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Sunday, March 3, 2024

Present Value – El Financiero

It is relatively trivial to deduce the formula for determining the financial equivalence between present value, future value and equal payments, which is the basis of financial mathematics. Furthermore, if perpetuity There will be a series of equal payments, which is known as paymentits equivalence to present value is simply the flow of the following period divided by the discount rate that is decided to use.

If the flows grow at a constant rate, the equivalent of the present value of a perpetuity, the numerator will be the flow of the next period and the denominator is the subtraction of the discount rate minus the growth rate of the flows between periods, assuming that said flow growth rate is constant. We must emphasize the theme of perpetuity: it is really what its name implies.

However, it is one thing to write the formulas on a blackboard, another thing is to determine the flows, the discount rate and the growth rate of the same flows for an investment analysis in real life, but another thing entirely to obtain the resources necessary to meet those needs in the future.

Of course, the problem of finding resources is greatly simplified (rather it would not be necessary) if you have a population that is gullible and that has not overcome the inheritance of the primitive peoples of exchanging gold for mirrors. Come on, exchange your vote for mirages or what is the same, believe that 100% pensions will come from an amount that who knows where it came from, from non-existent savings by destroying counterweights (And the savings from ending corruption? ) or – inexperiencedly – complain about the non-existent benefits of the state’s white elephants.

It’s not rocket-science realizing that, with 100% pensions, someone has to cover that cost that will not generate any income. Every time a company hires a person, the company – or who knows who – will have to pay their salary almost in perpetuity, whether or not they generate income. How beautiful it is to only promise without having to fulfill!

What would it take? Really put an end to corruption, productivity to be able to generate the salaries of those who will not work but also financial education from an early age to take responsibility because, worse than dying is outliving your economic resources at an advanced age. In Japan, for example, they reach retirement age and it becomes a time to enjoy: they have time and the monetary resources.

But not everything is on the side of the politicians. Companies have to be ethical and stop registering employees with “70% of their salary” (it’s real). They are affecting them for retirement.

Ps 1. Contrasts. While a “yes-person” demonstrated that he will follow the instructions of the power behind the throne, the drunken alternative of the rowdy pseudo-new Team (for better identification in case you don’t locate him, he is part of those who consider it disruptive to make a fool of himself), the other alternative is that of Team “Do I not pronounce English well? “I learn!”, which was solidifying ties with Mexico’s main trading partner from which a good part of the population lives directly or indirectly. Is it necessary to ask who is suitable as President?

Ps 2. We really have to return the soldiers to the barracks. They cannot deal with the insecurity on the roads, with the airports, with organized crime, with the train, we are going to have to maintain the companies that were given to them and now not even with customs having nearshoring on top of them. (imagine yourself in a war!).

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