Edward Chancellor’s quixotic Interest in the Price of Time

monetary interest central banking - E Chancellor B Bernanke - economist -11-2022

monetary interest updates

As goodreads reviewer Nilesh Jasani suggests, the title “… is a misnomer. The book is not a story of interest rates despite the occasional attempts to weave them into the narrative. Its first part provides summaries of a few most celebrated historic bubbles, followed by a long, unstructured diatribe on the state of current markets, economic structures, and policy frameworks”.

“Diatribe” maybe a bit harsh given how “dazzling” Chancellor’s prose can be. Nor, as Jasani writes, is there anything wrong with the topics or even Chancellor’s conclusions. “The problem is the ad hocism in the arguments used to support them.”

The Economist agrees that Chancellor’s “argument is seriously flawed” and is no match for Bernanke’s reasoning, even though that is steeped in orthodox adherence to the defunct Savings&Loans doctrine of fractional banking. Bernanke’s ortho-academic obfuscations may have won him the Riksbank’s dong and suffice to refute Chancellor’s ad hocism. But from a money research perspective both earn f-grades for blissfully luxuriating in fully comprehensive ignorance of modern banking theory, contemporary money research or post Keynesian economics.

Which kind of leaves us with a one-eyed Wicksellian outwitting a blind liquidationist when tilting at ortho-economic windmills. Still, unlike Bernanke’s, Chancellor’s book is worth reading as an entertaining lament for the financially repressed.

the book

penguin.co.uk 7-2022 The Price of Time: The Real Story of Interest by Edward Chancellor

A comprehensive and profoundly relevant history of interest from one of the world’s leading financial writers, The Price of Time explains our current global financial position and how we got here The tradition of charging interest on loans is one of man’s oldest practices, going back at least to the Mesopotamian era in the third millennium B.C. From ancient times, usury or charging for the use of money, has attracted opprobrium–from philosophers, including Plato and Aristotle, and from the religious authorities, whether Jewish, Muslim, or Christian. Yet as capitalism became established from the late Middle Ages onwards, denunciations of interest were tempered. It was gradually accepted that creditors had a right to charge for lending out their property and that credit was essential for trade. By the seventeenth century, the debate about interest shifted to what might be considered a fair price.

Over the first two decades of the twenty-first century, interest rates have sunk lower than ever before. Central bankers and policymakers appear blithe to the unintended consequences of their actions, but easy money after the global financial crisis in 2007/2008 has produced several ill effects, including the appearance of multiple asset price bubbles, a reduction in productivity growth, discouraging savings and exacerbating inequality, and forcing yield-starved investors to take on excessive risk.

The financial world now finds itself caught between a rock and a hard place, and Edward Chancellor is here to tell us why. In this enriching volume, Chancellor explores the history of interest and its essential function in determining how capital is allocated and priced.

sample/excerpt – ch8 Secular Stagnation

monetary, interest, secular stagnation 1 -The Price of Time: The Real Story of Interest  by Edward Chancellor - 2022
monetary, interest, secular stagnation 2 -The Price of Time: The Real Story of Interest  by Edward Chancellor - 2022
monetary, interest, secular stagnation 3 -The Price of Time: The Real Story of Interest  by Edward Chancellor - 2022

reviews

amazon.co.uk 2022

blogs.cfainstitute.org  6-2022 Book Review: The Price of Time – By William J. Bernstein

…”…Chancellor provides a different, more compelling, and more frightening explanation of the world’s slowing economies: central banks’ now decades-long love affair with artificially low interest rates. He starts by discussing Swedish economist Knut Wicksell’s concept of the natural rate of interest, r* (r-star), below which inflation results and above which deflation occurs. While a skeptic might point out that r* is unobservable, it has been eminently clear for the past two decades that we are in monetary terra nova with prevailing rates well below r*. …”…

economist.com  8-2022 Ben Bernanke and Edward Chancellor square off on monetary policy – Their duelling books reveal the clashes between central bankers and their critics

ft.com  8-2022 A matter of interest — the battle over monetary policy...

goodreads.com 7 – 2022

irishtimes.com 9- 2022 The Price of Time offers multiple examples of financial excess and collapse. The author strongly contends that low interest rates are a leading …

katevane.com  9-2022  Book review: The Price of Time – It begins with a history of interest, from the ancient Mesopotamians through the 18th century Mississippi Bubble and the Wall Street Crash, up … by Kate Vane

kirkusreviews.com 8-2022 A wide-ranging global history of finance …

literaryreview.co.uk  7-2022 Howard Davies: The Credit Trap – The Price of Time

…”…Edward Chancellor can sleep easily. His core thesis, that artificially low interest rates, administered by interventionist central banks, will eventually generate financial instability or galloping inflation, or both, is becoming more persuasive by the day…”…

scotsman.com 7-2022  Book review: The Price of Time, by Edward Chancellor – A history of interest may sound dry, but as told by Edward Chancellor it’s a compelling narrative peppered with intriguing characters and anecdotes, writes Emma Newlands

seekingalpha.com 7-2022 Book Review: The Price Of Time

90;Summary – Few areas of macroeconomic policy are as important and generate as much heat as monetary policy. It is no secret that productivity growth is slowing worldwide; for example, in the United States, it fell from 2.8% per year between 1947 and 1973 to 1.2% after 2010. One of this book’s joys is its relevance to both political policy and personal finance, and were I to fault Chancellor’s marvelous volume for anything, it would be for not exploring these areas further.

tls.com 9-2022 Anarchists at the bank – A history of interest rates and the modern controversies they generate – By Eric Rauchway

thetimes.co.uk/ 8-2022 The Price of Time by Edward Chancellor review — Tales of folly and interest rates – This astute history shows that a bad hangover always follows periods of excessively low interest rates. Review by Emma Duncan

wsj.com 7-2022 ‘The Price of Time’ Review: Getting Interest Rates Wrong – They are the ‘universal price’ at the base of an economy. Keeping rates artificially low has created an addiction with its own cost. By Adam Rowe

…”…Edward Chancellor has a gift for timing. Devil Take the Hindmost, his book on financial speculation, was published shortly before the stock…”…


see also

medium.mpi.org 10-2022 The Steady Decline in Interest Rates – by Louis-Philippe Rochon, Mario Seccareccia

…”…This is the conventional loanable funds approach that mainstream economists apply to any period in time. In other words, given their belief in their universal theory, this explanation is used to explain the evolution of rates going back decades, in a one-size-fits-all approach to monetary policy. The same argument, albeit in reverse, would explain why market rates were increasing from 1950 to 1980, as in Figure 3 below.

Figure 3: Interest Rates, 1950–2020 – Source: Source: Federal Reserve Economic Data FRED

The Heterodox Perspective – We find this explanation, however, rather simplistic, as we feel it lacks historical-institutional context. For heterodox economists, however, the reasons and explanations are wholly different. First of all, we argue that interest rates are an administered price, set exogenously by central banks, based on various objectives or targets and not on some fleeting will-o’-wisp concept of the “natural” rate that, before the adoption of inflation targeting policy, had never been taken seriously by central bankers. Today, this view of how monetary policy is pursued whereby, in their price leadership role, central banks set exogenously their policy interest rate seems rather uncontroversial, yet it carries important consequences.

Indeed, we would argue that the history of monetary policy in the 20th and the early 21st centuries (up until now), is characterized by distinct macroeconomic and monetary policy regimes, in which central banks have different policy objectives….”… read at source


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