It really is about "easy money" — Edward Chancellor

I'm not sure why a few Goodreads reviewers think they know better, but they don't.

The Price of Time: Interest, Capitalism and the Curse of Easy Money by Edward Chancellor
My rating: 5 of 5 stars

 This is an extended and edited version of my Goodreads review of a book that says, yes, it really is about "easy money" from the Federal Reserve, first with the "Greenspan put," then the "Bernanke bubbles," then Yellen and Powell being afraid to pull away the proverbial punchbowl.

A very good book overall, whose theme for today is “easy money is a drug,” while backing that up with a 4,000 year look at the history of interest rates, tied to discussions of what is a “normal” rate of interest, if there is such a thing, and other factors. The title comes from people as far back as Adam Smith or further nothing that interest was the price people paid on time discounting returns, especially if said time involves risk or anxiety.

Chancellor first goes back to antiquity and the first use of interest, predating Hammurabi’s Code by centuries. He notes, like Michael Hudson, that debt jubilees far preceded their biblical establishment, BUT he gives some details that Hudson doesn’t.

One big thing is that they weren’t on a 50-year or whatever cycle. Instead, a new king implemented them to cut social unrest, etc. Like new Caesars paying off the Praetorians. That's one thing we should remember today. A la "predictably irrationality," having a jubilee on a fixed cycle probably would lead to moral hazard issues, as well as hesitancy to loan near the end of such a cycle, something Hudson doesn't really address. Second, there were two types of debt — barley-based, which were generally “consumer” loans in today’s terms, and silver-based, which were “commercial” loans. Only the barley loans were forgiven. In line with Biden's push to cancel at least part of student loan debt and wingnuts pushing back, that would surely fall under "consumer" debt.  Third, a new king wasn’t guaranteed to do this. 

(Sidebar: If Hudson does want to go hunting for a background to this issue that stands on better ground? Per comments by David Graeber in "Debt," it's the old hunter-gatherer world he needs to look at, and, like the Inuit, preferably looking at a hunter-gatherer world with limited interaction with the agriculturalist world.)

From there, he looks at debt, interest and definitions of usury around the ancient eastern Mediterranean, with some excursion into China. (India doesn’t make his radar screen for whatever reasons.) The basic idea is not that money wasn't allowed to "work," but that it wasn't allowed to become too greedy in how and how much it worked.

Then, he starts early modern history where knowledgeable people would expect: John Law and the Mississippi Bubble, with details on just how bubbly it was. From there, it’s off to Walter Bagehot, his Bank of England as “lender of last” resort and just how much that’s abused in modern times. That includes even abuse in Switzerland, regarded throughout the Western world as a model of probity. Along the way, he loops in discussions on economists in the 1600s, notes on how “easy money” led to Fugger wealth and more.

NOTE: Chinese tankies will HATE this book because of the chapter “Financial Repression with Chinese characteristics.”

For more on this, see my full review and click the "spoiler" link to toggle it open. The TL/DR? Beijing has willingly been inflating bubbles at least as big as in the U.S. There's plenty of evidence for it, and most of it, albeit perhaps not always with his level of detail, I've seen before here.[
1. Between 2008 and 2018, Chinese households doubled their level of debt relative to income and ended up owing more than American households at the start of the subprime crisis.
2. On the corporate side, Chinese state-owned enterprises get state loans at a full percentage point or more lower than comparable private biz. That’s a large part of corporate bubbliness there.
3. China’s largest real estate developer, Evergrande, by itself has liabilities equivalent to 3 percent of total Chinese GDP.
4. Al Jazeera reporting on Ordos, China’s zombie city.
5. Related? Many new apartments are just blank shells, without electric wiring and plumbing.
6. Because China’s yuan is indirectly dollar-denominated, it, like an Argentina, is vulnerable. Federal Reserve rate hikes, like the modest ones in 2013, triggered Chinese currency flight. (One can only wonder with the current Fed hikes are going to do to China.)
7. As a result of the above and other things? China’s Gini is higher than the US. And, as with deliberate misreporting of COVID rates, the unofficial word on this is surely worse than the official one. (hide spoiler)]

Refuting people who challenge Chancellor's ideas on easy money? Chancellor’s short and sweet discursus on Iceland eating its shit, taking its haircut, and doing well today.

Finally, in his postscript, Chancellor speculates if central banks will offer their own digital currencies to drive out private crypto. It's speculative, but worth pondering. Before that, Chancellor notes just how bubbly crypto is, and how it's essentially deliberately designed to be that way.

I don’t think I’d ever even read a newspaper piece by him before. But, per Chancellor’s Wiki page, he is indeed insightful. His political positions would seem to be, in US terms, mainstream liberal to the left side of that, and minus most neoliberalism. And, per his previous two books also ultimately being about bubbles, the global economy is either going to be facing a Long Unwinding, if the Fed holds the course, or else more Fake Growth. That said, while he got the last three global bubbles right, his defense of voting Leave, and calling out economists who warned about its problems, appear to have been more miss than hit on the prognostication side. 

In essence, to riff on something from 15 years ago? We may be facing some sort of "Great Unwinding" to fully deal with 20 years of Fed problems. That said, the inflation rate has started dropping again, so it remains to be seen how long the Fed will stay the course and what its landing spot is.

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