Edward Chancellor Quotes

As Bastiat understood, a very low rate of interest may benefit the rich, who have access to credit, more than the poor.

The most encompassing view of interest is contained in the notion of interest as the ‘time value of money’ or, simply, as the price of time.

As a cynical pamphleteer observed, demands for lowering interest were really designed for the ‘ingrossing all trade, into the hands of a few rich Merchants, who have Money enough of their own to Trade with, to the excluding all young men, that wants it’.13

Wilson then goes on to provide a new definition of interest: ‘Usurye is also saide to be the price of tyme, or of the delaying or forbearing of moneye.’ Interest has been described in many ways over the years – it’s often referred to as the ‘price of money’. But Wilson knew better. Interest, he said, is the price of time. There is no better definition. In

After Augustus’ death, the Emperor Tiberius hoarded money, with the result that interest rates rose above the legal limit and a banking crisis erupted in AD 33. Tiberius then decided to lend out the imperial treasure free of interest to patrician families, which brought about an immediate decline in interest rates and an end to the crisis.55 His actions constituted the world’s first experience of quantitative easing.fn9

This book is about the role of interest in a modern economy. It was inspired by a Bastiat-like conviction that ultra-low interest rates were contributing to many of our current woes, whether the collapse of productivity growth, unaffordable housing, rising inequality, the loss of market competition or financial fragility. Ultra-low rates also seemed to play some role in the resurgence of populism as Sumner’s Forgotten Man started to lose patience.

If interest rates are kept below their natural level, misguided investments occur: too much time is used in production, or, put another way, the investment returns don’t justify the initial outlay. ‘Malinvestment’, to use a term popularized by Austrian economists, comes in many shapes and sizes. It might involve some expensive white-elephant project, such as constructing a tunnel under the sea, or a pie-in-the-sky technology scheme with no serious prospect of ever turning a profit.

Firms in industries with the greatest increase in concentration enjoyed higher profits. But, as Adam Smith observed, monopolies don’t serve the public good. Rather, monopolies create barriers to entry which discourage the establishment of new firms and innovation.29 Rising industry concentration was associated with higher pay for senior executives, a decline in workers’ bargaining power, and falling investment and R&D. Economists at the National Bureau of Economic Research found that while ‘low interest rates have traditionally been viewed as positive for economic growth … extremely low interest rates may lead to slower growth by increasing market concentration.

Summers also claimed that technology was reducing the demand for capital. Digital businesses, such as Facebook and Google, had established dominant global franchises with relatively little invested capital and small workforces. In his book The Zero Marginal Cost Society (2014), the social theorist Jeremy Rifkin heralded the passing of traditional capitalism.16 If the Old Economy was marked by scarcity and declining marginal returns, Rikfin argued that the New Economy was characterized by zero marginal costs, increasing returns to scale and capital-lite ‘sharing’ apps (such as Uber, Lyft, Airbnb, etc.). The demand for capital and interest rates, he said, were set to fall in this ‘economy of abundance’. There was some evidence to support Rifkin’s claims. The balance sheets of US companies showed they were using fewer fixed assets (factories, plant, equipment, etc.) and reporting more ‘intangibles’ – namely, assets derived from patents, intellectual property and merger premiums. In much of the rest of the world, however, the demand for old-fashioned capital remained as strong as ever. After the turn of the century, the developing world exhibited a voracious appetite for industrial commodities that required massive mining investment. China embarked on what was probably the greatest investment boom in history. Before and after 2008, global energy consumption rose steadily. The world’s total investment (relative to GDP) remained in line with its historical average.17 Rifkin’s ‘economy of abundance’ remained a tantalizing speculation.

Cages of women. Women and girls of all ages. Lining downtown streets behind The Great Barrier Walls. Passersby prodding at them with canes, sticks, and whatever they could find. Spitting on them through the bars, as law and culture required. “Cages of women who had disobeyed their husbands, or sons, their preachers, or some other males in their lives. One or two of them had been foolish and self-destructive enough to have reported a rapist. “A couple of them had befriended someone higher or lower than their stations, or maybe entertained a foreigner from outside the community, or allowed someone of a lesser race into their homes. A few may have done absolutely nothing wrong but for being reported by a neighbor with a grudge. “For the most part they had disobeyed or disrespected males. “Watching from behind tinted and bullet-proof windows at the rear of his immaculate stretch limo, the Lord High Chancellor of PolitiChurch, grinned the sadistic grin of unholy conquest. A dark satisfaction only a deeply tarred soul could enjoy.” … … “Caged women and young girls at major street corners in even the worst weather. Every one of them his to do with, or dispose of, as he would. “In this world – in His world – He was God.” - From “The Soul Hides in Shadows” “It is the year 2037. What is now referred to as ‘The Great Electoral Madness of ’16’ had freed the darkest ignorance, isolationism, misogyny, and racial hatreds in the weakest among us, setting loose the cultural, economic, and moral destruction of America. In the once powerful United States, paranoia, distrust, and hatred now rage at epidemic levels.

Baron, Baroness Originally, the term baron signified a person who owned land as a direct gift from the monarchy or as a descendant of a baron. Now it is an honorary title. The wife of a baron is a baroness. Duke, Duchess, Duchy, Dukedom Originally, a man could become a duke in one of two ways. He could be recognized for owning a lot of land. Or he could be a victorious military commander. Now a man can become a duke simply by being appointed by a monarch. Queen Elizabeth II appointed her husband Philip the Duke of Edinburgh and her son Charles the Duke of Wales. A duchess is the wife or widow of a duke. The territory ruled by a duke is a duchy or a dukedom. Earl, Earldom Earl is the oldest title in the English nobility. It originally signified a chieftan or leader of a tribe. Each earl is identified with a certain area called an earldom. Today the monarchy sometimes confers an earldom on a retiring prime minister. For example, former Prime Minister Harold Macmillan is the Earl of Stockton. King A king is a ruling monarch. He inherits this position and retains it until he abdicates or dies. Formerly, a king was an absolute ruler. Today the role of King of England is largely symbolic. The wife of a king is a queen. Knight Originally a knight was a man who performed devoted military service. The title is not hereditary. A king or queen may award a citizen with knighthood. The criterion for the award is devoted service to the country. Lady One may use Lady to refer to the wife of a knight, baron, count, or viscount. It may also be used for the daughter of a duke, marquis, or earl. Marquis, also spelled Marquess. A marquis ranks above an earl and below a duke. Originally marquis signified military men who stood guard on the border of a territory. Now it is a hereditary title. Lord Lord is a general term denoting nobility. It may be used to address any peer (see below) except a duke. The House of Lords is the upper house of the British Parliament. It is a nonelective body with limited powers. The presiding officer for the House of Lords is the Lord Chancellor or Lord High Chancellor. Sometimes a mayor is called lord, such as the Lord Mayor of London. The term lord may also be used informally to show respect. Peer, Peerage A peer is a titled member of the British nobility who may sit in the House of Lords, the upper house of Parliament. Peers are ranked in order of their importance. A duke is most important; the others follow in this order: marquis, earl, viscount, baron. A group of peers is called a peerage. Prince, Princess Princes and princesses are sons and daughters of a reigning king and queen. The first-born son of a royal family is first in line for the throne, the second born son is second in line. A princess may become a queen if there is no prince at the time of abdication or death of a king. The wife of a prince is also called a princess. Queen A queen may be the ruler of a monarchy, the wife—or widow—of a king. Viscount, Viscountess The title Viscount originally meant deputy to a count. It has been used most recently to honor British soldiers in World War II. Field Marshall Bernard Montgomery was named a viscount. The title may also be hereditary. The wife of a viscount is a viscountess. (In pronunciation the initial s is silent.) House of Windsor The British royal family has been called the House of Windsor since 1917. Before then, the royal family name was Wettin, a German name derived from Queen Victoria’s husband. In 1917, England was at war with Germany. King George V announced that the royal family name would become the House of Windsor, a name derived from Windsor Castle, a royal residence. The House of Windsor has included Kings George V, Edward VII, George VI, and Queen Elizabeth II.

Tis not altogether improbable, that when the nation become heartily sick of their debts, and are cruelly oppressed by them, some daring projector may arise with visionary schemes for their discharge. And as public credit will begin, by that time, to be a little frail, the least touch will destroy it, as happened in France; and in this manner it will die of the doctor. David Hume, ‘Of Public Credit’, 1752

And Chancellor did not let them down. A quiet man with a quick sense of humour, he stamped no menacing mark on his company. Only the observant eye, the lively brain, the pure, canalized flair of the mathematician had made him what Henry Sidney always said he was: the supreme man of his time on the sea. He took the Edward on compass and chart out of Vardȯ, and sailed her on instruments, on instinct, on geometry for a month while the wind drove the fleet on bare poles from one point of the compass to the next; into and out of the sight of land; in quarters where he had no charts and no books of reference, and could only trust to his work, to his tables, to his and Dee’s calculations.

After all, the Fed has driven down rates with the intention of encouraging investors to take on more risk. Yet those who embrace low yields, poor credits, thin liquidity and even currency mismatches today may discover, when market conditions deteriorate, that the modest yield pick-up proves poor compensation for future losses. Mr. Piketty can rest easy. In an age when risk-free assets yield little or nothing, the determination of the wealthy to earn somewhat more will, in due course, do more to restore equality than his proposed taxes. A free market solution to a political problem–who says capitalism is failing?

Buybacks: How the Game Works Imagine a company – let’s call it FinEng Corp – with sales of $1 billion and a 5 per cent profit margin. The $50 million of profits are taxed at a 30 per cent rate. The company has 500 million shares outstanding and shareholders’ equity of $500 million. The shares trade at 15 times earnings. The corporate incentive plan provides senior executives with 50 million stock options, which strike at the current market price. At this point, FinEng has no

This encouraging process is continuing with, for example, the largest players in the UK market all having announced price rises of 4 per cent already in 2010. In emerging markets, pricing growth has been easier to achieve, in part due to the greater fragmentation of the retail channel and generally higher levels of inflation which have made it possible to hide price increases. Here, as well as volume growth, the story is one of increased “premiumization”–persuading consumers to trade up as they become wealthier.

Taking all these things together–the emphasis on pricing, the focus on cost reduction and balance sheet efficiency–an improvement in both margins and return on capital was to be expected. As for valuation, the average free cash flow yields of 6–7 per cent imply growth rates of around GDP or a little less, which suggests that the stock market is underestimating the potential long-run benefit to be derived from market consolidation and improved discipline. In the light of an improving capital cycle among brewers, we find ourselves able, to paraphrase Sir Winston, to overcome our prejudice and begin increasing our exposure to beer. 6

The fact is that one person’s growth stock is another’s value stock. Recently, the investment data company Lipper has reported that Citigroup, AIG and IBM are among the top 15 mutual fund holdings in both the large company “value” and “growth” categories. This brings us to our next point, which perhaps best explains why Marathon should never be labelled as a pure value investor. Our capital cycle process examines the effects of the creative and destructive forces of capitalism over time. A growth stock usually becomes a value stock after excess capital, lured in by large current profitability, brings about a decline in returns. When this becomes extreme, as was the case during the technology bubble, the resultant bust can turn growth stocks into value stocks almost overnight. The telecoms sector provides

While the case for long-term investment has tended to centre around simple mathematical advantages such as reduced (frictional) costs and fewer decisions leading (hopefully) to fewer mistakes, the real advantage to this approach, in our opinion, comes from asking more valuable questions. The short-term investor asks questions in the hope of gleaning clues to near-term outcomes: relating typically to operating margins, earnings per share and revenue trends over the next quarter, for example. Such information is relevant for the briefest period and only has value if it is correct, incremental, and overwhelms other pieces of information. Even when accurate, the value of the information is likely to be modest, say, a few percentage points in performance. In order to build a viable, economically important track record, the short-term investor may need to perform this trick many thousands of times in a career and/ or employ large amounts of financial leverage to exploit marginal opportunities. And let’s face it, the competition for such investment snippets is ferocious. This competition is fed by the investment banks. Wall Street relies heavily on promoting client myopia to earn its crust. Why

The longer one owns the shares, however, the more important the firm’s underlying economics will be to performance results. Long-term investors therefore seek answers with shelf life. What is relevant today may need to be relevant in ten years’ time if the investor is to continue owning the shares. Information with a long shelf life is far more valuable than advance knowledge of next quarter’s earnings. We seek insights consistent with our holding period. These principally relate to capital allocation, which can be gleaned from examining the company’s advertising, marketing, research and development spending, capital expenditures, debt levels, share repurchase/ issuance, mergers and acquisitions and so forth.

In particular, there is strong social pressure from peers, colleagues and clients to boost near-term performance. Even if one has developed the analytical skills to spot the winner, the psychological disposition necessary to own shares for prolonged periods is not easily come by. J.K. Galbraith observed that: “nothing is so admirable in politics as a short-term memory.” Why should politics have a monopoly on sloppy thinking? Which makes us think that long-term investing works not because it is more difficult, but because there is less competition out there for the really valuable bits of information.

Charles T. Munger is fond of saying that there are “more banks than bankers.” A competitive advantage based on a willingness to make loans in an instant would be anathema to old-fashioned bankers. Of particular concern to us is the extent to which Irish bankers engage in the hard-sell to investors. One of them declared at the conference we recently attended: “I am here unashamedly to sell you X bank!” This rather goes against our preference for bankers as cautious individuals, obsessed with long-term downside risks. As we have seen in many other businesses, an obsession with growth, combined with overpromotion, is likely to end in tears. As to when this will happen, we must wait for time, Ireland’s proverbial story teller.

Compared to a conventional debt instrument, what makes securitization so attractive is the fact that the airline often retains the junior tranches. These become an asset on its balance sheet. Any discount associated with the low credit rating of these layers is more than offset by the discount on the purchase of the aircraft, thereby creating an immediate profit and cash inflow on delivery of the aircraft. Such are the wonders of modern financial alchemy. Under good, even normal, business conditions, the airline makes lease payments to the securitization vehicle. But in a recession or a bankruptcy filing, when payments are suspended, the owners of the senior strata are able to seize the collateral. The junior participants in the securitization have no rights, and any such assets on the airline’s balance sheet must be written down to zero, further increasing the airline’s losses. By this clever piece of financial engineering, the airline gets shiny new planes for an extremely low cost of funds–recently as low as 6 per cent–while equity shareholders carry nearly all of the business risk. That an industry which has rarely earned an acceptable return on capital should have access to such cheap capital is quite astonishing.

The problems of European auto-and steelmakers relate primarily to a fall in demand as opposed to any recent overbuilding of domestic capacity in more favourable macroeconomic conditions. Other industries have suffered from disruptive new technologies or business models which have left legacy companies struggling to cope. Flag-carrier airlines, saddled with outdated employment contracts and national champion status, have suffered greatly from the growth of unencumbered low cost carriers. The CEO of struggling SAS in Scandinavia recently bemoaned the lack of a Chapter 11 process in Europe. Perhaps he is jealous of a system which in the US has led to the anti-Darwinian outcome of the survival of the least fit!

The Japanese experience, since the early 1990s, is worrying in this respect. After the bubble economy collapsed and the private sector went into deleveraging mode, low interest rates have prevailed. During Japan’s two lost decades, returns on equity have been persistently lower than in Europe or the US–they currently average around 8 per cent compared to 12 per cent and 15 per cent respectively, albeit with lower gearing. Despite Japan introducing the world to ZIRP (the zero-interest rate policy), the country’s nominal GDP per capita remains below the 1991 level. Rather like the current Western experience, the decline in private sector leverage has been replaced by rising public sector debt–which is now over 200 per cent of GDP, up from around 50 per cent in the early 1990s. Total debt, both public and private, is greater today, relative to Japan’s economy, than in 1990. In short, Japan’s long experiment with low rates has hardly been a positive one, with respect to either corporate profitability or the country’s ability to outgrow its debt burden.

Swiftly gliding in, blushing like a girl, a tall thin stripling held out both his hands; and although I could hardly believe as I looked at his flushed feminine, and artless face that it could be the Poet, I returned his warm pressure. After the ordinary greetings and courtesies he sat down and listened. I was silent from astonishment: was it possible that this mild-mannered beardless boy could be the veritable monster of the world?–ex-communicated by the Fathers of the Church, deprived of his civil rights by the fiat of a grim Lord Chancellor, discarded by every member of his family,and denounced by the rival sages of our literature as the founder of a Satanic school? I could not believe it; it must be a hoax.

So who is the woman who excites Diana’s feelings? From the moment photographs of Camilla fluttered from Prince Charles’s diary during their honeymoon to the present day, the Princess of Wales has understandably harboured every kind of suspicion, resentment and jealousy about the woman Charles loved and lost during his bachelor days. Camilla is from sturdy county stock with numerous roots in the aristocracy. She is the daughter of Major Bruce Shand, a well-to-do wine merchant, Master of Fox Hounds and the Vice Lord Lieutenant of East Sussex. Her brother is the adventurer and author Mark Shand, who was once an escort of Bianca Jagger and model Marie Helvin, and is now married to Clio Goldsmith, niece of the grocery millionaire. Camilla is related to Lady Elspeth Howe, wife of the former Chancellor of the Exchequer, and the millionaire builder, Lord Ashcombe. Her great-grandmother was Alice Keppel who for many years was the mistress of another Prince of Wales, Edward VII. She was married to a serving Army officer and once said that her job was to “curtsey first--and then leap into bed.

As Gordon’s book The Rise and Fall of American Growth went to press in early 2016 (its publication facilitated by digital technologies), the internet continued to disrupt countless industries while the media fanned fears of an impending ‘second machine age’, in which robots replace human workers. Gordon’s Northwestern colleague Joel Mokyr suggested that a ‘shortfall of imagination [is] largely responsible for much of today’s pessimism’. Mokyr listed a number of revolutionary new technologies then under development, including 3D printing, graphene and genetic engineering, to which might be added autonomous cars and clean energy.19 Finance writer William Bernstein accused secular stagnationists of conflating what they couldn’t conceive with that which was not possible.20 Hansen made the same mistake. The most reliable prediction, Bernstein concluded, is to assume that past economic trends continue.

The mistake in setting targets lies in assuming that relationships between variables – in this case a certain measure of the money supply and inflation – are stationary. In the real world, human behaviour responds to attempts at control. ‘The essence of Goodhart’s Law,’ write John Kay and Mervyn King in their book Radical Uncertainty, is that ‘any business or government policy which assumed stationarity of social and economic relationships was likely to fail because its implementation would alter the behaviour of those affected and therefore destroy that stationarity.

As Edward Chancellor wrote in The Price of Time, “We do know that the Mesopotamians charged interest on loans before they discovered how to put wheels on carts.

Borio cast aside the money veil to reveal a world of asset price bubbles, financial cycles, and credit booms and busts: ‘Think monetary! Modelling the financial cycle correctly … requires recognising fully the fundamental monetary nature of our economies,’ was Borio’s clarion call.7 The financial system, he asserted, doesn’t just allocate resources, it generates purchasing power. It has a life of its own. Finance and macroeconomics are ‘inextricably linked’. We inhabit a looking-glass world. Finance does not mirror reality, but acts upon it.fn2 Economics without finance, said Borio, is like Hamlet without the prince.

Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate … It will purge the rottenness out of the system. High costs of living and high living will come down … enterprising people will pick up the wrecks from less competent people. Andrew Mellon, 1932

When doubts about the survival of the single currency surfaced in 2010, the financial markets started to view countries on Europe’s periphery, from Ireland to Greece, as over-indebted and uncompetitive. Bound by euro-fetters, members of the Eurozone could not regain competitiveness by devaluing their currencies. Instead, interest rates across the region diverged, with highly indebted countries, including Italy and Greece, suddenly forced to pay hefty risk premiums. Meanwhile German bond yields headed into negative territory. Deflation beckoned. Deleveraging was in order. To bring down labour costs, the PIIGS were going to have to embrace deep structural reforms. Unemployment in Spain climbed to Great Depression levels. Schumpeter’s forces of creative destruction were about to be unleashed, big time.

At least Japan had sufficient domestic savings to fund its escalating national debt and printed its own currency. Europe’s stricken periphery wasn’t so fortunate. Take Draghi’s homeland. In the fifteen years since the start of the euro project, Italy enjoyed no increase in income per capita and labour costs climbed relative to Germany’s, rendering Italian exports uncompetitive. Italy’s public debt trailed only Japan’s and Greece’s. Italian banks were loaded down with hundreds of billions of euros of bad debts. Many of its largest businesses were certified zombies. Political sclerosis accompanied the economic version. The IMF warned that ‘in the absence of deeper structural reforms, medium-term growth is projected to remain low.’30 Without adequate economic growth, Italy’s sovereign debt problems and the Eurozone’s existential crisis remained unresolved. As in Japan, easy money bought time, but time was wasted.fn6

The highly abnormal is becoming uncomfortably normal. Claudio Borio, 2014 As we have seen in Chapter 3, David Hume held that money was a mere representation of things. A loan may be denominated in money, but what is actually lent is a certain quantity of labour or stock, he maintained. Given money’s fictitious value, Hume believed that a change in the amount of money would affect prices but not interest. In his view, interest was determined by frugality (savings) and industry (the return on capital). The Scottish philosopher imagined what would happen if money dropped like manna from Heaven: For, suppose that, by miracle, every man in GREAT BRITAIN should have five pounds slipt into his pocket in one night; this would much more than double the whole money that is at present in the kingdom; yet there would not next day, nor for some time, be any more lenders, nor any variation in the interest … this money, however abundant … would only serve to encrease the prices of every thing, without any farther consequence … The overplus of borrowers above that of lenders continuing still the same, there will follow no reduction of interest. That depends upon another principle; and must proceed from an encrease of industry and frugality, of arts and commerce.

Metrics serve to stifle innovation and creativity; they imitate science but resemble faith. When an institution is guided by some specific target, critical judgement is suspended. In the 1970s, the American social scientist Donald Campbell pointed out that ‘the more any quantitative social indicator is used for social decision-making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor.’ Historian Jerry Muller adds a corollary to Campbell’s Law, namely: ‘anything that can be measured and rewarded will be gamed.

Paradoxical as it may seem, the riches of nations can be measured by the violence of the crises which they experience,’ opined the nineteenth-century French economist Clément Juglar.13 Once creative destruction is taken into account, Juglar’s observation doesn’t appear so puzzling. Some economists take a ‘pit-stop’ view of recessions, seeing them as periods when efficiency measures are most likely to be undertaken.14 Business failures, which soar during economic downturns, are seen as essential to the economy’s evolution over time. As the saying attributed to the former astronaut and airline boss Frank Borman goes, ‘capitalism without bankruptcy is like Christianity without hell.’ If that is the case, then monetary policy should not interrupt a recession’s cleansing effect.fn4 Put another way, if financial stability is destabilizing (as Hyman Minsky maintained), too much economic stability induces sclerosis.

Unicorns could be seen as a second class of zombie, wrote a correspondent to the Financial Times, ‘whose owners and investors can keep them alive by constant waves of propaganda about their cutting edge technology which has yet to produce a profit (Uber, for example) but are supposedly part of ‘disruption’ culture. This advertising keeps the flow of investments going. These companies are using the talent of engineers and coders, and marketing specialists that could be used in more productive enterprises. The hope that someday they will be profitable does not justify the destruction of useful and profitable business models.39 The large-scale misallocation of resources into loss-making businesses whose profits exist in Never-Never Land is a sign that the cost of capital is too low. Bring down interest rates low enough and even unicorns can fly and, soaring too high, they inevitably crash.

The fever for start-ups didn’t spread far beyond Silicon Valley. In fact, new business formation in the United States fell sharply after 2008. In 2016, business deaths outnumbered births for the first time since the Census Bureau started keeping records in 1978.

Thinking, Fast and Slow by Daniel Kahneman The Four Pillars of Investing by William Bernstein The Little Book of Common Sense Investing by John Bogle The Little Book of Behavioral Investing by James Montier Stocks for the Long Run by Jeremy Siegel The Warren Buffett Portfolio by Robert Hagstrom Damn Right: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger by Janet Lowe Investing: The Last Liberal Art by Robert Hagstrom Success Equation: Untangling Skill and Luck in Business, Sports, and Investing by Michael Mauboussin Devil Take the Hindmost by Edward Chancellor The Most Important Thing by Howard Marks All About Asset Allocation by Rick Ferri Winning the Loser's Game by Charles Ellis

whose father was Aeolus, god of the winds, and whose mother was a Caledonian nymph … As soon as he was fully grown his father taught him the secret of catching the wind in balloons.

Stay Loyal to People, Not Organizations Mitt Romney was wrong—corporations aren’t people. As British Lord Chancellor Edward Thurow observed more than two centuries ago, business enterprises “have neither bodies to be punished, nor souls to be condemned.” As such, they do not deserve your affection or your loyalty, nor can they repay it in kind. Churches, countries, and even the occasional private firm have been touting loyalty to abstract organizations for centuries, usually as a ploy to convince young people to do brave and foolish things like go to war so old people can keep their land and treasure. It. Is. Bullshit. The most impressive students in my class are the young men and women who have served their country. We benefit (hugely) from their loyalty to our country, but I don’t think we (the United States) pay them their due. I believe it’s a bad trade for them. Be loyal to people. People transcend corporations, and people, unlike corporations, value loyalty. Good leaders know they are only as good as the team standing behind them—and once they have forged a bond of trust with someone, will do whatever it takes to keep that person happy and on their team. If your boss isn’t fighting for you, you either have a bad boss or you are a bad employee.

Before reading the speech from the throne, Edward VII was called by the Lord Chancellor, in accordance with the Bill of Rights of 1689, to repeat a declaration repudiating the doctrine of Transubstantiation and asserting that ‘the invocation or adoration of the Virgin Mary or any other saint and the sacrifice of the Mass as they are now used in the Church of Rome are superstitious and idolatrous’. There was to be no evasion, equivocation or mental reservation whatever. King Edward saw it as a gratuitous insult to his Catholic friends,

There was probably no other person in the whole country who had meditated so much on the question of interest. Margayya’s mind was full of it. Night and day he sat and brooded over it. The more he thought of it the more it seemed to him the greatest wonder of creation. It combined in it the mystery of birth and multiplication. Otherwise how could you account for the fact that a hundred rupees in a savings bank became one hundred and twenty in the course of time? It was something like the ripening of corn. Every rupee, Margayya felt, contained in it the seed of another rupee and the seed in it another seed and so on and on to infinity. It was something like a firmament, endless stars and within each star an endless firmament and within each one further endless … It bordered on mystic perception. It gave him the feeling of being part of an infinite existence. R. K. Narayan, The Financial Expert, 1952

Prehistoric peoples probably charged interest on loans of corn and livestock. The association between interest and the fruit of a loan is embedded in ancient languages. Across the ancient world the etymologies of interest derive from the offspring of livestock. The Sumerian word for interest, mas, signifies a kid goat (or lamb).2 The ancient Egyptian equivalent ms means to give birth.3 In ancient Greek interest is tokos, a calf. Among the several Hebrew words for interest are marbit and tarbit, meaning to increase and multiply. The Latin for interest, foenus, connotes fertility, and for money, pecunia, is derived from pecus, a flock. Our word capital comes from caput, a head of cattle. These derivations, claim Sydney Homer and Richard Sylla, imply that interest originated with loans of seeds and of animals. These were loans for productive purposes. The seeds yielded an increase. At harvest time the seed could conveniently be returned with interest. Some part or all of the animal’s progeny could be returned with the animal. We shall never know but we can surmise that the concept of interest in its modern sense arose from just such productive loans.

Böhm-Bawerk declared that the cultural level of a nation is mirrored by its rate of interest. In the ancient world, interest rates charted the course of great civilizations. In Babylon, Greece and Rome interest rates followed a U-shaped curve over the centuries; declining as each civilization became established and prospered, and rising sharply during periods of decline and fall.57 Very low interest rates appear to have been the calm before the storm. In the early Neo-Babylonian period (700–630 BC) rates on silver loans fell to a low of 8.33 per cent. By early fifth century BC, after Babylonia fell to the Persians, they spiked above 40 per cent.58 In similar fashion, interest rates in eighteenth-century Holland reached a nadir shortly before the Dutch Republic was overrun by Revolutionary France. Given the extraordinarily low interest rates of the early twenty-first century, this is not a comforting thought.

Interest has always been with us because resources have always been scarce and must be rationed somehow, because wealth is unequally distributed between creditors and borrowers, and because, as Böhm-Bawerk says, ‘interest is the soul of credit.’ Interest exists because loans are productive, and even when not productive still have value. It exists because those in possession of capital need to be induced to lend, and because lending is a risky business. It exists because production takes place over time and human beings are naturally impatient.

The idea that time is valuable was not new to the Middle Ages. The earliest allusion to time having value has been attributed to a fragment of the Greek orator Antiphon (480–411 BC) which states that ‘the most costly outlay is time.’ Five centuries later, Seneca the Younger reminds his friend Lucillius that time is precious because man is mortal and his days are numbered: ‘embrace every hour,’ he advises, ‘the stronger hold you have on today, the less will be your dependence on tomorrow.

The idea that time has value resurfaces in a polemic penned by the Englishman Thomas Wilson, an Elizabethan diplomat and judge. In his Discourse Upon Usury (1572) Wilson likens the usurer to ‘hel unsaciable, the sea raging, a cur dog, a blind moul, a venomus spider, and a bottomles sacke, whereby you may well be assured that the dyvell dwelleth tabernacled in such a monstre’.46 Usury, says Wilson, is as great an event as murder, adultery and theft; usurers devour whole kingdoms and deserve nothing better than death. Wilson’s ideas were hopelessly old-fashioned by this date – indeed, between the writing and publication of his Discourse, usury in England was legalized (by Queen Elizabeth’s Statute of 1571).

Mary, to bee a tyme seller, to gayne for dayes, monethes and years, and to make the sune shyninge, which God sendeth so freely unto us, to be the frute of your occupiying, and to make mony of mony for the very acte of lending – these dealings I do saye, are most abominable in the sight of God and man.

As the modern era came into being, the avarice of the usurer was supplanted by interest in the broader and more abstract sense of a share or stake. This new concept of interest was ethically wide-ranging: it ‘came to cover virtually the entire range of human actions, from the narrowly self-centered to the sacrificially altruistic, and from the prudently calculated to the passionately compulsive’.49 The seventeenth-century English statesman and philosopher Lord Shaftesbury summed up the new thinking with his comment that ‘Interest governs the World.’50 In his Fable of the Bees (1714), Bernard Mandeville exposed the paradox at the heart of the modern world, namely that private vices brought public benefits. Adam Smith incorporated Mandeville’s wicked insights into his political economy. In The Wealth of Nations, Smith describes the individual as one who ‘By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.’51 A similar thought is expressed in another famous line, in which Smith writes that ‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.’ The spirit of capitalism was transmitted across networks of credit that connected lenders and borrowers through bonds of mutual self-interest.52 Daniel Defoe described credit as a ‘stock’, synonymous with capital, while the French in Defoe’s day referred to capital as ‘interest’, in the sense of taking a stake.fn6 From a technical viewpoint, capital consists of a stream of future income discounted to its present value. Without interest, there can be no capital. Without capital, no capitalism. Turgot, a contemporary of Adam Smith’s, understood this very well: ‘the capitalist lender of money,’ he wrote, ‘ought to be considered as a dealer in a commodity which is absolutely necessary for the production of wealth, and which cannot be at too low a price.’53 (Turgot exaggerated. As we shall see, interest at ‘too low a price’ is the source of many evils.)

Child development psychologists, including Mischel, ascribe impatience to stress early in life, which activates the brain’s limbic system.56 Economists have more prosaic explanations. Given that life is nasty, brutish and often short, some reward for delaying immediate pleasures makes sense. It may also be the case that humans are congenitally short-sighted and underestimate their future wants. And, even if none of the above held true, when an economy is steadily expanding most people can expect to become richer over time; since their future income exceeds their current income, people will value it less.

As Bastiat understood, a very low rate of interest may benefit the rich, who have access to credit, more than the poor. In his debate with Proudhon, Bastiat pointed out that time had value. The leading writers on the subject, Böhm-Bawerk and Fisher, believed that interest was intrinsic to human nature: humans are naturally impatient creatures and the rate of interest expresses their time preference.fn2 Fisher’s contemporary, the Swedish economist Gustav Cassel, author of a fine introduction to the subject, likewise insisted on the ‘absolute and unconditional necessity of interest’.27 Before the reader’s patience wears thin, it is time to start our story. Part One OF HISTORICAL INTEREST

Our earth is degenerate in these latter days: bribery and corruption are common; children no longer obey their parents; every man wants to write a book, and the end of the world is evidently approaching. Assyrian tablet, c. 2,800 BC

There was nothing original in Proudhon’s invective. His complaints had an ancient pedigree. He cited the Hebrew word for interest, neschek, which derives etymologically from the bite of a serpent.6 Proudhon’s rhetoric was high-flown and repetitive, and his economic analysis was not profound. In his History of Economic Analysis, Joseph Schumpeter lamented Proudhon’s complete inability to analyse. Even so, Proudhon had some original proposals.

Bastiat was having none of this. Interest wasn’t theft, he maintained, but a fair reward for a mutual exchange of services. The lender provides the use of capital for a period of time, and time has value. Bastiat cites the famous lines from Benjamin Franklin’s Advice to a Young Tradesman (1748): ‘Time is precious. Time is money – Time is the stuff of which life is made.’8

When money is lent on a contract to receive … [there is] an increase by way of compensation for the use; which is generally called interest by those who think it lawful, and usury by those who do not. Sir William Blackstone, Commentaries on the Laws of England, 1765

Moneylenders have always received a bad press. Over the centuries all – well, nearly all – the greatest minds have been aligned against them. Aristotle, Plato, St Augustine, Thomas Aquinas, Dante, Luther and Shakespeare have each had a go at the wretched usurer. Criticism has come from the left and from the right. Marx detested interest, but then so did Hitler. A few years ago, the Archbishop of Canterbury launched an attack on a UK payday lending firm, which he believed took advantage of the needy and desperate. ‘The War on Wonga’ (the name of the financial firm) is a campaign without end. Many economists, in particular the experts on inequality, side with the angels. The taking of interest is depicted as robbing the weak and the needy. What’s more, by demanding back more than has been given, the usurer stands accused of injustice.

It was widely believed by contemporaries that a reduction of interest would raise the value of land. Locke was unpersuaded. He thought other factors played upon land prices, and, even if land prices were to rise, there would be no advantage to the nation as a whole, since the lowering of interest merely ‘a little alters the distribution of the Money’: sellers of land would receive more money but buyers would have to pay more.22 Locke was concerned that cheaper borrowing would push money into the hands of City bankers, raising London house prices relative to the rest of the country.23

In ‘Of Interest’, Hume declared that ‘Money having chiefly a fictitious value, the greater or less plenty of it is of no consequence.’ He went on to suggest that if the amount of money in the country doubled, prices would rise but there would be ‘no alteration on commerce, manufactures, navigation, or interest’. In other words, the natural rate of interest would prevail regardless of any change in the money supply.

That a foreigner and fugitive from English justice should rise to such heights in his adopted country seems scarcely believable. Daniel Defoe, the keenest financial observer of the age, disparaged Law’s success. In order to rise in this world, wrote Defoe, The case is plain, you must put on a sword, kill a beau or two, get into Newgate [gaol], be condemned to be hanged, break prison if you can, – remember that by the way, – get over to some strange country, turn stock-jobber, set up a Mississippi stock, bubble a nation, and you may soon be a great man.

Easy money is the great cause of over-borrowing. When an investor thinks he can make over 100 per cent per annum by borrowing at 6 per cent, he will be tempted to borrow, and to invest or speculate with borrowed money.

By placing too low a discount on the future earnings of companies, investors ended up paying too much. The discounting error was widely acknowledged at the time. In early 1928, Moody’s Investors Services declared that stock prices had ‘over-discounted anticipated progress’.30 After the crash, Benjamin Graham and David Dodd wrote in their book Security Analysis that the late 1920s witnessed ‘a transfer of emphasis [in the valuation of stocks] from current income to future income and hence inevitably to future enhancement of principal value’.31 Or, as the market analyst Max Winkler memorably described: ‘The imagination of our investing public was greatly heightened by the discovery of a new phrase: discounting the future. However, a careful examination of quotations of many issues revealed that not only the future, but even the hereafter, was being discounted.

The Prime Minister, Lord Liverpool, lamented that ‘any petty tradesman, any grocer or cheesemonger, however destitute of property, might set up a bank in any place.’10 These country banks flooded Britain with their banknotes. ‘This fictitious surplus,’ intoned the banker Alexander Baring, MP, ‘was the fuel by which the fire was fed.’11

John Bull’, says someone, ‘can stand a great deal, but he cannot stand two per cent …’ Here the moral obligation arises. People won’t take 2 per cent; they won’t bear a loss of income. Instead of that dreadful event, they invest their careful savings in something impossible – a canal to Kamchatka, a railway to Watchet, a plan for animating the Dead Sea, a corporation for shipping skates to the Torrid Zone. A century or two ago, the Dutch burgomasters, of all people in the world, invented the most imaginative occupation. They speculated in impossible tulips.

In February 1876, Bagehot reflected on the foreign lending craze. It was a familiar story. Periods of low domestic interest rates, it seemed, made the specious promise of high yields on foreign debt particularly attractive: the human mind likes 15 per cent; it likes things which promise much, which seem to bring large gains very close, which somehow excite sentiment and interest the imagination. The manufacturers of ‘financial schemes’ know this, and live by it. A long and painful experience is necessary to teach men that ‘15 per cent’ is dangerous; that new and showy schemes are to be distrusted; that the popular instinct on them is essentially fallible, and tends to prefer the brilliant policy above the sound – that which promises much and pays nothing, above that which, promising but little, pays that little.68

It is a fact of experience, that when the interest of money is two per cent, capital habitually emigrates, or, what is here the same thing, is wasted on foolish speculations, which never yield any adequate return. Walter Bagehot, 1848

There never was a ‘canal to Kamchatka’, any more than there was a plan for animating the Dead Sea. A canal construction mania, however, did take place in England in the early 1790s. Canals were capital-intensive projects that took years to complete and even longer to pay back. Such long-dated investments are inevitably sensitive to changes in the discount rate. It is no surprise, therefore, to discover that canal-projecting was most intense when interest rates reached a low point.26 The economist and statistician Thomas Tooke considered the fall in interest rates, which dipped below 3 per cent in the 1790s, as ‘both a cause and an effect of the great extension of the country bank system which about that time took place’.27 The canal mania ended with a banking crisis in 1793 after war broke out with Revolutionary France.

Shut out of the European market by Napoleon’s Continental Blockade, English merchants turned with an eager eye towards the South American trade. According to a contemporary account, the exportations consequent on the first opening of the trade to Buenos Ayres, Brazil, and the Caraccas were most extraordinary. Speculation was then carried beyond the boundaries within which even gambling is usually confined, and was pushed to an extent and into channels that could hardly have been deemed practicable. We are informed by Mr. Mawe, an intelligent traveller, resident at Rio Janeiro, at the period in question, that more Manchester goods were sent out in the course of a few weeks, than had been consumed in the twenty years preceding … Elegant services of cut-glass and china were offered to persons whose most splendid drinking-vessels consisted of a horn, or the shell of a cocoa nut … and some speculators actually went so far as to send out [ice] skates to Rio Janeiro.34 The story that ice skates had been shipped south of the Equator entered City legend. When Bagehot alluded to this episode nearly half a century later his readers would have understood the reference.

Bagehot penned an editorial (The Economist, 23 November 1867) ‘On the Dangers of Lending to Semi-Civilised Countries’. The borrower under scrutiny was Egypt. It was not a question of that country’s great resources or agricultural fertility. Rather, what is required for the repayment of foreign debts, wrote Bagehot, is ‘a continuous polity; a fixed political morality; and a constant possession of money’. Egypt did not possess these qualities. The editorial concluded starkly: ‘We lend to countries whose condition we do not know, and whose want of civilisation we do not consider, and, therefore, we lose our money.’66

An axiom of the Austrian school was that interest is necessary so that investment and consumption decisions are co-ordinated over time.55 As we have seen, Böhm-Bawerk argued that the rate of interest reflects society’s time preference. He also claimed that the level of interest determines how much capital is tied up in production, and thus the return on capital.fn11 When interest is determined in a free market, he said, time preference and the return on capital should equalize. The danger comes when the authorities interfere with interest rates. When interest rates are pushed too low, credit takes off and bad investments (‘malinvestment’) abound.

In Das Kapital, Marx made an insightful comment on the failure of Overend Gurney. High interest might indicate prosperity, wrote Marx, but it could also indicate ‘that the country is undermined by the roving cavaliers of credit who can afford to pay a high interest because they pay it out of other people’s pockets … and meanwhile they live in grand style on anticipated profits.’54

History, it is said, is written by the victors. In the late 1920s, Hayek claimed that monetary policy had taken the wrong course and predicted a deflationary bust. Irving Fisher, on the other hand, saw nothing wrong at the time with either America’s economy or its monetary policy, famously opining in the summer of 1929 that US stocks had reached a ‘permanently high plateau’. If accuracy of prediction is what matters for economic theory, as Milton Friedman later claimed, then Hayek’s interpretation should have become the received wisdom of his profession. Yet the Austrian’s interpretation of the 1920s and its aftermath has been more or less air-brushed from the history books, while Fisher’s monetarist view has become received wisdom.

whenever money becomes very cheap, experience teaches us to expect that it will be misspent. John Bull, as it has been wisely observed, can stand a good deal, but he cannot stand two per cent. The particular form of mania differs in various years; but when the common and tried employments of money yield but a low profit, recourse will be had to new and untried ones, some of which will be unprofitable, and a few of which will be absurd. It is only at the outset of such manias that warning is of the least use – when they attain a certain growth, advice is thrown away. Everybody is seen speculating; and what every one does must be judicious. Foolish person No. II. imitates foolish person No. I.20

Among the speculators was the journalist Charles Mackay, an acquaintance of Charles Dickens and author of Extraordinary Popular Delusions and the Madness of Crowds – the first popular account of early speculative manias, published in 1841.37 The book’s warnings about the dangers of speculation were lost not only on the British public but also on Mackay himself.

Homer and Sylla, History of Interest Rates, p. 191.

Financial repression returned to the West after 2008. Short-term rates in the United States and Europe were held below the level of inflation and remained negative in real terms for years on end.

The arch-capitalist began his working life as a bond trader at Greedspin in New York in the 1960s. He rose to become one of the firm’s most successful M& A advisers during the 1980s and 1990s. His role in the disastrous merger of General Chocolate and ByteBack in 2000 led to his departure in 2004, following an official investigation into irregular practices. “I have no regrets about that deal. For General Chocolate, it was a case of either eat or be eaten.” The sommelier arrives with the red wine, quickly followed by the main course. Churn impales his meat, cuts it into squares and dispatches it to his molars. His songbird side order–a dish which is now banned in the EU on animal rights grounds–is skewered and consumed, beak-to-tail, in a single mouthful. “Do you know, they drown it alive in Armangac!” he exclaims as he noisily munches through the bones. Establishing a pattern which was to be repeated, Churn bounced back from the General Chocolate fiasco in a new guise. In 2005, he re-emerged as the Chairman of RearView Capital Partners, the private equity firm, at a time when huge sums were raised and invested at the peak of the credit bubble. “I have always tried to find the hot areas of the market where I can facilitate the flow of money. In our business, flows mean fees. It’s really very simple.

I enjoy my Picassos,” he says with a glint in his eye, “and, unlike some, I have never had to sell to pay the fines.” I ask about his recreational interests and for once he looks uncertain. His eyes scan the room for inspiration, or perhaps help from his PR adviser. His gaze eventually rests on a landscape painting. “I shoot sheep,” he declares darkly. With that he stands up, baring his teeth in a maniacal grin. “I really have taken up far too much of your time.” He leaves before the bill arrives. When it comes, like many former clients, I am left grappling with the awful financial consequences of my encounter with the Greedspin banker.

It was time to move on, which is why I’m now living here in the land of the cuckoo clock. Didn’t someone once say, “all successful careers in finance end up in Switzerland?

Easy money, wrote Hazlitt, creates economic distortions … it tends to encourage highly speculative ventures that cannot continue except under the artificial conditions that have given birth to them. On the supply side, the artificial reduction of interest rates discourages normal thrift, saving, and investment. It reduces the accumulation of capital. It slows down that increase in productivity, that ‘economic growth’ that ‘progressives’ profess to be so eager to promote.

It is relatively easy to identify those industries where these conditions exist currently (just look at existing returns on capital), and it is for this reason that the really juicy investment returns are to be found in industries which are evolving to this state. The joy from a capital cycle perspective is that most investors are, for a variety of behavioural reasons, taken by surprise. Across many competitive battlefronts, we are always looking out for the next outbreak of peace.

world, where competition was seen as regional in nature, have suddenly become global. Because of the difficulty of assessing what motivates competitors under conditions of state capitalism, capital cycle analysis tends to be more effectively applied to industries which are largely domestic in nature or where the dominant players are inclined to Anglo-Saxon style capitalism (as is the case in the global beer industry).

Our historical tendency to be overweight the Nordic stock markets has mostly been influenced by the perceived quality of Nordic management teams. Generally speaking, Nordic managers have been able to articulate their case clearly and apply a degree of focus that is not always the case elsewhere in Europe. One can also discern a high degree of adaptability. Scandinavian companies are not just open to foreign excursions. It was striking to note on a recent trip just how many of the large and successful companies are run by foreigners. A Belgian is head of Atlas Copco, a Scot runs SKF, and Nokia and Electrolux have recently recruited American bosses. This openness to outsiders stands in contrast to recent developments in Southern Europe, where Italy and France are engaged in a race to the bottom to redefine strategic industries for protectionist purposes.

Forming impressions of the CEO’s character, intelligence, energy and trustworthiness can be gleaned using a variety of questioning techniques. Intellectual honesty can be tested by asking the CEO to pick out what he or she thinks is important. To unsettle the more promotional CEOs, we like to ask what is not working and wait to see whether they have given the matter much thought.

We were equally impressed to learn that senior executives at another company preferred the underground to chauffeured limousine when travelling around London. The number of IR representatives in attendance is a good indicator as to how carefully a company counts its pennies. Of course, we have made mistakes when assessing management teams. But, in our view, trying to spot a great manager remains a game very much worth playing.

If we are delighting customers, eliminating unnecessary costs and improving our products and services, we gain strength ... . On a daily basis, the effects are imperceptible; cumulatively, though, their consequences are enormous. When our long-term competitive position improves as a result of these almost unnoticeable actions, we describe the phenomenon as “widening the moat.

There are numerous examples of successful cultures among our portfolio companies: the empowerment of branch managers that promotes responsible banking at Sweden’s Svenska Handelsbanken, for instance. Reckitt Benckiser, another holding, fosters an entrepreneurial spirit among its senior managers. Yet even if a strong culture is instilled in a company, it can take many years for its full effects to play out. That may be beyond Wall Street’s limited investment horizon. Long-term investors, however, would be wise to take heed.

3. Living in a cocoon Specialist analysts operate in a cocoon, in which they are overexposed to company management and peer analysts and underexposed to what is going on in the rest of the world. Herding instincts may tend to reinforce similar opinions among peer analysts. Their thinking starts to reflect what Daniel Kahneman calls the “insider view.” In the case of Ahold, the specialist retail analysts spent a great deal of time comparing the company’s performance, on a range of measures, with US peers such as Albertson’s and Kroger. As global investors, however, we find it more useful to compare the returns of a company in a particular industry with those in other industries and countries. A specialist analyst couldn’t say whether Ahold was a good investment relative to, say, a Scandinavian paper company or a Thai cement plant.

The herd-like behaviour of companies and their managements never loses its power to astound. All too often, when one company decides that buybacks are the thing to do, then its competitors will play the game too. By the same token, capital raising (secondary issues) often appears at the same time among multiple companies in the same industry. One reason they act together is that no company wants to see competitors gain a funding advantage.

Edward Chancellor’s Devil Take the Hindmost: A History of Financial Speculation.

A Good Start in Financial History You really can’t learn enough financial history. The following, listed in descending order of importance, are landmarks in the field. Edward Chancellor. Devil Take the Hindmost. New York: Farrar, Straus, and Giroux, 1999. What manias look like; how to recognize—and hopefully avoid—irrational exuberance. Benjamin Roth. The Great Depression: A Diary. New York: PublicAffairs, 2009. What the bottoms look like; how to keep your courage and your cash up. Roger G. Ibbotson and Gary P. Brinson. Global Investing. New York: McGraw-Hill, 1993. Five hundred years of hard and fiat money, inflation, and security returns in a small, easy-to-read package. Adam Fergusson. When Money Dies. New York: PublicAffairs, 2010; Frederick Taylor. The Downfall of Money. New York: Bloomsbury Press, 2013. What real inflation looks like. Be afraid, very afraid. Benjamin Graham. Security Analysis. New York: McGraw-Hill, 1996. You’re not a pro until you’ve read Graham “in the original”—the first edition, published in 1934. An authentic copy in decent condition will run you at least a grand. Fortunately, McGraw-Hill brought out a facsimile reprint in 1996. Charles Mackay. Extraordinary Popular Delusions and the Madness of Crowds. Petersfield, U.K.: Harriman House Ltd., 2003. If you were smitten with Devil Take the Hindmost, you’ll love this nineteenth-century look at earlier manias. Sydney Homer and Richard Sylla. A History of Interest Rates, 4th ed. Hoboken, NJ: John Wiley & Sons, 2005. Loan markets from 35th-century B.C. Sumer to the present.