Introduction:
Interest is generated as the outcome of transaction between borrowers and lenders, one of the earliest financial activities that have ever appeared in the human history. However, the functionality of interest is developed by the evolution of money, an idea that in fact appears later than interest. The modernization of money and interest has never taken a monotonous path: sometimes it breeds financial prosperity, but the next time it may bring catastrophe. As with fire, economists and policymakers throughout the history keep monitoring and intervening in money and interest, trying to grasp these tools but not get hurt. People interpret underlying signals sent by interest and use monetary policies to boost economics and avoid aberrations. …show more content…
However, the repayment was often accompanied by an extra portion of loan. This idea of compensation for lending was materialized on the Drehem Tablet written during the third dynasty of Ur, which began circa 2100 BCE. This tablet showed a “diagram of the ten-year growth plan for a dairy herd, showing expected future profits in dairy products”(Goetzmann 47). The underlying logic was that: with the unrealistic assumptions that no cow or bull ever dies and that each mated pair has exactly one calf each year, female cows could themselves mate and reproduce in successive years, turning an initial pair into a large herd. This might be the earliest example of compensation on investments. Then it should be reasonable to conjecture that the idea of interest was also generated from this natural multiplication of livestock. “In the Sumerian language, the word for interest, mash, was also the term for calves. In ancient Greek, the word for interest, tokos, also refers to the offspring of cattle. The Latin term pecus, or flock, is the root of our word ‘pecuniary’” (Goetzmann 51). In primitive early civilizations, basic agricultural inputs could be regarded as money, and the outcomes of reproduction, or the extra repayment, served as interest. This functionality of money and interest lasted for thousands …show more content…
However, without the boundary set by intrinsic value, financial markets are entering into new traps. Fiat money and interest rates are intended to avoid excessive expense, but the rising disbelief of their validity adds up new costs. How longer can people believe in the value of fiat money? And is the control over interest rates really the best way to regulate markets? Debates never stop. However, the ultimate question should always be: whether in God we trust, or in credit we
Interest is generated as the outcome of transaction between borrowers and lenders, one of the earliest financial activities that have ever appeared in the human history. However, the functionality of interest is developed by the evolution of money, an idea that in fact appears later than interest. The modernization of money and interest has never taken a monotonous path: sometimes it breeds financial prosperity, but the next time it may bring catastrophe. As with fire, economists and policymakers throughout the history keep monitoring and intervening in money and interest, trying to grasp these tools but not get hurt. People interpret underlying signals sent by interest and use monetary policies to boost economics and avoid aberrations. …show more content…
However, the repayment was often accompanied by an extra portion of loan. This idea of compensation for lending was materialized on the Drehem Tablet written during the third dynasty of Ur, which began circa 2100 BCE. This tablet showed a “diagram of the ten-year growth plan for a dairy herd, showing expected future profits in dairy products”(Goetzmann 47). The underlying logic was that: with the unrealistic assumptions that no cow or bull ever dies and that each mated pair has exactly one calf each year, female cows could themselves mate and reproduce in successive years, turning an initial pair into a large herd. This might be the earliest example of compensation on investments. Then it should be reasonable to conjecture that the idea of interest was also generated from this natural multiplication of livestock. “In the Sumerian language, the word for interest, mash, was also the term for calves. In ancient Greek, the word for interest, tokos, also refers to the offspring of cattle. The Latin term pecus, or flock, is the root of our word ‘pecuniary’” (Goetzmann 51). In primitive early civilizations, basic agricultural inputs could be regarded as money, and the outcomes of reproduction, or the extra repayment, served as interest. This functionality of money and interest lasted for thousands …show more content…
However, without the boundary set by intrinsic value, financial markets are entering into new traps. Fiat money and interest rates are intended to avoid excessive expense, but the rising disbelief of their validity adds up new costs. How longer can people believe in the value of fiat money? And is the control over interest rates really the best way to regulate markets? Debates never stop. However, the ultimate question should always be: whether in God we trust, or in credit we