RobertCunningham - Ethically Speaking

The ethics of interest rates

Interest rates. They get a lot of airplay. But what are they really?

Historically the charging of interest has been prohibited, restricted, condemned and scorned on ethical and religious grounds. Why?

While on one level interest rates simply represent the price of money, they do have a profound impact.

In my view, interest rates in their current form have the effect of skewing the productive activity of the under-resourced so as to benefit the well-resourced. This is because interest rates provide the mechanism whereby those with too much money sell money to those with not enough money.

In this way, interest rates have the effect of diverting the masses onto a perpetual treadmill whereby many are compelled to work a significant proportion of their lives just to secure the fundamental human need of shelter.

In Australia, home owners now spend a record level (33.8 per cent) of their disposable income on their mortgage, and many are completely priced out of the dream of ever owning their own home.

When most members of society are forced to spend much of their life energy securing the fundamental need of shelter, society itself becomes malleable and therefore easy to direct and control. It is no coincidence that the government capitalises on interest rates as yet another spook, along with refugees and terrorism, to instill fear.

Throughout modern history there have been some unique experiments which tried to secure alternative social goals through the use of interest rates. In Austria in the 1930s, which had been heavily affected by the Great Depression, the Worgel community created 32,000 units offree money in order to stimulate economic activity

the catch was, if you didnt spend the money within a specified period of time it became worthless. The free money had a built-in negative interest rate.

As a result, money rapidly circulated since there was a disincentive to horde it. And the issue of 32,000 units of free money enabled trade of goods and services to the value of nearly 15 million units.

So as an economic instrument, interest rates can be used to influence the productive activity of society in both negative and positive ways.

Ethically speaking, if the status quo remains it will become increasingly difficult to differentiate between a rat running on a treadmill and a human-being paying off a mortgage. Are we there yet?

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