Why do we have so much debt?

People, companies and governments are loaded with ever increasing piles of debt. Why? The answer is that in the age of inflation, borrowing is the only sensible thing to do.

Inflation is good for people who owe money. It eats away at the spending power of money, so the repayments are worth less than the amount borrowed. Since our government is committed to inflation, not borrowing money means missing out on the greatest giveaway of all time.

The government says that gradual inflation is good for us. It is not. In a good society, prices would gradually fall. Why? Because humans are always thinking of better ways to do things, and better usually means lower cost (or the same cost for a better result). Being able to afford a little more of the world’s good things today than we could yesterday is the natural order. Gradually falling prices are good for ordinary people.

So why does government promote the lie that inflation is good? The answer is simple. Because it likes spending more than it can afford and that means it has to borrow. Rising prices are good for borrowers. Government is the biggest borrower, so government loves rising prices.

How does the government make prices rise? By printing money, creating it out of paper, or nowadays virtual paper. Of course, we need to replace worn-out bank notes. But that is only a tiny fraction of money printing. The country’s central bank prints money, but most of the money printing is done by banks, operating under rules designed by government to promote inflation.

Inflation redistributes wealth on a huge scale. The winners are bankers, government employees and vested interests. Why? Because they stand close to the source of the newly printed money. The losers are ordinary people. Savers are punished and borrowers get free stuff.

Ordinary people would be better off without inflation. Society would be better balanced without inflation. And there is a simple way to avoid inflation: stop printing money (apart from replacement bank notes). Government controls money printing, either directly or through the rules it sets for banks. So ordinary people must use their votes to force government to change course.