Monday, May 4, 2015

Compound Interest

Mostly Cajun reports that on this day in 1626 the Native Americans traded away the island later known as Manhattan for $24 worth of cloth and beads.

Wikipedia informs us that the total value of the Manhattan real estate had an estimated worth of $802.4 billion in 2006.

Excel informs me that $24 invested at 6.6% interest for 380 years will be worth nearly $850 billion.

The common theme of the $26 of cloth and beads narrative is that the Native Americans were naive and were gypped.  In fact, they got a fair price.  If anything, a more useful narrative is that those who opt for consumer goods over durable, wealth producing investments become footnotes to history.

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