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The first book of the next crisis. A history of interest rates by a
leading financial commentator, updated with a new postscript.
*Winner of the 2023 Hayek Book Prize* *Longlisted for the 2022
Financial Times Business Book of the Year Award* All economic and
financial activities take place across time. Interest coordinates
these activities. The story of capitalism is thus the story of
interest: the price that individuals, companies and nations pay to
borrow money. In The Price of Time, Edward Chancellor traces the
history of interest from its origins in ancient Mesopotamia,
through debates about usury in Restoration Britain and John Law ' s
ill-fated Mississippi scheme, to the global credit booms of the
twenty-first century. We generally assume that high interest rates
are harmful, but Chancellor argues that, whenever money is too
easy, financial markets become unstable. He takes the story to the
present day, when interest rates have sunk lower than at any time
in the five millennia since they were first recorded - including
the extraordinary appearance of negative rates in Europe and Japan
- and highlights how this has contributed to profound economic
insecurity and financial fragility. Chancellor reveals how
extremely low interest rates not only create asset price inflation
but are also largely responsible for weak economic growth, rising
inequality, zombie companies, elevated debt levels and the pensions
crises that have afflicted the West in recent years - conditions
under which economies cannot possibly thrive. At the same time,
easy money in China has inflated an epic real estate bubble,
accompanied by the greatest credit and investment boom in history.
As the global financial system edges closer to yet another crisis,
Chancellor shows that only by understanding interest can we hope to
face the challenges ahead.
Is your investment in that new Internet stock a sign of stock market savvy or an act of peculiarly American speculative folly? How has the psychology of investing changed--and not changed--over the last five hundred years? Edward Chancellor examines the nature of speculation--from medieval Europe to the Tulip mania of the 1630s to today's Internet stock craze. A contributing writer to The Financial Times and The Economist, looks at both the psychological and economic forces that drive people to "bet" their money in markets; how markets are made, unmade, and manipulated; and who wins when speculation runs rampant. Drawing colorfully on the words of such speculators as Sir Isaac Newton, Daniel Defoe, Ivan Boesky, and Hillary Rodham Clinton, Devil Take the Hindmost is part history, part social science, and purely illuminating: an erudite and hugely entertaining book that is more timely today than ever before.
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
In the beginning was the loan, and the loan carried interest. For
at least five millennia people have been borrowing and lending at
interest. The practice wasn't always popular--in the ancient world,
usury was generally viewed as exploitative, a potential path to
debt bondage and slavery. Yet as capitalism became established from
the late Middle Ages onwards, denunciations of interest were
tempered because interest was a necessary reward for lenders to
part with their capital. And interest performs many other vital
functions: it encourages people to save; enables them to place a
value on precious assets, such as houses and all manner of
financial securities; and allows us to price risk.All economic and
financial activities take place across time. Interest is often
described as the "price of money," but it is better called the
"price of time: " time is scarce, time has value, interest is the
time value of money.Over the first two decades of the twenty-first
century, interest rates have sunk lower than ever before. 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.
We live in an age of serial asset bubbles and spectacular busts.
Economists, policymakers, central bankers and most people in the
financial world have been blindsided by these busts, while
investors have lost trillions. Economists argue that bubbles can
only be spotted after they burst and that market moves are
unpredictable. Yet Marathon Asset Management, a London-based
investment firm managing over $50 billion of assets has developed a
relatively simple method for identifying and potentially avoiding
them: follow the money, or rather the trail of investment. Bubbles
whether they affect a whole economy or merely a single industry,
tend to attract a splurge of capital spending. Excessive investment
drives down returns and leads inexorably to a bust. This was the
case with both the technology bubble at the turn of the century and
the US housing bubble which followed shortly after. More recently,
vast sums have been invested in mining and energy. From an
investor's perspective, the trick is to avoid investing in sectors,
or markets, where investment spending is unduly elevated and
competition is fierce, and to put one's money to work where capital
expenditure is depressed, competitive conditions are more
favourable and, as a result, prospective investment returns are
higher. This capital cycle strategy encourages investors to eschew
the simple 'growth' and 'value' dichotomy and identify firms that
can deliver superior returns either because capital has been taken
out of an industry, or because the business has strong barriers to
entry (what Warren Buffett refers to as a 'moat'). Some of
Marathon's most successful investments have come from obscure,
sometimes niche operations whose businesses are protected from the
destructive forces of the capital cycle. Capital Returns is a
comprehensive introduction to the theory and practical
implementation of the capital cycle approach to investment. Edited
and with an introduction by Edward Chancellor, the book brings
together 60 of the most insightful reports written between 2002 and
2014 by Marathon portfolio managers. Capital Returns provides key
insights into the capital cycle strategy, all supported with real
life examples from global brewers to the semiconductor industry -
showing how this approach can be usefully applied to different
industry conditions and how, prior to 2008, it helped protect
assets from financial catastrophe. This book will be a welcome
reference for serious investors who looking to maximise portfolio
returns over the long run.
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