The Price of Time: The Real Story of Interest

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

Böhm-Bawerk declared that the cultural level of a nation is mirrored by its rate of interest. In the ancient world, interest rates charted the course of great civilizations. In Babylon, Greece and Rome interest rates followed a U-shaped curve over the centuries; declining as each civilization became established and prospered, and rising sharply dur

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

Economists talk about time preference rather than impatience to describe how people value present and future goods differently. An individual’s time preference can be seen as a kind of personal rate of interest.

traditional view that charging for loans was inherently unjust.

Interest is much older than coined money, which only originated in the eighth century BC.

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.

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

Nature is, to a great extent, reproductive. Growing crops and animals often make it possible to endow the future more richly than the present. Man can obtain from the forest or the farm more by waiting than by premature cutting of trees or by exhausting the soil. In other words, Nature’s productivity has a strong tendency to keep up the rate of int