Thursday, Jul 15, 2010
What have the savers ever done for us?
Guardian: Inflation leaves savers struggling to keep up
"CPI, the government's favoured inflation figure, is still far higher than the target of 2%, which means that higher rate tax payers are unable to find a straightforward, no-strings savings account that will enable them to beat its erosive effects. They would need to earn 5.33% on their savings to beat tax and inflation".
Posted by alan @ 07:54 AM (2357 views) Add Comment
31 Comments
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3. paul said...
This is the most underreported story in economics right now. The focus remains on homeowners and how they would have to face the unspeakable horror of renting their homes if interest rates returned to normal levels rather than examining how innocent and prudent savers have been the real victims.
4. mystie010 said...
@ paul - Absolutely spot on!
5. Estrader said...
"Hagger said there are no savings accounts that beat the effects of RPI"
4 words Mr Andrew Hagger: Index-Linked-Savings-Certificates
6. tom101 said...
Absolutely right!
7. smugdog said...
Get over it and adapt.
[gladness be]
8. Ddhk said...
It's an outrageous situation. The winners - the prudent who avoid debt and save - are forced to bail out the losers who have paid far too much for houses they can't afford. Meanwhile the BOE sits on it's hands, pretends that inflation is not a problem, and looks after the incompetent banks by money printing.
Disgusting.
9. Uncle_monty said...
NS and I Index-Linked Certificates are the solution.
10. nomad said...
Crisp comments!
11. tyrellcorporation said...
Walkers Prawn Cocktail can't be beaten IMO.
12. inbreda said...
smugdog - be careful what you wish for - if savers adapted it would probably bring your dodgy BTL empire down
13. Robh said...
£15,000 per issue
14. Crunchy said...
Smuggy, when it all breaks down I will miss you.
OK, you have been looked after for now but don't think for a minute that the banks are on your side. Sorry to break this to you....
It doesn't work like that and never has. When the banks are ready they will strip you of all you have just like the savers and OAPs.
When they are 'ready' you had better be ready to turn on a sixpence. Not easy with illiquid investments.
Don't underestimate banks, they have been in this game for longer than you. Good luck!
15. cynicalsoothsayer said...
Zero Interest Rate Policy has to go wrong at some point
16. uncle tom said...
I'm expecting some movement on IR's before long - it would be consistant with the stress test agenda, and Tories really don't like screwing savers..
..maybe a little 0.25% hike in September, followed by a series of further small hikes.
The next BoE minutes should give some clues
17. mark wadsworth said...
Did anybody see Moneywatch with the ever delightful Sophie Raworth yesterday evening on BBC 2? They featured some chap who earned about £20,000 and managed to gear up to buy 100 BTLs - he said his borrowings were about £5.5 million and when they briefly hiked interest rates he came close to losing it all, but now they have dropped them again he is cruising along nicely, thank you.
I personally don't have a strong opinion on interest rates - OT1H, after all and in the long run, the UK government has to pay market interest rates, and as a taxpayer, I warmly commend them paying the lowest interest rates they can get away with. OTOH, Mrs W and I have all our ill gotten property gains invested in NSI monthly income bonds which pay about 2% a year.
So to be fair about this, if the government hadn't kept interest rates far lower than they should have been, we'd never have made that small fortune in the first place, which is now being eroded away again slightly.
You win some, you lose some.
18. titaniccaptain said...
"Get over it and adapt."..............I must say there is much truth in that statement.
We can't just sit an moan about our circumstances and the injustice of it all.
The ability to adapt to his environment is what sets man against beasts in survival.....so it must be for savers.
Fear of adapting is what holds us back from maximising our potential...fear of getting it wrong.
But.
That is when the individual must explore avenues of research that he would not normally have entertained in order to protect wealth against this TEMPORARY inflation that is the result of measures to plug the black hole in the economy.
We all know that hyperinflation can only occur in a deflationary environment like the one we are in because the mechanisms to pub said black hole may over extend themselves if not monitored properly but mechanisms capable of achieving this have yet to materialise.
Increasing liquidity via QE does not mean that money will find itself in the hands of Joe public or small to medium size businesses...this has been proven when you look at the credit restrictions in place with business and mortgage lending.
So the inflation we are witnessing has very little if anything to the so called 'money expansion'.
It has more to do with currency performance and inflation created by higher costs of imports.
Anyway back to plot.
Adapting to the new financial constructs means that there are no certainties.......i.e. investing in agricultural land was a great idea (I wish I had put my money where my mouth was on that 4 years ago) however farm land price is held up by subsidies from Europe (amongst other factors like speculation which has inflated the agricultural land bubble).....if Europe decided that it could not afford subsidies what would that do to the price of farm land?
What would happen if the state decided that the only way it could function would be to grab all property/gold/investments/savings?
Yes all very alarmist and doomsdayish but after doing a little research in the lets just say 'non-mainstream' media (as well as some quite alarming stuff creeping through to the mainstream media) it becomes clear that we really are not in as good a position as we may think.
Now then.
The conclusion to be reached is a very polarised one.
Either you think that this will all blow over and there will be a recovery after a period of pain and things will return to some semblance of what we have been lead to believe is normal....OR.
We must consider the outcome of the drama in the world economy we are watching unfold is not going to be one we would wish for.
So.
You place your money according to what you believe the outcome will be.
With no conspiracy theory or rational thinking to back up my thoughts on this I will say...........
We must entertain losing everything.
"Ah but people will riot in the streets in protest".........not if the solution will prevent them from starving.
And the solution could mean a confiscation by the state of all assets...including property.
It has happened before (i.e. gold in America, Communist Russia) so not as much of pie in the sky nightmare as one might think.
But even that can be adapted to.
Or....
We are going to pull back from the cliff and there is a world of investment awaiting the clever individual who has done his or her homework and seen opportunities to invest his or her (must be politicly correct and include the non-p*nis types) savings whilst the rest of the world prepared for Armageddon.
Time for coffee.
19. debtfree said...
higher rate tax payers would have to earn 8.34% gross.
Would it be fair to say, that if house prices don't rise by more than 8.34% this year, then they are static or falling ?
20. Simon said...
If mortgage holders who are being given a helping hand by artificially low interest rates are not taking the opportunity to overpay they are taking the p1ss .
So not only are savers being shafted but the money is being wasted so even more will have to be taken from the savers .
Rational and responsibly behaviour is only for suckers and does not pay .
21. Sarah said...
@UT
"and Tories really don't like screwing savers.."
I distinctly remeber the tories sending out election leaflets to everyone stating how they intended to keep IRs as low as possible
22. mystie010 said...
@ mark wandsworth - I saw that program and I'm already charging all of my mates £20 per head to come to my barbies! All my financial troubles are well and truly over at Chez Mystie's!
23. peter said...
I wouldn't say I was 'struggling' to keep up. I'd say I was +failing+ to keep up. along with most other people who were silly enough to have savings instead of debts.
This is no accident. It is part of the ruling clique's plans to systematically transfer wealth from savers to borrowers.
The aim is twofold: to buy votes and inflate away government debt. It also has the pleasant side effect for the ruling clique of strengthening the position of the state in the economy.
The answer? To hold your savings in forms that are not susceptible to this erosion by inflation. For example, gold.
24. Gooders said...
#16 TC "It is not until you lose everything that you are free to do anything" from Fight Club
reCaptch bashed might (how apt given the quote source)
25. mark wadsworth said...
@ Peter 19, the idea is NOT to transfer wealth from savers to borrowers; the idea is to transfer wealth from savers to Home-Owner-Ists (i.e. bankers, landlords and existing home owners). As you may be aware, people with credit card debts are paying higher interest rates than before.
26. simon68 said...
TO: titaniccaptain
I can tell you that your Armageddon has begun since last year. You know what Gordon is good at? I’ve got few friends who invested in UK properties retreated the market in 2008 and same as Iceland investments in UK has been held up by British Government using the Anti-terrorism legislation. My friend’s bank HSBC told him that he could only remit the sale proceeds to Hong Kong after obtained the clearance from UK monetary authority to prove it has no connection with terrorists. It took 2 months to get clearance and the sterling has fallen which erode the gain on property sale.
I took a flight to Hong Kong in November 2009. You know what? The custom officers searched all elder Hong Kong passengers (but not White British) to see if they bring large sum of cash on the plane back to Hong Kong. The raid isn't carried out at the X-ray line but right before boarding the plane. When the custom officers find large sum of cash, they ask you to give bank statement to prove you own the money…………………if there is a sterling collapse the next move will be Foreign Exchange Control!!!!!!!!!!!!!!!!!
27. simon68 said...
Honestly speaking I don't think 4 grand is substantial sum of money!
28. Hermes Kelly Bag said...
higher rate tax payers would have to earn 8.34% gross.
Would it be fair to say, that if house prices don't rise by more than 8.34% this year, then they are static or falling ?
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