The Price of Time
The Real Story of Interest
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5.0 • 6 Ratings
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- £11.99
Publisher Description
The first book of the next crisis. A history of interest rates by a leading financial commentator, updated with a new postscript.
*Winner of the 2023 Hayek Book Prize*
*Longlisted for the 2022 Financial Times Business Book of the Year Award*
All economic and financial activities take place across time. Interest coordinates these activities. The story of capitalism is thus the story of interest: the price that individuals, companies and nations pay to borrow money.
In The Price of Time, Edward Chancellor traces the history of interest from its origins in ancient Mesopotamia, through debates about usury in Restoration Britain and John Law ' s ill-fated Mississippi scheme, to the global credit booms of the twenty-first century. We generally assume that high interest rates are harmful, but Chancellor argues that, whenever money is too easy, financial markets become unstable. He takes the story to the present day, when interest rates have sunk lower than at any time in the five millennia since they were first recorded - including the extraordinary appearance of negative rates in Europe and Japan - and highlights how this has contributed to profound economic insecurity and financial fragility.
Chancellor reveals how extremely low interest rates not only create asset price inflation but are also largely responsible for weak economic growth, rising inequality, zombie companies, elevated debt levels and the pensions crises that have afflicted the West in recent years - conditions under which economies cannot possibly thrive. At the same time, easy money in China has inflated an epic real estate bubble, accompanied by the greatest credit and investment boom in history. As the global financial system edges closer to yet another crisis, Chancellor shows that only by understanding interest can we hope to face the challenges ahead.
PUBLISHERS WEEKLY
Historian Chancellor (Crunch-Time for Credit) offers an exhaustive history of credit and interest rates. Charging for the use of money is an ancient practice, he shows: during the third and second millennia BCE, loans of silver or barley were repaid at a premium. Interest rates have frequently been kept low by governments or central banks, Chancellor writes, but generally with disastrous consequences. Chancellor contends that "interest is required to direct the allocation of capital, and that without interest it becomes impossible to value investments." He offers an extensive look at interest during America's Great Recession, when the Federal Reserve "cut its lending rate to a record low, targeting a range of 0 to 0.25 per cent." The current economy, he suggests, is one of "fake money fake interest rates," likening it to The Truman Show, and concluding that "nobody knows" how it will end. Along the way, Chancellor introduces a wealth of economic theories, including those of 17th-century contemporaries Josiah Child, who pushed for lower rates, John Locke, who disagreed, as well as that of William Easterly, a 21st-century economist who wrote: "Becoming rich is a choice between today's consumption and tomorrow's." Readers interested in the history of finance will find much to consider.
