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Bank profits inflate the money supply.
If banks hold 100% of the money and lend it all out x10 (fractional reserve) and earn 1% interest, the money supply is growing by 10% per year.
That's inflation. All that money goes to the banks.
Edit: that's 1% on top of whatever they have to pay for the money from the fed, so 7% rate plus 1%, or whatever.
That doesn't even account for the stock market and other speculative devices.
When business and the wealthy class get richer, they want to get even RICHER. Prices rise. Which drives record profit, which makes rich people wealthier, which causes the cycle to repeat.
Raising interest rates is SUPPOSED to make people uncomfortable and stop spending. It's not working yet, because literally EVERY INCENTIVE IN OUR SOCIETY is pushing people to spend spend spend.
There is no functional market force driving down housing costs, food costs, or education costs. Unchecked capitalism can't work.
We just need proper incentive structures and regulation. But seeing as nobody has the guts to start figuring that out, the only lever we have is interest rates.
So they'll keep going up until something breaks.
You've got it backwards.
Banks hold other people's money and use it to issue loan. It's the issuance of loans that creates money. The fractional reserve doesn't magically multiply the money. It just (in a roundabout way) allows banks to loan up to that multiplier of money to people. But that only works if there's people who want to borrow that money.
If a bank earns 1% interest, that doesn't grow the money supply. It transfers money from the people that borrowed the money to the bank which then uses it to pay executives, shareholders and employees (in that order of priority).
The higher the interest rates, the less money people can afford the borrow, the more the money supply shrinks.
Banks HATE high federal reserve rates, because that means people don't borrow as much which means they don't make as much money.
This can only happen in a poorly regulated environment where the rich setup monopolies or oligopolies. Otherwise they'd lose all their customers if they raise prices.
I think you're just speaking for yourself here. Before you start spreading misinformation on the internet, maybe you should find the guts to actually figure out what you're talking about.
High federal reserve rates can make things difficult for banks and that might be why the CEO of JP Morgan is butt hurt right now.
Want to deal with inflation? Raise interest rates.
Want to really improve the population's purchasing power? Break up the monopolies and oligopolies.
I actually don't disagree with most of what you're saying. I'm mostly pro-capitalist but anti-crony and anti-corruption which it sounds like you are too.
Maybe I'm just misunderstanding, so I'll try and clarify:
X$ exists.
Banks loan out 10*X$ (or whatever).
The loaned money is debt and so doesn't change anything because the cash and the liability counter each other.
The bank charges Y$ in interest.
After the debt is repaid, the bank has X+Y$
You're saying that because the Y$ comes from somewhere, it's not inflation. However as banks are profitable, they clearly have more money left after paying salaries, wages, costs, and dividends.
As long a the money that the bank has is growing, the amount they can lend is growing which means the pool of available money is growing.
It might not be "real" money (I'm probably misusing the term "money supply") but it doesn't change the fact that more "money" is available.
Raising interest rates means people borrow less which means banks make less money and grow slower. If this were to keep up eventually the banks would lose money and the amount of loans they could give out would decrease and the available money would decrease. Which might finally put an end to this rampant inflation.
You're describing profit, not money supply.
Bank profits don't cause inflation in the way you seem to say and bank profits are no different than any other company's profits in terms of how they affect inflation.