A great deal of practical change has taken place since this was written. Major surgery is required! (2010)

There is a large agreement that present controls of macro-economies are (mainly) through the use of one of two mechanisms: the variable use of bank interest rates; and fiscal means. The second seems to be out of favour for two reasons: that it puts the “blame” for such actions on politicians rather than on bankers: and because taxation has become a political “brownie point” concept: the lower the taxes one political party promises, regardless of any thing else, the more electable will it become.

(It may be noted, however, that the recent tax refunds in the USA have been given simply because the US dollar was so lowly valued that further lowering of the interest rate was considered impossible: but on this occasion the political gains have been negligible)

But the use of the interest rate mechanism has major practical problems in long-term increasing of a country’s overheads (rents etc are almost never lowered when interest rates fall): but from our point there results a severe ethical problem: should the economy of a country, when it overheats, be put right by effectively making the rich richer and the poor poorer? Should the poor in practice pay for the situation resulting from the over-spending of others?

The theory seems to be that those who have to borrow (not the rich) will reduce their spending when they have to pay more for their borrowing. But why just them? Why do the rich (who do not have to borrow) also have to share in the reduction of spending power?

Surely the amount of money available in one form or another is the significant factor. So why not variable income tax rates? Is it an impossible dream that taxation for incomes should be based on a present, daily rate rather than annual ones?

As mentioned above, the problem would appear to be totally political. Whilst the economists are concerned with inflation and money-flow, (and we do not argue that they are wrong so to be), should the task for controlling such be given to a body without an ethics guideline or committee to guide such? More thought is surely required.

[It is perhaps not without significance that most of the world’s religions give strict condemnation of “usury”.]

End of 2008 note: Very low interest rates in some parts of the world have not produced the quick solutions the protagonists of the interest rate tool have suggested. Why?