The Price of Money: Interest, Usury, and the Power of Compounding

In this episode, we explore the fundamental economic concept of interest—the price paid for the use of credit. We trace the history of lending from ancient Sumerian grain loans and religious prohibitions against usury to the modern mechanisms of the Federal Reserve. Join us as we discuss: • The definitions of simple versus compound interest and how the study of compounding led to the discovery of the mathematical constant e. • Religious perspectives on lending, including the Medieval Church’s opposition to usury and the principles of interest-free Islamic finance. • Key economic theories regarding why interest exists, ranging from Turgot’s "fructification" theory to Keynes’s liquidity preference and the Austrian School’s time preference. • Practical calculations, such as the Rule of 72, which estimates how long it takes for an investment to double. • How factors like inflation, default risk, and opportunity cost determine the market interest rates we see today.