induced......................

 

     To twenty-first-century policymakers, the interest rate is simply a lever used to control inflation and tweak economic output.  Yet an acquaintance with the Babylonian origins of interest should give pause for 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.

-Edward Chancellor, The Price of Time: The Real Story of Interest