Is inflation a necessary evil?

As consumers brace for another interest rate, economists continue a decades old debate on monetary control, and who should have the control.  Most consumers do not care.  As long as we can borrow money at an affordable rate, we really don’t care who is in control of the countries money.
 
Monetarists have ruled the economy for several generations. They believe that the government should control the money and manipulate the countries economy using the interest rates.
 
Keynesians feel that the supply of money is a better weapon against inflation. 
 
The ‘fly in the ointment’ is that the banks want to make a big profit. The only way to make a big profit is to make money readily available to the public.   This removes control of the economy from the government and puts it in the public’s hand.
 
This is why the UK population is enjoying the battle between those who want to lower the inflation rate by increasing the interest rates, in effect, lowering the supply of money in the country, and those who think that we should let it flow and continue to grow.
 
Is Inflation evil?  Not really. Think about it. If we lowered all the interest rates, on all financial products, to 2 or 3 points above the inflation rate, then banks would make a tidy profit and the debt mountain would be reduced to a manageable although untidy pile of rubbish hidden in a dark corner of an obscure government office.
 
On one side are the banks, on the other side is the government.  And, caught in between is the population. Not a pretty picture no matter what colors you paint it.
 
A few generations ago, this would not have caused the average consumer more than a few minutes of worry every month as they paid their bills.  Unfortunately, we are now in a debt motivated economy. 
 
The only way we could have a say in how the country controls money is if we all stopped borrowing. That would get their attention.   It wouldn’t take more than a few weeks for both camps to sit up and realize that we are not happy.
 
The problem with monetarism is that it feeds the problem. We pay more interest, fall farther in debt, and receive a lower interest rate, which increases our debt while effectively lowering the money we have to spend. It is hard not to see a problem with this picture.
 
One question that no one is asking is, why not let the population control the economy?  We are the ones working for the money that feeds the countries economic growth. If we didn’t work, they wouldn’t have anything to tax.   It is an interesting concept, unfortunately, no one wants to give us control because spending increases the inflation rate. An increased inflation rate lets businesses increase their prices, which increases wages.   It is a vicious cycle.  But, it does make people ask themselves whether the interest rate, or inflation rate, is the reason why people are suffering under debt.
 
Look at the housing market. It skyrocketed, and people built wealth.  The banks created new financial products that let more consumers buy their first home, other people started buy-to-let portfolios, and everyone was happy – until the interest rates started to increase. 
 
An increase in bankruptcy will not be the result of people borrowing to buy homes, but the increase in utilities and interest rates that happen ‘after’ people sign their mortgages.
 
To fix the debt mountain the government is going to start teaching economics. This is ironic.  The government is going to teach children how to manage their money, when it is the government’s actions that are driving some households into bankruptcy. 
 
The Keynesians believe that letting us control our own money would teach us how to manage money. Some countries have a seven year waiting period after bankruptcy before people can borrow again.  That would be a much better deterrent to overspending than increasing interest rates.
 
It would also slow the banks down a little. At the moment, the banks have very little to lose. Yes, they write off record levels of debt – but this doesn’t outweigh their profits.   If everyone who went bankrupt was not permitted to borrow for seven years, then it would cut deep into the bank’s profits.  This would ‘teach’ them to be a little more wary when lending.
 
The government has nothing to lose. Even if you petition for bankruptcy, you will still continue to pay taxes. You may not own your home, but someone will, and they will pay taxes on that home.  
 
There is an old theory that claims ‘those who have the most to lose should have responsibility for decisions.’  That would be us, the population, the people who have a lifetime of working, wealth building, and assets to lose.  
 
It would be interesting to see what would happen if we were allowed to control our own destiny, our own wealth, and our own finances.