There is no lender and borrower 'class'.

Quite so. If there were only "lenders" and "borrowers" there would be no new money.

Banks create credit and lend it as new money into circulation, and it is simultaneously redeposited.

Some of this new credit is used to create new productive assets, which is fine - without this there can be no development.

Unfortunately a very large amount of it is used to purchase productive assets once they have been developed. This is where asset price inflation and "bubbles" come from.

Credit has no "cost" when created, and through the cycle its cost comprises operating costs, default costs and bank profits.

Productive Capital (ie property in assets with a value in use) also has a "cost" or market price and this has come down from 25% pa in Babylonian times, through 10% pa in medieval times to 5% before the Industrial Revolution.

"Financial Capital" (ie Debt and Equity) then kicked in and funded the Industrial Revolution and everything since. The result is that the world is now awash in productive capital to the extent that the "Cost" is probably now less than 1% pa.

Interest rates are purely arbitrary and bear no relationship at all to either the cost of Credit or this Cost of Productive Capital.

Inflation is IMHO caused by a combination of:

(a) deficit spending by governments (other than on productive assets);

(b) the deficit basis of Bank created credit; and

(c) the "profit" motive.

The problem is that because our Money is Credit then we have essentially conflated Capital and Credit within a parasitic overlay of "Financial Capital" upon the productive economy.

The rates of return demanded by investors take into account the inflation which is inherent in the system itself.

Productive assets are not only inequitably shared among the population, but the system leads inevitably to the concentration of "Wealth" in fewer and fewer hands. Which is how it has evolved as it has developed organically under the control of the rich.