Broken down: interest rates

I've long maintained that humans aren't in any way special among the creatures that inhabit The Earth.
However, in one regard we are somewhat unique: we know we will eventually die.

This has some curious implications for it shapes our behavior. One particular way in which this can be observed is in how we plan for the future. What I will focus on here is how we discount the future and arrive at net present values.
The way this is done is via interest rates - it's a beautiful system where we can transfer our own wealth from the future into the present or the other way. The reason we generally prefer the present over the future, and thus always arrive at positive real interest rates, is precisely because we know we are mortal. Why someone would want to transfer wealth into the future might be to be productive now and enjoy leisure at a later time (think retirement). The person on the other side of that transfer will then demand a reward for giving up consumption in the present.

When a lot of people do this, we collectively express a preference for the present over the future and create a market for it. In this market, there will be a number for relatively low-risk interest rates (government bonds) and the same interest rate + some premium for perceived risk.

For as long as we can go back, humans have always demanded positive real interest rates. Real interest rates are simply nominal interest rates minus the inflation rate. Nowadays we can't get even positive nominal interest rates in much of the developed world, let alone positive real interest rates. The immediate effect is multi-fold: pension plans are going belly-up, zombie corporations continue to exist, new companies can't be created, people take on far more debt than they should, savers get stiffed... in short: incentives for the whole of mankind are heavily screwed with.

This is perhaps the biggest topic we could possibly talk about. It encompasses all of humanity and will affect multiple generations. It is why I chose it for the first part of the broken-down series. We will continuously come back to this issue.

Please submit all or any questions and comments below, I'll be happy to address them in the next part.