The Price of Time Quotes

“After Augustus’ death, the Emperor Tiberius hoarded money, with the result that interest rates rose above the legal limit and a banking crisis erupted in AD 33. Tiberius then decided to lend out the imperial treasure free of interest to patrician families, which brought about an immediate decline in interest rates and an end to the crisis.55 His actions constituted the world’s first experience of quantitative easing.fn9”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“As Bastiat understood, a very low rate of interest may benefit the rich, who have access to credit, more than the poor.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“Summers also claimed that technology was reducing the demand for capital. Digital businesses, such as Facebook and Google, had established dominant global franchises with relatively little invested capital and small workforces. In his book The Zero Marginal Cost Society (2014), the social theorist Jeremy Rifkin heralded the passing of traditional capitalism.16 If the Old Economy was marked by scarcity and declining marginal returns, Rikfin argued that the New Economy was characterized by zero marginal costs, increasing returns to scale and capital-lite ‘sharing’ apps (such as Uber, Lyft, Airbnb, etc.). The demand for capital and interest rates, he said, were set to fall in this ‘economy of abundance’. There was some evidence to support Rifkin’s claims. The balance sheets of US companies showed they were using fewer fixed assets (factories, plant, equipment, etc.) and reporting more ‘intangibles’ – namely, assets derived from patents, intellectual property and merger premiums. In much of the rest of the world, however, the demand for old-fashioned capital remained as strong as ever. After the turn of the century, the developing world exhibited a voracious appetite for industrial commodities that required massive mining investment. China embarked on what was probably the greatest investment boom in history. Before and after 2008, global energy consumption rose steadily. The world’s total investment (relative to GDP) remained in line with its historical average.17 Rifkin’s ‘economy of abundance’ remained a tantalizing speculation.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“As a cynical pamphleteer observed, demands for lowering interest were really designed for the ‘ingrossing all trade, into the hands of a few rich Merchants, who have Money enough of their own to Trade with, to the excluding all young men, that wants it’.13”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“Prehistoric peoples probably charged interest on loans of corn and livestock. The association between interest and the fruit of a loan is embedded in ancient languages. Across the ancient world the etymologies of interest derive from the offspring of livestock. The Sumerian word for interest, mas, signifies a kid goat (or lamb).2 The ancient Egyptian equivalent ms means to give birth.3 In ancient Greek interest is tokos, a calf. Among the several Hebrew words for interest are marbit and tarbit, meaning to increase and multiply. The Latin for interest, foenus, connotes fertility, and for money, pecunia, is derived from pecus, a flock. Our word capital comes from caput, a head of cattle. These derivations, claim Sydney Homer and Richard Sylla, imply that interest originated with loans of seeds and of animals. These were loans for productive purposes. The seeds yielded an increase. At harvest time the seed could conveniently be returned with interest. Some part or all of the animal’s progeny could be returned with the animal. We shall never know but we can surmise that the concept of interest in its modern sense arose from just such productive loans.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“Our earth is degenerate in these latter days: bribery and corruption are common; children no longer obey their parents; every man wants to write a book, and the end of the world is evidently approaching. Assyrian tablet, c. 2,800 BC”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“Wilson then goes on to provide a new definition of interest: ‘Usurye is also saide to be the price of tyme, or of the delaying or forbearing of moneye.’ Interest has been described in many ways over the years – it’s often referred to as the ‘price of money’. But Wilson knew better. Interest, he said, is the price of time. There is no better definition. In”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“The most encompassing view of interest is contained in the notion of interest as the ‘time value of money’ or, simply, as the price of time.”
― Edward Chancellor, 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 seemed to play some role in the resurgence of populism as Sumner’s Forgotten Man started to lose patience.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“Firms in industries with the greatest increase in concentration enjoyed higher profits. But, as Adam Smith observed, monopolies don’t serve the public good. Rather, monopolies create barriers to entry which discourage the establishment of new firms and innovation.29 Rising industry concentration was associated with higher pay for senior executives, a decline in workers’ bargaining power, and falling investment and R&D. Economists at the National Bureau of Economic Research found that while ‘low interest rates have traditionally been viewed as positive for economic growth … extremely low interest rates may lead to slower growth by increasing market concentration.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“If interest rates are kept below their natural level, misguided investments occur: too much time is used in production, or, put another way, the investment returns don’t justify the initial outlay. ‘Malinvestment’, to use a term popularized by Austrian economists, comes in many shapes and sizes. It might involve some expensive white-elephant project, such as constructing a tunnel under the sea, or a pie-in-the-sky technology scheme with no serious prospect of ever turning a profit.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“After the bubble burst, Mississippi Company shares lost around 90 per cent of their value, falling back to the level they had traded at in 1718. François Velde, an economist at the Chicago Federal Reserve, estimates that a fair value for Mississippi stock during the bubble year was around 1,875 livres, roughly a fifth of the peak share price.54 This was not the first time, nor the last, that speculators would place too high a price on some exciting new development. As James Buchan writes, their delusion lies in the conception of time. The great stock-market bull seeks to condense the future into a few days, to discount the long march of history, and capture the present value of all future riches. It is his strident demand for everything right now – to own the future in money right now – that cannot tolerate even the notion of futurity – that dissolves the speculator into the psychopath.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“To make matters worse, Law availed himself of the monarch’s absolute powers to impose his System upon the French nation. In order to make his banknotes appear more attractive, Law, on several occasions, altered by decree the monetary value of gold and silver. He forced the banknotes upon the people. When leading Mississippians, led by the Prince of Conti, started to realize – another neologism thrown up by bubble, meaning to convert ‘ideal property into something real’ – their profits, exchanging banknotes and shares for ‘other things more solid than paper’, Law responded by banning the possession of precious metals.fn7”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“The Mississippi Company dominated France’s economy and overwhelmed its nascent stock market. ‘No company before or since has had a greater share of the world’s investment capital than the Compagnie des Indes in the autumn of 1719 … In comparison, Apple Inc is a rag-and-bone shop,’ writes Law’s biographer James Buchan.36 Law’s personal stake in the Company made him, by his own calculation, the richest individual who had ever lived. He soon acquired a great property empire, comprising fifteen estates scattered around France and several properties in the capital. In Paris, he bought the vast Palais Mazarin, for which he paid a million livres, together with five houses in the Place Vendôme and ten houses in the Faubourg Saint-Honoré.fn5 Law and his brother William borrowed nearly 20 million livres from the bank to purchase shares and property.37”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“Shares in the Mississippi Company were issued to the public at 500 livres. Following the example of the General Bank’s earlier flotation, three-quarters of the subscription could be paid for in depreciated government debt. For the first couple of years the stock flat-lined. But then Law opened the monetary spigots. In December 1718, the General Bank was nationalized and renamed the Royal Bank. This was the type of institution that Law had envisioned in his earlier writings. Unlike the General Bank, the Royal Bank’s notes were denominated in the unit of account, the livre tournois, rather than gold. This removed any restriction on the amount of money that could be issued. As soon as the Royal Bank started printing its paper money, Mississippi shares perked up. Over the course of 1719, their price climbed some twentyfold, peaking at close to 10,000 livres. Investors who had bought into the first subscription with depreciated government debt increased their money by more than forty times. The French coined a new word, millionaire, to describe these lucky fellows.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“In modern language, Law was suggesting that a central bank could reduce interest rates by printing money; that this would alleviate the position of heavily indebted borrowers (in this case, French nobles), create jobs and revive the economy. At the same time, the cost of servicing government debt would fall and deflation come to an end. In the aftermath of the 2008 financial crisis, the world’s central bankers acted with similar intentions. The Regent’s Council initially rejected Law’s proposal of late 1715 to establish a national bank in France but granted him permission for a private bank. The General Bank, as it was called, opened its doors in May 1716. The bank received the patronage of the Regent, who took a large shareholding and issued an edict making its notes legal tender for the payment of taxes. These notes were redeemable in gold but, unlike gold and silver coin, they could not be debased by royal command.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“To twenty-first-century policymakers, the interest rate is simply a lever used to control inflation and tweak economic output. Yet an acquaintance with the Babylonian origins of interest should give pause for thought. Interest has always been with us because resources have always been scarce and must be rationed somehow, because wealth is unequally distributed between creditors and borrowers, and because, as Böhm-Bawerk says, ‘interest is the soul of credit.’ Interest exists because loans are productive, and even when not productive still have value. It exists because those in possession of capital need to be induced to lend, and because lending is a risky business. It exists because production takes place over time and human beings are naturally impatient.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“The view that the rate of interest is determined by ‘real’ economic, as opposed to monetary, factors was advanced by the Scottish philosopher David Hume in his influential essay ‘Of Interest’ (1752).52 Yet Hume’s claim that interest rates are unaffected by changes in the money supply is not supported by the ancient history. After Alexander the Great seized and distributed large stocks of Persian gold and silver, prices are said to have risen and interest rates declined.53 Suetonius, in The Twelve Caesars, describes how, when the Emperor Augustus brought the treasure belonging to the kings of Egypt back to Rome, money became plentiful and interest rates fell from 6 to 4 per cent.54 After Augustus’ death, the Emperor Tiberius hoarded money, with the result that interest rates rose above the legal limit and a banking crisis erupted in AD 33. Tiberius then decided to lend out the imperial treasure free of interest to patrician families, which brought about an immediate decline in interest rates and an end to the crisis.55 His actions constituted the world’s first experience of quantitative easing.fn9”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“In the beginning was the loan and the loan carried interest. Well, this may have been the case. We don’t know for sure, but it’s now widely believed that the earliest transactions were for credit rather than barter. We do know that the Mesopotamians charged interest on loans before they discovered how to put wheels on carts. Interest is much older than coined money, which only originated in the eighth century BC. Some suggest that interest may have originated with the payment of blood money, known as Wergild, as compensation for murder and other injuries, with ‘interest’ as a penalty payment over and above the value of the injury.1 On the other hand, the French anthropologist Marcel Mauss in The Gift (first published in 1925) maintains that interest began with the practice of reciprocating gifts among tribal people.fn1”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“Like leggy plants given too much fertiliser,’ wrote Oliver Wainwright in the Guardian, ‘these buildings are a symptom of a city irrigated with too much money.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“opinion.4 Interest turns time into a cost of production. Time is money. Entrepreneurs who save time in production, who bring goods most quickly to market, emerge as winners in the game of creative destruction.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“whenever money becomes very cheap, experience teaches us to expect that it will be misspent.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“Interest is the barometer of trust, rising and falling over the course of the cycle. Too much trust is a dangerous thing.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“lowering of Interest is not a sure way to improve either our Trade or Wealth.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“Low interest rates fed the demand for credit, while financial innovation increased its supply.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“The fever for start-ups didn’t spread far beyond Silicon Valley. In fact, new business formation in the United States fell sharply after 2008. In 2016, business deaths outnumbered births for the first time since the Census Bureau started keeping records in 1978.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“Unicorns could be seen as a second class of zombie, wrote a correspondent to the Financial Times, ‘whose owners and investors can keep them alive by constant waves of propaganda about their cutting edge technology which has yet to produce a profit (Uber, for example) but are supposedly part of ‘disruption’ culture. This advertising keeps the flow of investments going. These companies are using the talent of engineers and coders, and marketing specialists that could be used in more productive enterprises. The hope that someday they will be profitable does not justify the destruction of useful and profitable business models.39 The large-scale misallocation of resources into loss-making businesses whose profits exist in Never-Never Land is a sign that the cost of capital is too low. Bring down interest rates low enough and even unicorns can fly and, soaring too high, they inevitably crash.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“At least Japan had sufficient domestic savings to fund its escalating national debt and printed its own currency. Europe’s stricken periphery wasn’t so fortunate. Take Draghi’s homeland. In the fifteen years since the start of the euro project, Italy enjoyed no increase in income per capita and labour costs climbed relative to Germany’s, rendering Italian exports uncompetitive. Italy’s public debt trailed only Japan’s and Greece’s. Italian banks were loaded down with hundreds of billions of euros of bad debts. Many of its largest businesses were certified zombies. Political sclerosis accompanied the economic version. The IMF warned that ‘in the absence of deeper structural reforms, medium-term growth is projected to remain low.’30 Without adequate economic growth, Italy’s sovereign debt problems and the Eurozone’s existential crisis remained unresolved. As in Japan, easy money bought time, but time was wasted.fn6”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“When doubts about the survival of the single currency surfaced in 2010, the financial markets started to view countries on Europe’s periphery, from Ireland to Greece, as over-indebted and uncompetitive. Bound by euro-fetters, members of the Eurozone could not regain competitiveness by devaluing their currencies. Instead, interest rates across the region diverged, with highly indebted countries, including Italy and Greece, suddenly forced to pay hefty risk premiums. Meanwhile German bond yields headed into negative territory. Deflation beckoned. Deleveraging was in order. To bring down labour costs, the PIIGS were going to have to embrace deep structural reforms. Unemployment in Spain climbed to Great Depression levels. Schumpeter’s forces of creative destruction were about to be unleashed, big time.”
― Edward Chancellor, The Price of Time: The Real Story of Interest

“Paradoxical as it may seem, the riches of nations can be measured by the violence of the crises which they experience,’ opined the nineteenth-century French economist Clément Juglar.13 Once creative destruction is taken into account, Juglar’s observation doesn’t appear so puzzling. Some economists take a ‘pit-stop’ view of recessions, seeing them as periods when efficiency measures are most likely to be undertaken.14 Business failures, which soar during economic downturns, are seen as essential to the economy’s evolution over time. As the saying attributed to the former astronaut and airline boss Frank Borman goes, ‘capitalism without bankruptcy is like Christianity without hell.’ If that is the case, then monetary policy should not interrupt a recession’s cleansing effect.fn4 Put another way, if financial stability is destabilizing (as Hyman Minsky maintained), too much economic stability induces sclerosis.”
― Edward Chancellor, The Price of Time: The Real Story of Interest