The Price of Time

August 29, 2022
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.