The Price of Time

The Price of Time, written by acclaimed financial historian Edward Chancellor, provides an compelling exploration into the pivotal role interest rates play in the world economy. This groundbreaking work, which has been shortlisted for the 2023 Hayek Book Prize, delves deep into the intricate history of interest rates and how they have shaped economic landscapes through different eras. Chancellor seamlessly weaves historical analysis with contemporary financial insights, presenting a narrative that is as enlightening as it is timely.

Through the pages of The Price of Time, readers are taken on a journey starting from the ancient civilisations of Mesopotamia, where the concept of interest first emerged. Moving through significant milestones, the book examines the fierce debates over usury in Restoration Britain and the fallout from John Law's disastrous Mississippi scheme. Chancellor deftly illustrates how each historic moment laid the groundwork for modern financial systems.

The book argues that while high interest rates are often viewed with trepidation, it is the era of exceedingly low rates that warrants concern. Chancellor postulates that excessively low interest rates, a phenomenon witnessed in Europe and Japan with the arrival of negative rates, foster conditions that may precipitate economic instability. He critiques the notion of 'easy money,' explaining how it has led to asset price inflation, economic stagnation, rising inequality, and the proliferation of 'zombie' companies tethered to unsustainable levels of debt.

Chancellor's narrative is particularly poignant as it brings readers to the present day financial landscape, where current interest rates are at historic lows. He contends that this easy money policy has cultivated an environment ripe for financial fragility and profound economic insecurity, drawing parallels to China's massive real estate bubble and unprecedented credit expansion.

In The Price of Time, Chancellor doesn't merely highlight past and present financial crises but posits that understanding the underlying dynamics of interest rates is crucial for navigating future economic challenges. With its meticulous research and acute insights, this book is an indispensable resource for anyone seeking to comprehend the complex interplay between interest rates and economic stability.

Edward Chancellor provides a thought-provoking examination of the global financial system, revealing how our historical and contemporary relationship with interest has set the stage for potential crises. His analysis underscores the necessity for a nuanced understanding of financial principles as we move into an uncertain economic future.