The Price of Time
The Real Story of Interest
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- USD 14.99
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- USD 14.99
Descripción editorial
Winner of the 2023 Hayek Book Prize
Longlisted for the 2022 Financial Times Business Book of the Year Award
A comprehensive and profoundly relevant history of interest from one of the world’s leading financial writers, The Price of Time explains our current global financial position and how we got here
In the beginning was the loan, and the loan carried interest. For at least five millennia people have been borrowing and lending at interest. The practice wasn’t always popular—in the ancient world, usury was generally viewed as exploitative, a potential path to debt bondage and slavery. Yet as capitalism became established from the late Middle Ages onwards, denunciations of interest were tempered because interest was a necessary reward for lenders to part with their capital. And interest performs many other vital functions: it encourages people to save; enables them to place a value on precious assets, such as houses and all manner of financial securities; and allows us to price risk.
All economic and financial activities take place across time. Interest is often described as the “price of money,” but it is better called the “price of time:” time is scarce, time has value, interest is the time value of money.
Over the first two decades of the twenty-first century, interest rates have sunk lower than ever before. Easy money after the global financial crisis in 2007/2008 has produced several ill effects, including the appearance of multiple asset price bubbles, a reduction in productivity growth, discouraging savings and exacerbating inequality, and forcing yield starved investors to take on excessive risk. The financial world now finds itself caught between a rock and a hard place, and Edward Chancellor is here to tell us why. In this enriching volume, Chancellor explores the history of interest and its essential function in determining how capital is allocated and priced.
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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.
