In the interest of keeping us poor
This cut should be welcomed and celebrated – whatever the real motive behind it. Because, more than any other capitalist mechanism, interest rates exist to widen the divide between rich and poor.
Since the onset of a recession, many of us have begun to question such unnecessary evils as credit systems and banking bonuses – indeed, any bonuses. But still, no-one dare seem to question the very lynchpins that tentatively hold this economic system on top of its lofty perch. None more so than interest rates.
Imagine this scenario. You have £1,000 in the bank. You decide to leave it there, and spend the next month of your life sat comatose on a park bench. No bills. No rent. No job. You go back to the bank and suddenly you have £1,001. You have just made a £1 profit. For doing nothing.
Now if you had an apple, and took a bite out of it, would you not expect there to be less apple remaining? Would you not be surprised if you kept biting; yet that ripe, red, juicy debt refused to get smaller?
These scenarios are illogical. But they are the very principles upon which interest rates are based.
No, interest rates do not exist to keep the economy stable. If they did, we wouldn’t be in a recession right now.
No, interest rates do not exist to counter inflation. When was the last time you decided not to buy something because the Bank of England’s rates were encouraging you to save your money instead? The only thing driving inflation is a lack of supply of goods, and if we aren’t doing something about that, we shouldn’t pin our hopes on playing with numbers.
Have interest rates solved the economic crisis in Zimbabwe?
And yes, there is an alternative way to price the cost of borrowing. It’s called shared ownership. When you give money to a business you do so because you expect it to be profitable, and on the condition that when such profit is forthcoming, you will receive a piece of it as gratitude for your earlier faith. And no one should be lending money if they can’t afford to lose it.
The cost of borrowing, therefore, should be no more than a division of the profit made as a result of that borrowing.
This is logic, but it is logic which remains notably absent from the entire banking system – even after its collapse. By no measure are interest rates the only thing wrong with modern economics, but they must be the single-most ignored evil of capitalism.
Because the only reason for interest rates to exist is to make the poor poorer, and the rich richer. When interest rates are combined with such deadly tools as mortgages, credit cards and overdrafts; it creates a vicious cycle of debt.
While this month’s record low interest rates are something to be celebrated, we should not kid ourselves. Interest rates still exist. Only once they are abolished will the wealth gap narrow.
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