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The Price of Time: Play with interest rates and you might get burned

A new book argues that central bankers’ attempts to keep down the cost of borrowing are feeding a global financial wildfire

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Disastrous: Edward Chancellor draws a parallel between state regulation of forests and economies. Photo by Corbis via Getty Images

Disastrous: Edward Chancellor draws a parallel between state regulation of forests and economies. Photo by Corbis via Getty Images

The Price of Time by Edward Chancellor

The Price of Time by Edward Chancellor

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Disastrous: Edward Chancellor draws a parallel between state regulation of forests and economies. Photo by Corbis via Getty Images

In 1905, the US Forest Service was created, to protect America’s magnificent forest reserves. Unfortunately, woodland ecologies are complex systems, where top-down management risks a cascade of unintended consequences. When the Forest Service decided to protect trees by stopping them from being burnt down, the results were disastrous. Modest, intermittent forest fires, it turns out, are part of the natural process that maintains the landscape. They prevent larger fires from burning out of control, destroying everything in their path. By suppressing a natural balancing mechanism, the technocrats of trees caused far worse, and more lasting, damage.

Now imagine treating interest rates the same way. America’s central bank, the Federal Reserve, was created less than a decade after the Forest Service, and for Edward Chancellor the parallel is irresistible. In his terrific new book, The Price of Time, he argues that well-meaning attempts by central bankers to manage interest rates have also brought disaster — not just for America this time, but all round the world. The book opens with a graph showing the rise and fall of interest rates over the past 5,000 years. It nicely illustrates how unprecedented our own times really are. The European Central Bank plans to raise its base rate next month, for the first time, but it will remain at a historic near-zero low. The more you read of this engrossing book, the more terrifying that simple fact becomes.


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