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Genesis of a Historical Novel

Tuesday, August 28, 2007

credit history

In my inventory yesterday of the research books I read the previous day, I left out one: A History of Interest Rates by Sidney Homer.

I think I forgot it because I have been reading (and typing) it down here at the PC, instead of in the living-room as part of my daily reading period. I got my hardback copy of Homer's classic last February through Abebooks; it is marked (discreetly) with the stamps of a former owner, the Ambassador College Library in Pasadena, California.

I first learned about this book in 1994, when it was referenced by James Dale Davidson and William Rees-Mogg in their hefty jeremiad The Great Reckoning, a bold set of forecasts based on their theory of history. This theory was centered around the concept they called megapolitics: that the ultimate driver of historical change is and always has been the technology of weapons. In the last analysis, those who make things happen have always been those who held the greatest ability to project violence. In the view of these authors, the history of civilization has been essentially the story of how governments have controlled the freelance violence of individuals and small groups by being able to overpower them. But a continuing trend, from the beginning of history, has been the "democratization" of violence: the development of ever more powerful weapons that placed ever more violent power in the hands of individuals. We have gone from spears to muskets to handguns to machine guns to high-yield explosives to "tactical" nuclear weapons. In the long run, in their view, the question is whether governments, including legitimate, accountable ones, can hold the balance of power against violent individuals and splinter-groups.

The authors acknowledge that these thoughts are not cheerful. However, when you boil away all the ideology and talk, you arrive, basically, at Hobbes's "state of nature": what we now call the law of the jungle, or, in more sanitized Darwinian terms, survival of the fittest. Hobbes saw the rule of law as what separates us from that miserable condition in which men's lives are "solitary, poor, nasty, brutish, and short". But Davidson and Rees-Mogg are saying that the rule of law itself is only as good as the weapons that back it up. If the police are less well armed than the miscreants they are trying to control, then the state is lost just as surely as if its army is outmanned and outgunned by an invading force. The final backstop of the rule of law is violence.

I found their book fascinating, and in fact have read it twice. It even formed a key inspiration for another TV project that Warren and I created in the 1990s, a drama about a degenerated society in the near future (a project which has not got off the pad). For the record, I'm a nonviolent person myself, and believe firmly in the principle of negotiation rather than violence in achieving results. No matter how long it takes, agreement is a much more powerful force, as well as more humane, than simply imposing your will through violence. At the same time, we all know what happens when we operate by an "honor system" that has no one policing it. Even in a monastery, frictions and grievances arise.

The authors of The Great Reckoning were investors and investment advisers, and the book was addressed mainly to fellow capitalists. How do you make a buck in Hobbes's state of nature? One of their favorite authorities was Sidney Homer, and his monograph on the history of interest rates. When I first saw the title, A History of Interest Rates, I laughed. It sounds like a satire of dullness--a text that might be carried around by an ultra-nerdy sitcom character. Because I have long been interested in finance and capitalism, I actually felt some nerdish attraction for the book--although not enough to actually seek it out and buy it.

However, now that my own story of the ancient world is developing more of a financial component, I felt I had to get it. I've still read only the first 60 pages or so, but I find that it is even more interesting than I'd hoped. As Homer, a bond trader and partner of Salomon Brothers in New York, observes, interest rates are like a fever chart of society: peace, calm, and stability are reflected in low interest rates; and disorder, uncertainty, and fear are reflected in high interest rates.

Homer also observes that every major legal code, at least of the ancient world, from that of Hammurabi on, was brought in largely to regulate credit. From ancient times, Jews (and other compact societies) were forbidden to lend to each other at interest; loans were expected to be interest-free. Only loans to strangers or outsiders could bear interest. Eventually such rules created large financial and social problems, which were addressed in various ways.

The very word credit is related to words like credo and credible, relating to belief. To extend credit is to have faith. Faith in someone, faith in the future. Faith is the basis of religion.

My intuition tells me that this is an important theme, both for my story and for all of us.

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