READER REPORT:

Can you fix it? Interest is unnecessary

KELVIN DEAL
Last updated 05:00 31/10/2012

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Have you ever tried to work out the cost to you of interest?

It is on every step of the economy, from the miner or grower of the raw materials, to the manufacturer, the wholesaler and then retailer.

Furthermore it is in the cost of the services each buys. It is in the taxes and rates we pay. It is often on the credit card or hire purchase we buy it with.

It is a huge proportion of our cost of living, but no-one seems able to calculate what that proportion is. Yet it is all unnecessary.

Politicians borrow in order to stimulate the economy and make us feel good (and vote them back in). The sad thing is, if a nation begins to pay back debt, it is deflationary, making it very difficult to save money and repay while unemployment and government welfare rise in consequence.

Now that world-wide debt has reached the point where the effect of compounding interest is unsustainable, debt levels, particularly of governments, will continue to go higher and higher. However, the good news is there will not be a worldwide crash because that would bring down both the governments and their lenders.

Both are in partnership, and neither can afford to let it happen. Instead, the lenders will end up controling the borrowing governments. I admit it sounds crazy, but then this situation has never been reached before in world history.

We now have a global economy for the first time. We first saw the result of the emerging partnership in 2007, when governments chose to borrow in order to save their largest banks. We wondered why at the time. Now the banks are making record profits while many of the western governments are insolvent.

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