Behold the power of
Compound Interest! :lmfao:
Good luck getting that paid!
http://in.reuters.com/article/2012/07/19/uk-germany-berlin-debt-idINLNE86I00M20120719
QuoteCash-strapped Berlin stalked by 450-year-old debt
BERLIN | Thu Jul 19, 2012 6:13pm IST
(Reuters) - The sleepy hamlet of Mittenwalde in eastern Germany could become one of the richest towns in the world if Berlin were to repay it an outstanding debt that dates back to 1562.
A certificate of debt, found in a regional archive, attests that Mittenwalde lent Berlin 400 guilders on May 28 1562, to be repaid with six percent interest per year.
According to Radio Berlin Brandenburg RBB.L, the debt would amount to 11,200 guilders today, which is roughly equivalent to 112 million euros.
Adjusting for compound interest and inflation, the total debt now lies in the trillions, by RBB's estimates.
Town historian Vera Schmidt found the centuries-old debt slip in the archive, where it had been filed in 1963. Though the seal is missing from the document, Schmidt told Reuters that she was certain the slip was still valid.
"In 1893 there was a debate in which the document was examined and the writing was determined to be authentic," Schmidt said.
Schmidt and Mittenwalde's Mayor Uwe Pfeiffer have tried to ask Berlin for their money back. Such requests have been made every 50 years or so since 1820 but always to no avail.
Reclaiming the debt would bring significant riches to Mittenwalde, a seat of power in the middle ages, which now has a population of just 8,800. Red brick fragments of medieval fortifications still dot the leafy town centre.
The town's Romanesque church was once the provost seat for Paul Gerhardt, one of Germany's most prolific hymn writers. Gerhardt, who lived there briefly in the 17th century, is the only noted Mittenwalde resident to date.
Schmidt and Pfeiffer met with Berlin's finance senator Ulrich Nussbaum, who ceremonially handed them a historical guilder from 1539. The guilder was put in a temporary display at the Mittenwalde museum.
"This case shows that debts always catch up with you, no matter how old they are," Nussbaum told the Berliner Zeitung paper.
The debt-laden German capital would have difficulty meeting Mittenwalde's demands anyway. According to a report released by the senate finance administration in June 2012, Berlin is already close to 63 million euros in the red. (Reporting by Sophie Duvernoy, editing by Paul Casciato
Did you finish reading the article this time?
Quote from: sbr on July 20, 2012, 02:01:31 AM
Did you finish reading the article this time?
Yeah
Debt denominated in a non-existing currency is pretty easy to pay, no? Just send a piece of paper that has a very large number on it.
Quote from: Zanza on July 20, 2012, 02:09:20 AM
Debt denominated in a non-existing currency is pretty easy to pay, no? Just send a piece of paper that has a very large number on it.
You are probably wrong - when a currency is withdraw in the modern era, it is almost always converted into another, surviving currency - otherwise any currency exchange or withdrawal would mean a de facto abolition of debts and property, which would be disastrous and against any principles of rule of law. For example, the German mark may no longer exist, but any debt denominated in the German mark would be enforceable, because it can be converted into Euro.
If I were to defend against an age-old debt, the statute of limitation would probably be a better venue.
Since when is a guilder worth 10000 euros? :huh:
Quote from: Solmyr on July 20, 2012, 02:56:48 AM
Since when is a guilder worth 10000 euros? :huh:
Since southern Europe joined the eurozone. <_<
A Guilder is presumably a kind of coin with a fixed worth. But the math here is just stupid. 450 years of compound growth of 6% gives 97 trillion guilders owed in 2012.
How they turn 400 guilders into 11,200 guilders into 112,000,000 euro baffles me. Math people, MATH!!!!!!111on3oneoneoenoen
They should just mint some devalued 17th century guilders with minimal gold content and give those back. :P
There are a total of 5 billion troy oz. of gold on earth.
each troy oz. is 31 grams. The normal content of Rheinish Guilders (minted by the emperor under the golden bull) of the period was supposedly about 1.75 grams (50% devaluation of the 14th century coin).
97 trillion guilders means 169,75 trillion grams or 5,5 trillion troy oz. Or about 1000 times the total amount of gold on planet earth. Even for the heavily adulturated coin of the 16th century.
Berlin couldn't afford to pay the raw materials cost of that many coins made of iron not to mention to the minting costs.
Quote from: Viking on July 20, 2012, 04:50:04 AM
How they turn 400 guilders into 11,200 guilders into 112,000,000 euro baffles me.
The first one is 400+24*450 (24 being 6% of 400). I.e. whoever calculated it fails at understanding compound interest.
Quote from: Solmyr on July 20, 2012, 05:21:58 AM
Quote from: Viking on July 20, 2012, 04:50:04 AM
How they turn 400 guilders into 11,200 guilders into 112,000,000 euro baffles me.
The first one is 400+24*450 (24 being 6% of 400). I.e. whoever calculated it fails at understanding compound interest.
sigh.. the 10,000 euro per guilder is probably the collectors book price, not the gold content... we seriously need a Ben Goldacre of math.
Quote from: Solmyr on July 20, 2012, 05:21:58 AM
Quote from: Viking on July 20, 2012, 04:50:04 AM
How they turn 400 guilders into 11,200 guilders into 112,000,000 euro baffles me.
The first one is 400+24*450 (24 being 6% of 400). I.e. whoever calculated it fails at understanding compound interest.
Probably depends on how the loan agreement was worded? Did they use compound interest back then? I have no idea.
As retarded as the calculations are in the article they do arrive at trillions when including compound interest (and inflation wtf).
Quote from: Syt on July 20, 2012, 05:39:15 AM
Quote from: Solmyr on July 20, 2012, 05:21:58 AM
Quote from: Viking on July 20, 2012, 04:50:04 AM
How they turn 400 guilders into 11,200 guilders into 112,000,000 euro baffles me.
The first one is 400+24*450 (24 being 6% of 400). I.e. whoever calculated it fails at understanding compound interest.
Probably depends on how the loan agreement was worded? Did they use compound interest back then? I have no idea.
The article says
QuoteAdjusting for compound interest and inflation, the total debt now lies in the trillions, by RBB's estimates.
so presumably compound interest in included in the deal.
Ok, according to this article from May this year:
http://www.maerkischeallgemeine.de/cms/beitrag/12333847/62129/Berlin-und-Mittenwalde-legen-die-Diskussion-um-ein.html
There was a law suit over the debt in 1893, but this went nowhere because the IOU wasn't properly signed.
Mittenwalde delegates discussed claiming he debt again in 1899 but decided against it.
Meanwhile, they've been symbolically recompensated by receiving one gold guilder for their local museum.
Quote from: Syt on July 20, 2012, 05:46:53 AM
Ok, according to this article from May this year:
http://www.maerkischeallgemeine.de/cms/beitrag/12333847/62129/Berlin-und-Mittenwalde-legen-die-Diskussion-um-ein.html
There was a law suit over the debt in 1893, but this went nowhere because the IOU wasn't properly signed.
Mittenwalde delegates discussed claiming he debt again in 1899 but decided against it.
Meanwhile, they've been symbolically recompensated by receiving one gold guilder for their local museum.
That 16th century lawyer is so gonna get his arse kicked in the afterlife.
Quote from: Viking on July 20, 2012, 05:41:01 AM
Quote from: Syt on July 20, 2012, 05:39:15 AM
Quote from: Solmyr on July 20, 2012, 05:21:58 AM
Quote from: Viking on July 20, 2012, 04:50:04 AM
How they turn 400 guilders into 11,200 guilders into 112,000,000 euro baffles me.
The first one is 400+24*450 (24 being 6% of 400). I.e. whoever calculated it fails at understanding compound interest.
Probably depends on how the loan agreement was worded? Did they use compound interest back then? I have no idea.
The article says
QuoteAdjusting for compound interest and inflation, the total debt now lies in the trillions, by RBB's estimates.
so presumably compound interest in included in the deal.
I'm not following why you would adjust for inflation. Since there have been a few bouts of inflation in Germany since this time, the total debt may not be so bad if not adjusted. Which would make for a less compelling newspaper article.
Quote from: alfred russel on July 20, 2012, 09:14:16 AM
I'm not following why you would adjust for inflation. Since there have been a few bouts of inflation in Germany since this time, the total debt may not be so bad if not adjusted. Which would make for a less compelling newspaper article.
hmm.. if there is a legal chain of legal tender going through the Reichsmark of the 1920s from the guilder to today then the debt is worth nothing.
In which case the Weimar Republic may have just saved Berlin :lmfao:
Quote from: Syt on July 20, 2012, 05:46:53 AM
Ok, according to this article from May this year:
http://www.maerkischeallgemeine.de/cms/beitrag/12333847/62129/Berlin-und-Mittenwalde-legen-die-Diskussion-um-ein.html
There was a law suit over the debt in 1893, but this went nowhere because the IOU wasn't properly signed.
Res judicata.
Quote from: Viking on July 20, 2012, 09:16:54 AM
In which case the Weimar Republic may have just saved Berlin
It's creation saved Berlin from Allied occupation so that is two Berlin owes it. I suggest they name a street after Friedrich Ebert.
Quote from: Valmy on July 20, 2012, 09:26:46 AM
Quote from: Viking on July 20, 2012, 09:16:54 AM
In which case the Weimar Republic may have just saved Berlin
It's creation saved Berlin from Allied occupation so that is two Berlin owes it. I suggest they name a street after Friedrich Ebert.
The road that runs in front of the Brandenburg Gate is named for him.
Quote from: Martinus on July 20, 2012, 02:16:48 AM
Quote from: Zanza on July 20, 2012, 02:09:20 AM
Debt denominated in a non-existing currency is pretty easy to pay, no? Just send a piece of paper that has a very large number on it.
You are probably wrong - when a currency is withdraw in the modern era
Maybe. But we are talking about 1563 here.
Quoteit is almost always converted into another, surviving currency - otherwise any currency exchange or withdrawal would mean a de facto abolition of debts and property, which would be disastrous and against any principles of rule of law. For example, the German mark may no longer exist, but any debt denominated in the German mark would be enforceable, because it can be converted into Euro.
Yes, and guilders can't be converted into Euro.
Quote from: Zanza on July 20, 2012, 09:56:26 AM
Quote from: Valmy on July 20, 2012, 09:26:46 AM
Quote from: Viking on July 20, 2012, 09:16:54 AM
In which case the Weimar Republic may have just saved Berlin
It's creation saved Berlin from Allied occupation so that is two Berlin owes it. I suggest they name a street after Friedrich Ebert.
The road that runs in front of the Brandenburg Gate is named for him.
Yes, but is there a Havenstein (http://en.wikipedia.org/wiki/Rudolf_E._A._Havenstein) Allé or Strasse? I think not. Failed presidents and prime ministers still get streets named after them. There are streets and schools named after Buchanan and Harding.
Yes, there is a Havensteinstraße in Berlin. It's nowhere near as prominent as the Ebertstraße though. Looks like a random street in some residential area.
Quote from: alfred russel on July 20, 2012, 09:14:16 AM
I'm not following why you would adjust for inflation. Since there have been a few bouts of inflation in Germany since this time, the total debt may not be so bad if not adjusted. Which would make for a less compelling newspaper article.
I've never heard of adjusting debts owed for inflation before, either. Which is why inflation is generally considered a good thing for debtors and a bad thing for creditors.
Quote from: Zanza on July 20, 2012, 10:14:34 AM
Yes, there is a Havensteinstraße in Berlin. It's nowhere near as prominent as the Ebertstraße though. Looks like a random street in some residential area.
well.. I'll be...
unsurprisingly it is a one way street....
Quote from: alfred russel on July 20, 2012, 09:14:16 AM
I'm not following why you would adjust for inflation. Since there have been a few bouts of inflation in Germany since this time, the total debt may not be so bad if not adjusted. Which would make for a less compelling newspaper article.
Exactly. Besides the inflation bit of dishonesty, the matter was apparently dismissed in 1893 because the document was never legally signed, and then there is the fact that, even had the other matters not intervened, the town apparently accepted compensation in the form of "one gold guilder for their local museum."
In short, a non-story posing as a story in order to sell papers/clicks/whatever.
I'm not witty enough to make a good "Take it from Grumbler-- he was there" joke, so someone else please go ahead :P
Quote from: grumbler on July 20, 2012, 11:45:46 AM
Quote from: alfred russel on July 20, 2012, 09:14:16 AM
I'm not following why you would adjust for inflation. Since there have been a few bouts of inflation in Germany since this time, the total debt may not be so bad if not adjusted. Which would make for a less compelling newspaper article.
Exactly. Besides the inflation bit of dishonesty, the matter was apparently dismissed in 1893 because the document was never legally signed, and then there is the fact that, even had the other matters not intervened, the town apparently accepted compensation in the form of "one gold guilder for their local museum."
In short, a non-story posing as a story in order to sell papers/clicks/whatever.
Astute summary. A usual summer non-story for slow news days.
Quote from: Zanza on July 20, 2012, 09:56:26 AM
The road that runs in front of the Brandenburg Gate is named for him.
No kidding? Good on Berlin then. He deserves something for his efforts poor bastard.
Quote from: Valmy on July 20, 2012, 12:02:58 PM
Quote from: Zanza on July 20, 2012, 09:56:26 AM
The road that runs in front of the Brandenburg Gate is named for him.
No kidding? Good on Berlin then. He deserves something for his efforts poor bastard.
Yeah, he was a pretty decent guy as far as SPD types go. His son seems to have been a DDR douchebag, but Friedrich, Sr. did about as good a job as anyone could do in his position.
Quote from: Valmy on July 20, 2012, 12:02:58 PM
Quote from: Zanza on July 20, 2012, 09:56:26 AM
The road that runs in front of the Brandenburg Gate is named for him.
No kidding? Good on Berlin then. He deserves something for his efforts poor bastard.
Every bigger German city will have a square or street named for Friedrich Ebert, although not as prominent as the street in Berlin (runs from Reichstag along Brandenburg Gate, American Embassy, Holocaust Memorial to Potsdamer Platz). Adenauer and Brandt and Bismarck usually have more prominent streets and squares named after them in most cities though - not in Berlin however.
Is he like the Marshall Foch of Germany? It seemed like the main street of every French town was 'Rue du Marechal Foch'
As I said, the late chancellors Adenauer, Brandt and Bismarck usually have more prominent places named for them in German cities. Ebert is more of a second rank politician as far as place names go and is comparable to Hindenburg and Kaiser Wilhelm I, but more prominent than say Scheidemann, Schumacher or Erhardt.
Will be interesting to see what they'll name for Helmut Kohl and Helmut Schmidt after they die.
Any streets named after Roger Ebert?
From a visitor's guide to Augsburg:
(http://www.augsburg.de/index.php?id=12416)
QuoteThe Fuggerei is known as a "city within a city" and is still managed by the Fugger family foundation as it was at the time of its beginning.
In 1521, Jakob Fugger the Rich and his brothers founded what is now the oldest social settlement in the world for Augsburgers who had fallen into hardship (and who practiced the Catholic faith). The settlement is comprised of 67 houses with 140 apartments, a church and a fountain.
Even today, annual rent is the equivalent of one Rhinish Gulden, about 0,88€
The Fuggerai has been is continuous operation and charging rent at a fixed amount in guilder; so that conversion ratio presumably represents the fair present day value of a 16th century guilder.
The tenants are also required to pray for the souls of the Fugger family.
Quote from: The Minsky Moment on July 20, 2012, 02:01:15 PM
From a visitor's guide to Augsburg:
(http://www.augsburg.de/index.php?id=12416)
QuoteThe Fuggerei is known as a "city within a city" and is still managed by the Fugger family foundation as it was at the time of its beginning.
In 1521, Jakob Fugger the Rich and his brothers founded what is now the oldest social settlement in the world for Augsburgers who had fallen into hardship (and who practiced the Catholic faith). The settlement is comprised of 67 houses with 140 apartments, a church and a fountain.
Even today, annual rent is the equivalent of one Rhinish Gulden, about 0,88€
The Fuggerai has been is continuous operation and charging rent at a fixed amount in guilder; so that conversion ratio presumably represents the fair present day value of a 16th century guilder.
Assuming that is right, I figure Berlin "owes" them about 9,856 euro.
:huh:
400 guilders * 0.88 = 352€
But compound interest means you have to multiply that by 1.06^448, no? Berlin would still owe them more than 76 trillion Euro. Which is more than the annual GDP of the world.
The mayor of the small town now regrets that he even publicized that story as he was badgered by journalists from all over the world for the last two days.
Quote from: Zanza on July 20, 2012, 03:02:42 PM
:huh:
400 guilders * 0.88 = 352€
But compound interest means you have to multiply that by 1.06^448, no? Berlin would still owe them more than 76 trillion Euro. Which is more than the annual GDP of the world.
The mayor of the small town now regrets that he even publicized that story as he was badgered by journalists from all over the world for the last two days.
This makes you the third person on this thread to point out that the person who wrote the article can't do math.
I wanted to point out that Alfred can't do math.
Quote from: Zanza on July 20, 2012, 03:02:42 PM
:huh:
400 guilders * 0.88 = 352€
But compound interest means you have to multiply that by 1.06^448, no? Berlin would still owe them more than 76 trillion Euro. Which is more than the annual GDP of the world.
The mayor of the small town now regrets that he even publicized that story as he was badgered by journalists from all over the world for the last two days.
That is what I thought at first, but if you go back to the article it seems the interest isn't compound--just simple.
Quote from: Zanza on July 20, 2012, 03:05:28 PM
I wanted to point out that Alfred can't do math.
Wait a second...if you calculate by simple interest 400 +(400 * 450 * 0.06 ) you get 11,200, which is a number actually quoted in the article. Plus, simple interest makes sense in light of the time period the theoretical contract was written.
Quote from: alfred russel on July 20, 2012, 03:37:25 PM
Quote from: Zanza on July 20, 2012, 03:05:28 PM
I wanted to point out that Alfred can't do math.
Wait a second...if you calculate by simple interest 400 +(400 * 450 * 0.06 ) you get 11,200, which is a number actually quoted in the article. Plus, simple interest makes sense in light of the time period the theoretical contract was written.
The problem is that compound interest is the only way to get to trillions and the article mentions compound interest. This story is only interesting because of compound interest. Berlin welching on a minor debt is not interesting, berlin owing some shit hole sub-urb 1000 times the world's total gold supply in gold coins is fascinating.
Quote from: Viking on July 20, 2012, 03:42:31 PM
Quote from: alfred russel on July 20, 2012, 03:37:25 PM
Quote from: Zanza on July 20, 2012, 03:05:28 PM
I wanted to point out that Alfred can't do math.
Wait a second...if you calculate by simple interest 400 +(400 * 450 * 0.06 ) you get 11,200, which is a number actually quoted in the article. Plus, simple interest makes sense in light of the time period the theoretical contract was written.
The problem is that compound interest is the only way to get to trillions and the article mentions compound interest. This story is only interesting because of compound interest. Berlin welching on a minor debt is not interesting, berlin owing some shit hole sub-urb 1000 times the world's total gold supply in gold coins is fascinating.
It isn't the only way...The calculation in the article, for reasons mysterious to me, takes into account inflation. Germany has had a bout or two of significant inflation through the centuries, so when you string them together you can get a very large number.
Quote from: alfred russel on July 20, 2012, 03:48:22 PM
Quote from: Viking on July 20, 2012, 03:42:31 PM
Quote from: alfred russel on July 20, 2012, 03:37:25 PM
Quote from: Zanza on July 20, 2012, 03:05:28 PM
I wanted to point out that Alfred can't do math.
Wait a second...if you calculate by simple interest 400 +(400 * 450 * 0.06 ) you get 11,200, which is a number actually quoted in the article. Plus, simple interest makes sense in light of the time period the theoretical contract was written.
The problem is that compound interest is the only way to get to trillions and the article mentions compound interest. This story is only interesting because of compound interest. Berlin welching on a minor debt is not interesting, berlin owing some shit hole sub-urb 1000 times the world's total gold supply in gold coins is fascinating.
It isn't the only way...The calculation in the article, for reasons mysterious to me, takes into account inflation. Germany has had a bout or two of significant inflation through the centuries, so when you string them together you can get a very large number.
Historical inflation ffs.. you can get a currywurst for a few trillion 1923 reichsmarks.
Actually, the fourth paragraph mentions compound interest. I can't be expected to read so far down. I don't understand why they mention compound interest but quote the simple interest value.
Maybe this is just silly article and not meant to be serious financial journalism. :hmm:
Quote from: alfred russel on July 20, 2012, 03:57:45 PM
Actually, the fourth paragraph mentions compound interest. I can't be expected to read so far down. I don't understand why they mention compound interest but quote the simple interest value.
Maybe this is just silly article and not meant to be serious financial journalism. :hmm:
Journalists are uneducated dolts. Film at 23.
Only fair way to figure it out would be to calculate the amount of gold or silver the guilders were worth and than convert that to the spot price in euro.
Quote from: MadImmortalMan on July 20, 2012, 04:24:02 PM
Only fair way to figure it out would be to calculate the amount of gold or silver the guilders were worth and than convert that to the spot price in euro.
I did that in reply #9 in this thread.