The Price of Time: The Real Story of Interest

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JD: I particularly enjoyed the way you disabused readers of the vaunted Chinese savings rate. It turns out they juice their currency constantly and that rapid expansion of credit shows up as investment savings on one side of the ledger. Earlier generations of economists, who considered the problem of interest more deeply than their twenty-first-century counterparts, had no doubt as to its importance. For Böhm-Bawerk, interest was ‘an organic necessity’. Irving Fisher called interest ‘too omnipresent a phenomenon to be eradicated’. In similar vein, Joseph Schumpeter stated that interest ‘permeates, as it were, the whole economic system’. The author of Das Kapital, an avowed enemy of interest, agreed with this arch-apologist for capitalism. In a phrase evocative of the ancient world in which a charge for lending was first recorded, Marx writes that ‘usury lives in the pores of production, as it were, just as the gods of Epicurus lived in the space between worlds.’ 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

This book started out well. The first half walks through a relatively chronological look at use of debt and interest through history. Finally, in his postscript, Chancellor speculates if central banks will offer their own digital currencies to drive out private crypto. He is currently a columnist for Reuters Breakingviews and an occasional contributor to the Wall Street Journal, MoneyWeek, the New York Review of Books and Financial Times. In 2008, Edward received the George Polk Award for financial reporting for his article “ Ponzi Nation” in Institutional Investor magazine. Then, he starts early modern history where knowledgeable people would expect: John Law and the Mississippi Bubble, with details on just how bubbly it was. From there, it’s off to Walter Bagehot, his Bank of England as “lender of last” resort and just how much that’s abused in modern times. That includes even abuse in Switzerland, regarded throughout the Western world as a model of probity. Along the way, he loops in discussions on economists in the 1600s, notes on how “easy money” led to Fugger wealth and more. On the corporate side, Chinese state-owned enterprises get state loans at a full percentage point or more lower than comparable private biz. That’s a large part of corporate bubbliness there.It’d be interesting to confront [Lowe] with this research that he wrote,” he says, noting that the RBA under Lowe had likely acted in a way “contradictory” to his research with Borio on the dangers of allowing asset bubbles to inflate. Chancellor does a great job of showing how time affects various aspects of our lives, and how understanding the value of time can lead us to make wiser decisions about our finance, work, and personal lives. The book offers a comprehensive view of time as a valuable resource that we should be mindful of, manage, and use effectively.

Bank of Japan discount rate and Japanese nominal GDP growth, 1985–1995. (Source: Bank of Japan, Global Financial Data) Law’s biographer Antoin Murphy wrote in the wake of the global financial crisis. ‘From this perspective, it may Historian Jerry Muller adds a corollary to Campbell’s Law, namely: ‘anything that can be measured and Refuting people who challenge Chancellor's ideas on easy money? Chancellor’s short and sweet discursion on Iceland eating its shit, taking its haircut, and doing well today.At least Proudhon and Bastiat agreed on one thing. Proudhon believed the 1848 Revolution’s aims could be realized through monetary reform. With interest at three-quarters of a per cent, he said, three-quarters of the revolution would be achieved. ¹³ ‘Free credit is socialism’s final word, its final slogan, and its final effort,’ Bastiat rejoined. ‘An inexhaustible paper money factory: that is your solution.’ To abolish interest on capital would result in the ‘annihilation of credit’ and the death of capital. Chancellor then talks about Hayek (must add him to the TBR). Hayek didn’t think central bankers should stabilise prices, because this would lead to rapid technological development and a commodity glut. Stabilisation excessively stimulates output, which then drops as prices fall because there’s too much stuff made. We move on then to Goodhart’s law: when a measure becomes a target, it ceases to be a good measure (helloooooo, healthcare systems). JD: You left Cambridge and Oxford with an advanced degree in history but ended up working for the investment bank Lazard. Did your time in mergers and acquisitions plant the seed of a “financialized” economy in your mind, that investment bankers move money around but don’t produce much?

There is nothing wrong with these topics. The author's attempts fall short because of how the content appears manipulated, like the title of the book, to emphasize his discomfort with the way things are. The author is right in pointing out numerous current ills from the extreme and rising inequality to market valuations, corporate abuses and policy adventurism, real-life reflexivities of financial events and externalities including climate damage, etc. When a rich man presents himself at the bank, he will be told: You are solvent, here is the capital, we lend it to you for nothing. Portrait of central bankers Hjalmar Schacht, Benjamin Strong and Montagu Norman, c. July 1927. (Photograph: Federal Reserve Bank of New York) An admirably researched and very well written account of speculative insanity from the earliest times to, let no one doubt, the present. -- J.K. GalbraithThe second horseman is bloated asset prices. Again, think especially of the societally corrosive effects of unaffordable housing or, more generally, of the increasing concentration of financial assets in the upper percentiles of wealth, whose relatively low marginal propensity to consume further depresses economic growth. After all, if you direct income to poor people, they will only blow it on food and shelter. Ideally, I’d rate this 4.5 stars, but with it getting lowballed by two people, both of whom argue against Chancellor’s central premise that the “easy money is a drug,” and the Fed and other banks causing it — and argue wrongly — it gets bumped up rather than down to 4 stars. The work is also timely, as an independent panel is halfway through a review of the RBA and its operations, due for completion in March. From there, he looks at debt, interest and definitions of usury around the ancient eastern Mediterranean, with some excursion into China. (India doesn’t make his radar screen for whatever reasons.)