If you asked him, Edward Chancellor wouldn’t say he’s particularly Austrian. Yet The Price of Time: The Real Story of Interest, the dense book he most timely published during the height of the inflation summer of 2022, is as obsessed with centrally planned interest rates as your average Misesian. Like many before him, and many in the Austrian camp, Chancellor identifies the many ills that trouble the world and locates their cause in a dysfunctional interest-rate regime.
In Chancellor’s own words, “The most important question addressed in this book is whether a capitalist economy can function properly without market-determined interest.” Most readers of these pages will automatically respond, no—free-market capitalism rests on an uninhibited market for capital and debt, and thus interest rates act as a rationing mechanism and guiding principle. The rest is just implementation, as Michael Malice might say.
A skilled journalist and trained historian, Chancellor’s writing is calm and balanced, nuanced and well thought through. It’s littered with citations and quotes from economists and commentators both past and present.
That’s also part of why making it through the three-hundred-plus carefully written pages of The Price of Time is such a hardship. It’s fascinating and engaging but dense and ultimately a bit confusing. The author gives no clues for where we’re going, over and above the early hint that low interest rates have all sorts of bad downstream effects on an economy and its financials. The signposts are missing. Another piece of annoyance is the frequent antimarket talking points he returns to—monopoly power, corporations centralizing through acquisition and control, debt-issuing and share buybacks to boost financial returns, inequality, and wealth concentration.
The saving grace is they all fit into a low-rates story. Much like James Grant, of Grant’s Interest Rate Observer, remarks, “A little-known fact about unicorns . . . is that they feed on interest rates. They like low, little rates—the tinier, the better.” The same goes for the conglomerate empire-building, leveraged buyouts, takeovers paid for with shares, or even the explosion of ultra-high-net-worth individuals. It wasn’t a flaw in the capitalist system that generated these perverse outcomes, but the Fed-manipulated, centrally planned rates and its money printing.
He traces the long history of interest back to Mesopotamia, but it’s in his treatment of the last few centuries that the book really shines. He identifies John Locke as “the first writer to consider at length the potential damage produced by taking interest rates below their natural level.” He continues,
In the wake of the global financial crisis of 2008, central bankers slashed interest rates, hoping to revive economies by easing the burden of debt and boosting asset values. Their aims were remarkably similar to those espoused by the seventeenth-century advocates of easy money.
Locke had already spelled out the consequences for them: “Paper wealth has multiplied while genuine wealth has stagnated.” At the bottom of all bubbles, continues Chancellor, lies “a disconnect between finance and the real world.” Low interest rates turn otherwise careful and diligent investors into financial engineers and imbue venture capitalists with a “spray-and-pray” mentality, like macro analyst Andreas Steno says in a piece I keep coming back to over and over, “Three Reasons Why Everyone, Zuckerberg, Me, and Their Dogs Turn into Idiots When Rates Are 0 Percent.”
“Easy money,” concludes Chancellor, “was dumb money.” Cue WeWork and fake meat companies, GameStop and zombie companies, the mania around environmental, social, and governance, and the FTX collapse.
He quotes Murray Rothbard and Ludwig von Mises with as much ease and approval as he does Jeremy Bentham or Daniel Defoe, and he digs up some remarkably Austrian commentary from the past. A nineteenth-century British banker, after one of England’s infamous midcentury panics, remarks, “As a rule, panics do not destroy capital; they merely reveal the extent to which it has previously been destroyed by its betrayal into hopelessly unproductive works.”
“The book inclines quite strongly toward the Austrian interpretations,” Chancellor confessed in an interview with Jeff Deist last year. Maybe that’s why so many establishment outlets didn’t touch it. Sane economic reasoning is apparently right-wing extremism. (And The New York Timesbestseller list is editorial content anyway, so go figure.)
Case in point: Jamie Martin’s piece for the London Review of Books—which more favorably could have been titled “Don’t Slash My Precious Government Spending!”—completely missed the point of Chancellor’s well-assembled armada, instead rallying against austerity: “As a consequence, [countries cutting government spending] face the prospect of years of lost growth, deteriorating public services and infrastructure, and political instability. . . . There are no zombie countries whose destruction will make us better off.” Ugh.
Toward the end of The Price of Time, Chancellor finds an eerie echo of our times in Lewis Carroll’s last novel Sylvie and Bruno, published in 1889. In it, emperor-mandated money printing generates wealth, two eggs cost less than one, and a loan is repaid before it is even issued. The absurdity is amusing—until central bankers a century later thought to make it a reality. “Carroll would have understood that when the price of time is set at nothing or turns negative, and central banks print money without limit, finance becomes absurd.” Accordingly, capitalism without bankruptcy is like Christianity without hell.
The best way to destroy capitalism truly is to mess with its most important set of prices: the price for “hired money,” incorporating as it does the spread between present and future goods, and the time value of money between the various stages of production.
In the concluding chapter, Chancellor picks up the pace, throws caution to the wind, and turns downright radical:
Each time the monetary authorities stepped forward to deal with some real and pressing problem—whether the collapsing banking system, the unravelling of international credit and rising unemployment in 2008, or Europe’s sovereign debt crisis a couple of years later—there followed secondary consequences that were never properly considered or resolved.
“LFG!!” as the kids would say. The Price of Time is a book well worth your time.
