MAIN IDEA:

This book is mainly about the time value of money and its accounting representation by the interest rate on loans. The author reviews the history of the money credit, starting with Babylon and all the way until our time. Special attention is allocated to using credit as an instrument of power. For the part of the book about our time, the author reviewed in some detail the Chinese “financial repression” when the Communist Party used artificially depressed interest rates on households’ deposits to transfer resources to a government-controlled part of the economy. In conclusion, the author refers to Hayek’s “Road to Serfdom” and demonstrates how this road often includes financial methods in addition to trivial for communist regimes’ concentration camps and killings. The author stresses the change that occurred in the process of moving from XX to XXI century:”… our central planning hasn’t so far involved the nationalization of industries, large-scale public investment, the regulation of prices and incomes, high levels of taxation, rationing, or other wartime measures. Instead, central planning in the twenty-first century has involved manipulating the most important price in a market-based economy, the universal price, namely the rate of interest. Interest lies at the heart of capitalism. Interest rates are the traffic signals that guide the market economy, writes James Grant. Turn off those signals and pile-ups occur. If money is provided too cheaply, the market’s steering mechanism breaks down”

MY TAKE ON IT:

It is a good review of the history of interest rates and overall finance as a resource allocation tool. In my opinion, the essential thing to understand is that the current trend of building the Road to Serfdom via financial manipulation is a simple consequence of economic and human disasters that occurred in countries that implemented any form of socialism, whether it was the Soviet or Chinese or European style. As a practical idea, socialism/communism lost its attractiveness for anybody who is even slightly knowledgeable of history. However, the government-dependent “intellectuals,” either bureaucrats, pseudo-educators, or statist politicians continue to seek ways to implement this “good” idea that somehow was consistently implemented poorly. I do not doubt that an attempt to implement it via finance will be a fiasco. It may not be as bloody as such attempts of the XXth century, but it will still cause much pain and suffering.