Monday, June 12, 2017

Catastrophe of bank interest rates – 13

Continues from the previous post -

What is wrong in those formulae they produce to justify their bogus arguments? The formula is not wrong but in all such formulae, several components are considered. According to principles of arithmetic when value of all components excepting one are known that value can be found by putting other known values in that formula. Such many formulae we have in our modern science of economics. These formulae are taught in universities all over world. Theoretically, they are correct since they are prepared according to rules of arithmetic. The hitch is that in any economic problem we always have more than one component with unknown value. However, we want to find out value of only one of them. In such situation, what they do is, they put some fictitious value to fill that gap and come with solution. Since that fictitious value is probably not correct, product is also not correct. In some formulae, there is no possibility of putting even a fictitious value. There they put some fixed value called constant, to complete the formula. There also it fails in giving correct value because in economic considerations these constants also keep changing, there is no such thing as true constant in any formula in economic arithmetic. All economic calculations are done with such formulae. As far as theory, concerned working in formula of this type is OK. Universities teach them, so students believe in them and when in business try to use them. However, if we want to use them actually, in market to come with values, we always go wrong. I would like to mention experience of notable financier Warren Buffet from America. He told his experience of these formulae in talk. Warren Buffet is known for giving lectures to enthusiasts every year and here I quote one of those experiences he mentioned.

Continues in the next post –

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