be $1,100 sitting...