We’ve seen typical consumer/investor interest rates in modernity ranging from 5% to 20 % +/-. What have historical interest rates been like throughout history?
I wouldn’t know where to start on this. I believe that for most of human history money credit has not existed, and for most of the period where it has existed, has been restricted to what amounts to trade financing, speculation or financing the whims of monarchs.
I’m not sure those can be generalised into a prevailing interest rate, it would be like trying to work out what the prevailing credit card rate was in Hoboken last year.
This discussion of the history of credit talks about some earlier rates: http://www.myvesta.org/history/history_interest.htm
This has some stuff in it: http://www.chicagofed.org/publications/economicperspectives/ep_3qtr2006_part3_fisher_quayyum.pdf
Prime rates from 1929 on: http://research.stlouisfed.org/fred2/data/PRIME.txt
This lets you get the rate for a given year: http://eh.net/hmit/interest_rate/
I can’t specifically answer the OP but probably the place to start is to understand “usary”.
Because there were religious prohibitions to charging interest, the charting of the historical cost of lending money gets very difficult.
That’s USURY, not USARY. Sorry.
Interest rates attested in Indian texts from the twelfth century and earlier can be as much as 20% per month—ouchie! Bear in mind, though, that without things like bankruptcy court or consolidated debt repayment plans, lenders of the distant past were often taking a bigger risk of losing their money than they are today.
Shakespeare gave us Shylock, history’s most famous money lender, more than 500 years ago. Nearly 300 years before that, Dante wrote about money lenders in The Divine Comedy. (They were confined to the seventh circle of hell.)
I disagree with slaphead. I’d assert that credit has been around forever, and not just among monarchs and merchants, but at the very basic level for the common person. Money lending may be the proverbial second oldest profession. Historian Paul Johnson writes: “Food money in the shape of olives, dates, seeds or animals was lent out as early as c. 5000 BC, if not earlier. … Among the Mesopotamians, Hittites, Phoenicians and Egyptians, interest was legal and often fixed by the state.”
The modern banking system has its roots in the 16th century London coffee houses, where credit was extended towards shipping expeditions and the cargo they would return – which is what I think slaphead was getting at. But there was also credit at the low end, in forms such as pawn shops.
Wikipedia has good articles on the history of banking and usury which I think are very illuminating on this subject, although they don’t actually address the OP’s question about specific interest rates.
I have no actual answer to the question, but just a piece of advice: If you want to deduce anything meaningful from your numbers, make sure they are adjusted for inflation. Contemporary inflation that is. If interest rates were 20% in 1980 and inflation was 10%, the interest is actually the same as, say, 15% in 1900 when inflation was 5%. That is, in both cases you are actually paying 10% more than you were loaned, inflation just eats the rest. (Actually, I’m not sure the rates just subtract like that, but they do need to be taken into account in some manner.)
They subtract if they are the continuously compunded rates. If they are a simple interest rate for one year then the real rate, r; the nominal rate, n; and the expected rate of inflation, i; are related by
(1+r)*(1+i) = (1 + n)
The nominal rate is the one you see stated.
If the annual rates are compounded monthly (like credit card or mortgage rates are, then the relation is
(1+r/12)^12*(1+i/12)^12 = (1 + n/12)^12
or
(1+r/12)*(1+i/12) = (1 + n/12)