Theory of Debt, Its Proper Role, and Leverage Cycles

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Summary – Theory of Debt, Its Proper Role, Leverage of Cycles
Professor Robert Shiller takes a deep dive into the theory of interest as put forward by scholars of different times. The work of Eugen Von Boehm-Bawerk and Irving Fisher has been heavily featured, collectively bringing the notion that interest rates come about as a result of some fundamental reasons; technical progress, the advantages of roundaboutness, and time differences (Shiller). The analysis of the work of Irving Fisher takes a more technical approach but ultimately points to the same conclusion as Boehm-Bawerk arguments on the causes of interest rates.
The lecture further expounds on various technical terms often associated with interest rates: compounding, present discount value, continuous compounding, conventional bonds, and forward rates. The discussion around the term structure of inter...