THE PRICE OF TIME

A wide-ranging global history of finance focused on interest.

“By the early twenty-first century,” writes financial journalist Chancellor, “interest had been charged on loans for around five thousand years, possibly longer. Interest had survived biblical injunctions, Aristotelian outrage, and the onslaught of medieval canonists and modern socialists.” As the author shows, interest is the oil in the wheels of capitalism, but it can just as easily became the wrench in the works. Many leftist commentators see it as the means by which the rich get richer, extracting wealth from others while doing nothing. Chancellor points out that lenders are taking on risk and sacrificing the option of spending the money directly, so they should get something for it. Borrowers, for their part, hope to use the funds to improve their own position, even after paying the interest. The rise of banks and professional lenders revolutionized societies, accelerating wealth creation and moving power away from landed aristocrats. It was chaotic, and governments tried to bring order with central banks, which set official rates. The assumption was that rates could be raised to dampen an overheated, inflationary economy and lowered when stimulus was needed. The nadir of this strategy was rates of zero or near zero after the Great Recession, from 2007 to 2009. Of course, for every winner, there is a loser, and Chancellor presents data showing that ultra-low rates often do little to lift a sagging economy. In fact, low interest rates often lead to property speculation, poor corporate governance, and frightening levels of risk-taking. In explaining all this, the author looks at some of the great financial debacles, a host of theories about interest, and rate policy in China. In the end, he does not present answers for finding a “natural” rate—because there aren’t any. Nevertheless, the book is a comprehensive, entertaining read on an ever relevant topic.

An authoritative examination of the secret machinery of capitalism and how, for better or worse, it affects us all.