Theoretically, there are at least two reasons for interest rates to be positive. First, the need to compensate creditors for postponing consumption i.e. the time value of money, and secondly, the need to compensate creditors for the varied but unavoidable risk of not being repaid i.e. credit risk. In practice, since at least the earliest references to debt in the ancient world, the fact of debtors compensating creditors has been widely accepted. This continued through the classical period, and even in Medieval Europe where usury was forbidden by the Christian Church, interest-bearing loans were the norm. But in the wake…

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