First, house price inflation. An article in today's Guardian describes the result of a report from the National Housing Federation showing that "in 2001 the average price of a home was £121,769, and the average salary was £16,557. In the space of ten years the price of a home has rocketed to £236,518 – an increase of 94% - whereas wages have risen just 29% to £21,330, making buying a home increasingly unaffordable for millions of workers". Not only have the prices risen way faster than wages, the amount of deposit required has also increased enormously. We learn that "In 2001 the deposit for a typical 90% mortgage was £12,177, about nine months' salary.... Now, because banks and building societies have tightened their lending criteria, a buyer can typically expect to put down a 25% deposit at £59,129, almost three years salary."
Where does the blame lie for these ridiculous rises? Hopefully you will already know that the origin lies in the fact that commercial banks have been given virtual monopoly on money creation. And when commercial banks get to decide on where to put newly created credit, their number one priority tends to be lending to people to buy houses - and in particular, houses that already exist. Result - a house price bubble that has left many people in a position where finding somewhere affordable to live is a distant dream.
That brings me on to a second subject - the appaulingly low rates that banks offer to savers. According to another report in today's Guardian,
"With the consumer prices index now at 2.6%, a 20% basic rate taxpayer needs to find an account paying 3.25% to offset the impact of inflation. A 40% taxpayer needs an account paying at least 4.3%.Why are interest rates so low? Well one reason is that banks really have no incentive to try and encourage saving. Since the Bank of England will happily lend them money at 0.5%, why would they bother offering higher rates to attract savers? Furthermore, since they can use fractional reserve banking to create more money out of thin air, there is clearly going to be no need to go chasing after savers.
According to Moneyfacts, which monitors UK savings products, there are 1,092 savings accounts available on the market and only 227 of them will offset the inflation rate (and then only just). Of those, 128 are ISAs and 96 are fixed-term accounts. There are just two notice accounts that allow savers to stay ahead of inflation (by 0.05% and 0.1%) and not a single no-notice account."
Of course, if banks were no longer allowed to create their own money, they would be forced to try and attract savers. Yet another reason why we need to get rid of the current corrupt and stupid system.
Finally, there is the general question of inflation. An editorial in Tuesday's Guardian discussed the latest figures from the Office for National Statistics. In the last five years, food prices in the UK have shot up 28.7%. Electicity, gas and other fuels have shot up 45.5%, and transport costs by nearly 25%. I had a look at the dataset from the ONS, and compiled the following table that shows the increases in price index for the 124 different items in their "shopping basket". The numbers give the increase in prices using 2005 as a baseline of 100.
The table makes for sobering reading. Gas prices have more than doubled. So have postal services. Anything to do with energy and transport are through the roof. How can we explain those increases? Surely, if money is in short supply, there should be a tendency for prices to increase more slowly.
Well, not necessarilly. When energy and transport companies have been privatised and their shareholders are looking for very high returns, then those companies will be tempted to increase prices as much as they can. And for food prices, don't forget that the ability of commercial banks to create money that can be used to speculate on the prices of basic commodities means that here again, a lot of the problems can be traced back to the same original cause: the fact that the money supply is created by commercial banks for profit.
It is definitely time for a change