The Price of Time: The Real Story of Interest

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Like Bastiat, Hazlitt lamented the persistent tendency of men to see only the immediate effects of any given 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. In the year of Bastiat’s death, a final pamphlet appeared. In ‘What is Seen and What is Not Seen’ Bastiat tells the parable of a merchant, Jacques Bonhomme, whose shop window is broken by his careless son. Neighbours thought that it wasn’t all bad news. At least repairing the window provided employment for the glazier, who could spend the money on food and other sundries. But Jacques Bonhomme now had less money to spend, says Bastiat. Here, Bastiat is urging readers to consider the broad consequences of any economic action, not just its effect on a particular beneficiary: Bastiat was having none of this. Interest wasn’t theft, he maintained, but a fair reward for a mutual exchange of services. The lender provides the use of capital for a period of time, and time has value. Bastiat cites the famous lines from Benjamin Franklin’s Advice to a Young Tradesman (1748): ‘Time is precious. Time is money – Time is the stuff of which life is made.’ ⁸ It follows that interest is ‘natural, just and legitimate, but also useful and profitable, even to those who pay it’.⁹ Far from depressing output, capital made labour more productive. Far from stoking class antagonism, Bastiat believed that capital benefited everyone, ‘particularly the long-suffering classes’.¹⁰ NOTE: Chinese tankies will HATE this book because of the chapter “Financial Repression with Chinese characteristics.”

Our low-interest trap is characterised by stagnation and growing inequality – and it hasn’t even saved us from spiralling inflation. In ancient Babylon, new reigns were traditionally marked by debt jubilees. With a wounded Prime Minister limping towards the exit, perhaps it’s time for the next leader to look to the lessons of post-crisis Iceland, and offer a fresh start. 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.I enjoyed reading this magnum opus of a book much as you would like to do. My interest in this book on interest is forever. JD: As an aside, would you rather live with the European Central Bank or the Bank of England? Are you glad to have the pound?

Extraordinario libro sobre la historia de uno de los conceptos más importantes de la actividad humana: la tasa de interés. The last third of the book is a bit confusing - the author sort of takes a sharp turn out of the blue and starts talking about all the problems with China. That just felt like too big of a topic to examine adequately when the more interesting topic in my opinion would be again what might happen after the bubble bursts? Anyways the author then concludes with a headscratcher that centralized digital currencies might be the answer... Pierre Joseph Proudhon (1809–1865), French socialist and political theorist. (Photograph: Bridgeman) 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? One is that they weren’t on a 50-year or whatever cycle. Instead, a new king implemented them to cut social unrest, etc. Like new Caesars paying off the Pretorians. Second, there were two types of debt — barley-based, which were generally “consumer” loans in today’s terms, and silver-based, which were “commercial” loans. Only the barley loans were forgiven. Third, a new king wasn’t guaranteed to do this.Chancellor himself then observes that “an increasing number of Americans were forced to work beyond the traditional retirement age. For younger workers, the dream of enjoying a comfortable old age would remain a dream — another illusion of wealth. Pensioners faced the prospect of their nest eggs running out.” The Money Lender and his Wife, 1514 (oil on panel) by Quentin Massys (c. 1466–1530). (Photograph: Bridgeman)