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  • Writer's picturePhillip Ullmann

It’s a Bank robbery (in reverse) – interest rate rises are stealing from us


It’s hard not to say I told you so!

Inflation remains stubbornly high – the headline figure is still over 10% according to the latest numbers. And yet the authorities persist with their crazy policies.

Raising interest rates to fight this inflation is criminal I tell you.

Just look at the numbers.

Prices are rising because of many factors – few of which bear any relation to the Bank of England’s narrow monetary remit.

Food and energy are soaring ever higher. Basic products that everyone buys are costing 20-30 percent more.

This is because we no longer produce enough food in our own country to feed our people. We have allowed the corporate retail giant supermarkets to take over our food industry and they source food from the cheapest possible places around the world. However, their supply chains and transport costs were hit hard by the pandemic shutdowns, and then the surging cost of fuel. Result: higher prices. Relevance to interest rates: zero!

In the energy market it’s a similar story. According to Reuters, our consumer energy prices are almost 80% higher than they were two years ago.

It doesn’t matter what interest rate the Bank of England sets, that rate has got next to nothing to do with the costs of sourcing our food or energy. In fact, all it does is punish those who can least afford it – the least well-off members of society who have to pay an even larger share of their limited budgets for essentials.

And this is true across our whole economy. The factors driving inflation are more to do with problems on the supply side.

The war in Ukraine … China flexing its muscles against the US … trade issues with our biggest partners in the EU as we inch our way beyond Brexit … the increasing burden of trying to reach Net Zero … all these play their part and higher interest rates can only affect them negatively.

The biggest issue of all? Productivity is weak in Britain. We hardly produce more now than we did before the financial crisis in 2008.

This isn’t exclusive to the UK, but we are suffering more than our peers.

Now they must be aware of this at the Bank. They’re not stupid. So, what are they doing?

In part, it’s the nature of our economy. We are reliant on service industries, especially financial services, and asset prices, especially housing.

Policies like quantitative easing poured money into these areas and gave us the illusion of plenty for many years. But it’s not real wealth. For that we need to create things, things that have value not just a high price.

Look I’m not a socialist central planner who wants to control what everyone does, and set targets for output like the Soviets. That won’t work.

Equally, pouring billions into the pockets of the already-rich through central bank financing is the wrong course and will end in disaster. We’ve already seen the banking sector showing signs of distress and it’s not over yet by a long way.

There is another path that we can take. And we must take it soon.

We must ask ourselves what society we want to live in. A country that produces well over £2 trillion a year in gross domestic product must surely be able to provide comfortably for just under 70 million people, mustn’t it?

Communities across the country face different challenges and have different needs. One size does not fit all – yet that it the nature of centralised government.

I believe we should trust the people. Our government should be there to create a framework in which we operate, but it should not get involved in making the decisions on how we run our lives.

For that we should distribute the power, allocate the money to those local communities. Protect it within civic trusts, lock up the assets so they are preserved for the people in the community.

Accountability can rest with the community through local assemblies. Transparency through technologies like the blockchain.

The beauty of this approach is that we can start small, test it and refine it before we roll it out across the country. Once we have it working well we can build it out and the network effect will strengthen the impact across the country.

This is the way to build a strong society, powered and nurtured by a strong economy. We must all recognise that only by looking after all of our fellow citizens can we truly be free.

It sounds radical, and in the benefits it brings it will be. But really it’s a very simple approach.

It starts with urging our leaders to distribute power and trust us to come together.

Join me and let’s push for a positive change!

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