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Location: Interest Rates
Discussion: Inflation and Interest
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aBetterPlace2be aBetterPlace2be |
Inflation and Interest
Feb 26 2008, 2:58 AM EST We must get a better answer to inflation than interest rate rises. It is unfair on new mortgage holders, and punishes them severely at a time when other economic measures are also working against them 10 out of 26 found this valuable. Do you? |
 trgh |
RE: Inflation and Interest
Feb 26 2008, 6:18 PM EST Actually, the function of charging interest is THE MAIN CAUSE of inflation! Being charged extra for the use of money is an incredible (but legal) exploitation. It devalues the currency and withdraws more money from circulation than has been issued into circulation. This forces us into the debt cycle since everybody as a whole, cannot pay back everything that has been issued. 1 out of 5 found this valuable. Do you? |
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Anonymous |
RE: Inflation and Interest
Feb 27 2008, 3:58 AM EST The last thing we want is governments interfering with the economy. Housing would be affordable if the state governments would just get out of the way, removing their restrictive land planning laws. 2 out of 3 found this valuable. Do you? |
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Anonymous |
RE: Inflation and Interest
Mar 17 2008, 9:22 AM EDT "Actually, the function of charging interest is THE MAIN CAUSE of inflation!How does withdrawing more money than is being issued cause inflation? It doesn't. 1 out of 1 found this valuable. Do you? |
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trgh |
RE: Inflation and Interest
Mar 17 2008, 6:04 PM EDT "How does withdrawing more money than is being issued cause inflation?That's not exactly what I said (or what I mean). Take this scenario: 1) I borrow $10,000 from the bank, which means the bank has created & issued $10,000 into circulation (for me to spend). 2) I buy $10,000 worth of goods within the year while the loan attracts, lets say 5% interest. Remember that every repayment of a loan takes money out of circulation and back to the bank. Now, at the end of the year ... 3) I pay back $10,500 to the bank (principle plus interest). The bank, at the end of this cycle, has withdrawn $500 more from circulation than it provided in the first place. Now lets extrapolate that process for all Australia: Not everybody can pay back their loans plus the interest charges because the banks never issued enough money in the first place! They only issued the principle - not the interest (which, if being paid back to the bank must come from elsewhere in circulation). Someone, somewhere, will have to default (and hand over their assets to the bank), or borrow more money to keep the system going. This is the cycle of debt which I spoke about. The entire system is designed to devalue money and cause inflation. The RBA's job is to keep it manageable and within acceptable limits - not to abolish it. They have a target of 2-3% exploitation, which is not a target of long term sustainability. It is a policy of subtle, creeping control over the lives of their prey - the general public. 0 out of 1 found this valuable. Do you? |
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Anonymous |
RE: Inflation and Interest
Mar 17 2008, 8:41 PM EDT This scenario seems to ignore the fact that the bank will pay a depositor some interest (maybe not the full $500) and thereby return most of that interest charged into circulation. The bank will also pay staff and taxes, again increasing circulation in the system. Inflation is not the outcome of the lending cycle. Do you find this valuable? |
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trgh |
RE: Inflation and Interest
Mar 17 2008, 11:47 PM EDT "This scenario seems to ignore the fact that the bank will pay a depositor some interest (maybe not the full $500) and thereby return most of that interest charged into circulation. The bank will also pay staff and taxes, again increasing circulation in the system. Inflation is not the outcome of the lending cycle."Have you noticed that the depositor never gets the same rate as the borrower is charged? And this is only if it is deposited (ie. temporarily out of circulation) Then there is the ratio to consider: Under the fractional reserve system (currently being used), the bank has the authority to lend 10 times its current deposits! Your suggestions do make a difference, I grant you, but only extremely marginally. Of course the bank pays it's staff - they themselves are part of the consumer/workforce. Your statement that "Inflation is not the outcome of the lending cycle" requires some sort of proof or justification - will you provide it? 0 out of 2 found this valuable. Do you? |
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Anonymous |
RE: Inflation and Interest
Jul 3 2008, 11:24 AM EDT Inflation is 95% of time in fact caused by the direct manipulation of monetary policy. Firstly by RBA lowers interest rates to very low levels (the carrot) making cheap money available - unchecked and lots of it for over-extended period. The Banks then practice in the issuing of 'cheap' easy to get credit/loans, handing it out to any Tom, Dick or Harry without need to prove income or repayment capacity (no doc)!! This irresponsible over-supply of money into the system can only lead to 'inflation' and nothing more. Of course this practice also fuels a 'boom' period given the cheap money so easily accessible. Upon inset of this phenomena 'inflation' RBA diligently appears to address by vigoraous frequent interest rate rises with little time availed between for fair and reasonable ability for effects of each to be clearly noted. The interesting factors cited for this inflation were 'credit crunch' in US, then to control consumer spending, then rising fuel and food. Whilst the rest of the world were lowering interest rates due to the reasons we in Australia were raising. Yes, the desired effects were achieved - we are now on the brink of a recession, our own credit crunch whereby banks "are scared" to lend to each other let alone to the punter (unheard of statement), bordering a recession and inflation still healthy. Absolutely bizzare action given that the RBA decided to end the 'boom' it helped precipitate at its own discretion to 'slow things up'!! - now consider that the RBA is a privately owned bank!! A very rude awakening with dire ramifications for all Australia. We do not print our own money, it defies belief, requiring immediate addressing without question. FED is the same scenario!! Thus our national debt is owed to RBA. Do you find this valuable? |
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trgh |
RE: Inflation and Interest
Jul 4 2008, 2:53 AM EDT Hi anonymous. I agree with you that the practices of the central banks to artificially fluctuate the economy cause havoc and make the inflation/depreciation situation worse. The other thing that this process enables is the transfer of wealth from small businesses to big monopolistic corporations and cartels, from struggling mortgagees to banks, etc. However, I don't this is the main issue. Within your proposed 95%: There are 2 separate elements within your proposed 95% cause of inflation: 1) direct manipulation of monetary policy (as you have identified) 2) the erroneous monetary policy itself In my opinion, it is not item 1) but item 2) which causes the majority of inflation, and in fact the former in many ways is only possible because the latter is its foundation. That is, how can one manipulate and exploit the peaks and troughs if the mechanism which causes those fluctuations is removed? So, the deception is two fold. Firstly the set-up of the erroneous system, and secondly the exploitation of its in-built fluctuations. Do you understand my distinction here? Do you agree? Terence Do you find this valuable? |