The Price of Time: The Real Story of Interest

This book is about the role of interest in a modern economy. It was inspired by a Bastiat-like conviction that ultra-low interest rates were contributing to many of our current woes, whether the collapse of productivity growth, unaffordable housing, rising inequality, the loss of market competition or financial fragility. Ultra-low rates also seeme

Interest is the wage of abstinence, said Senior.

In 2015, the Bank for International Settlements warned that finance was crowding out the real economy. More bank loans went to sectors with plenty of collateral, such as real estate, which generated little by way of efficiency improvements. Manufacturing and businesses that required lots of R&D were starved of credit. Beyond a certain point, th

Interest, he said, is the price of time. There is no better definition.

But economic volatility, as Clément Juglar observed long ago, is a source of vitality.

There is nothing so unstable as a stabilized price level. James Grant, 2014

‘This is not a question of trade-offs. We cannot shy away from implementing a policy that ensures price stability on account of potential collateral effects.’53 The ECB would pursue its target, let the consequences be damned.

Drawing a parallel between the US Forest Service and Federal Reserve is irresistible. The Fed was created less than a decade after its environmental counterpart. By the 1920s the Fed was attempting to suppress the business cycle. While ‘federal fire suppression acts to subsidize developments of private lands in fire-prone areas’, the Fed’s policy o

For Turgot, the world of finance was a mirror held up to the world, with real and financial assets exchangeable for each other. Since land, buildings and factories produce income, so money must yield interest. This important insight is too often overlooked by modern economists.