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Library of Mistakes

Ep 7: The Price of Time (with Edward Chancellor)

Jul 22, 2022
Edward Chancellor, Author of 'The Price Of Time', discusses the functions of interest rates, misallocation of capital, heroes and dogmatism in finance, consequences of low interest rates such as rise of corporate monopolies, and the future of the market rate of interest and financial repression.
36:52

Podcast summary created with Snipd AI

Quick takeaways

  • Interest rates serve multiple functions beyond controlling inflation, acting as an inducement to lend and preventing hoarding, while also being used to value financial assets.
  • The distortion of interest rates as manipulation tools by central banks has consequences for the allocation of investments, capital, and resources, leading to asset price bubbles, credit booms, and a need to review inflation targets and the functional role of central banks.

Deep dives

The multifunctionality of interest rates

Interest rates serve multiple functions, beyond controlling inflation. They act as an inducement to lend, preventing hoarding, and are used to value financial assets. Low interest rates discourage lending and create financial absurdities, as seen in the spikes of speculative assets. Central banks have been distorting asset prices and misallocating capital, as admitted by central bankers themselves, leading to risky financial engineering.

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