TLB: The Miracle of Compound Interest

Now by this stage, French Royalty had overthrown the Merovignian traditions, and the Carolignians had implemented primogenture, which prevented that $5,630 from being split among the heirs.

As such, growth continued (remarkably, at a consistent 5%), so that when Louis XIV ascended to the throne in 1643 my family had claim to $70.6 Billion dollars. Several key wars, the revocation of the treaty of Nantes, and the Sun King's lavish lifestyle did not affect my 5% at all.

So much so, that by the time his grandson was beheaded during the French Revolution in 1789, my ancestors' $1 was worth $834 Trillion dollars.

Now Napoleon, on crowning himself Emperor, probably should have used that money to buy Europe, instead of invading it. But mindful of the powerful miracle of compound interest he was manifesting for my family, he did not - in fact, his wars of conquest were largely driven by the need to find that 5% each year.

You can imagine the relief in France in 1940 when that amount (which by now had reached $119.8 Quadrillion) was handed over to the Nazis. US Troops located the amount shortly after the landing at Normandy, and decided only the great US of A was able to continue the miracle.

And so the money grew, through Kennedy, Nixon, Reagan et al, until by 2008 it was worth $3,149,637,318,314,090,000. In one of his final acts as President George W Bush handed control of the money into my personal safe keeping (as with Social Security, he firmly believed I would be able to do better investing it myself).

And so it was that on this day, 12 months ago, I invested that entire amount in Lehman Brothers stock.

I should probably check on that soon to see if the 5% came through for the 870th consecutive year.

There's also a more interesting question - what does the notion of "$1 in 1500" even mean?

The solution is option 2: every once in a while, great fortunes are wiped out by great misfortune (if not by plain incompetence): War, natural disaster, hyperinflation, nations defaulting on their debts. You cannot hedge against everything.

If you save right now, you barely get any interest and that you do get is taxed by the IRS and inflation.