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Putting your money in someone else's hands was probably a lot riskier in those days, and that is priced into the interest rate. If there's a real chance a pass
by ukoki 11y ago
Putting your money in someone else's hands was probably a lot riskier in those days, and that is priced into the interest rate. If there's a real chance a passing army or crooked king might walk in and take your money, you need to be better compensated.
- jeffdavis 11y agoExcept the risk is relative. What else are you going to do with your money? What government is backing the money?
- yk 11y agoI would guess the opposite, society needed a much larger share of its workforce for basic necessity. So assuming that the different opportunities to build something were similar, only a smaller fraction of the possibilities got actually build and this fraction had the highest return of investment. So expected ROI was a lot higher and therefore the creditors could ask for a lot more interest.
- kijin 11y agoWhether you keep all your money in your own house or lend it to your neighbors doesn't make a difference if a passing army can pillage and burn everything in your town. What's different is that the modern legal apparatus make it much easier for you to track down someone who defaults on a loan and force them to pay you back. Just petition a magistrate, and he can magically transfer a portion of your debtors' income to your vault every month no matter where they live!