Sacrificing Savers - Short-Term Politics Of Long-Term-Pain

[exiges]

http://www.saveoursavers.co.uk/2011/04/sacrificing-savers-the-short-term-politics-of-long-term-pain/

Pre-election, both David Cameron and George Osborne were pro-saving; they were going to rebuild the economy on a recipe of exports, investment and savings. But rather than nurturing and rewarding saving, they now seem intent on bleeding savers dry in order to support growth in an unbalanced economy.

The last decade saw record low savings with a booming economy fuelled by massive consumer debt. Now we have an economic policy that is designed to penalise savers, encouraging them to spend rather than save; our diminished savings are being sacrificed to prop up a semblance of economic growth. However at the same the Government realises that we are saving too little and we are seeing the introduction of initiatives such as NEST to encourage us to save more!

The result of this schizophrenic approach, which as ever sees political expediency triumph, is to undermine the long term financial security of millions of households. Providing the economy does eventually pick up, the retired – who contributed least to the financial crisis and are the most badly hit by current Government policy – will be the least likely to benefit.

Supporting economic growth in this way not only flies in the face of the Coalition’s claim of fairness, it will prove to be economic suicide in the long term.

A new economic morality

The morality of transferring from savers to borrowers is wrong whether the country is in an economic boom or the depths of a recession. It undermines the prudence of the saver, destroys the incentive to save and works to widen the growing financial divide between the rich and poor in society.

By devaluing our savings, the Government is depriving the UK of a source of capital for investment and robbing the older generations of their ability to properly support themselves. The prospect of an ageing “top-heavy” financially dependent population is every bit a threat to the prosperity of future generations as the current scale of public sector debt. Our route to long term economic growth and financial stability lies in a new economic morality where prudent financial behaviour is always rewarded.

A Budget for growth but not for saving

The Budget saw no change in the Government’s overall policy towards saving. They hope to persuade more people to save by providing greater flexibility, a range of simple financial products, better financial education and an annual financial health check.

They are, however, failing to address the immediate issue: the value of your savings is dropping in real terms and as such, you are better off spending it now. Already the older generation is telling the younger that there is no point saving. They know; they tried it and have gained precious little for it.

And if the younger generation does not pick up the savings habit, then we are likely to end up the way of Greece and Portugal. Ironically if the UK was to lose its AAA credit rating then at least savers would get better interest rates.

One thing you can be sure of though, the annual financial health check the Government wants to provide for everyone will not be spelling out the corrosive effect that low interest rates and high inflation is having on your savings.

[billybong]

And if the younger generation does not pick up the savings habit, then we are likely to end up the way of Greece and Portugal.

Savings habit is good if savers are given reasonably fair treatment - some hope in the UK? It's not the younger generation's responsibility to avoid becoming another Greece or Portugal because that problem is already here, here and now, the fundamentals of the UK's economy are just as bad as in Greece and Portugal already. The whole system needs changing not only savings - some hope again.

[SarahBell]

Women between the ages of 52 and 58 are having the age that they will receive their state pension delayed, some by up to 2 years - this could cost some as much as £10,000 in lost pension. Act now and support the campaign to phase this chnage in a fairer way.

http://www.saveoursavers.co.uk/2011/06/pension-delay-for-women-time-for-action/

HOW the f*ck does that help my savings rate?

[Shotoflight]

Inflation wipes £36 Billion from savings.

http://www.telegraph.co.uk/finance/personalfinance/savings/8569721/Inflation-36bn-wiped-off-our-savings.html

[gf3]

If the savers don't spend their money where are the borrowers going to get the money to pay off their debt?

[Democorruptcy]

Providing the economy does eventually pick up, the retired – who contributed least to the financial crisis and are the most badly hit by current Government policy – will be the least likely to benefit.

By devaluing our savings, the Government is depriving the UK of a source of capital for investment and robbing the older generations of their ability to properly support themselves.

It's a big mistake to try associate saving just with the retired/older generations.

What might happen then is a tax policy that only applies to pensioners. In 2009 Cameron promised the removal of the 20% tax on interest income for everybody, if elected.

The Bank of England think that anyone over 40 MUST own a house so if they have savings they are losing interest income but their policies have protected the value of their house. It's not allowed for young people to have savings or anyone over 40 to rent.

['Bart']

Save our savers

Save yourselves.

GOLD

You know the rest.

If the savers don't spend their money where are the borrowers going to get the money to pay off their debt?

Work for it?

[ken_ichikawa]

Work for it?

Don't be silly we have a magic printing press for that.....

This time next year Rodney...

[gf3]

Work for it?

and where will the money come from to pay your wages if the savers aren't spending. You see it is impossible to borrow money to pay off your debt.

Edited June 11, 2011 by gf3

[shiningliao]

Government always love inflation. Inflate away nation debt, push more people to higher band of tax. Less debt, more tax income!

Savers, what savers? Saver's vote are limited. There are much more votes from people on job seeker's allowance.

http://www.cityam.com/news-and-analysis/allister-heath/inflating-away-the-uk-s-national-debt

[MrFlibble]

(Getting it yet?)

Sure am, ounce by ounce

[Dorkins]

If the savers don't spend their money where are the borrowers going to get the money to pay off their debt?

By consuming less?

[pl1]

This is a pointless protest group. A bit like an online petition on Facebook, totally worthless unless it's backed up with some kind of direct action that hurts someone. Isn't it run by a vicar?

[gf3]

By consuming less?

That wont work either. Have you ever heard of fractional reserve banking?

The debt can only paid off with savings because savings are just somebody else debt.

Edited June 11, 2011 by gf3

[mfp123]

That wont work either. Have you ever heard of fractional reserve banking?

The debt can only paid off with savings because savings are just somebody else debt.

no, the same bit of money can circulate 100 times to wipe out debt.

the biggest problem is that debt doesnt disappear when it is rising. its difficult to reduce debt when you borrow more and more....

[gf3]

no, the same bit of money can circulate 100 times to wipe out debt.

the biggest problem is that debt doesnt disappear when it is rising. its difficult to reduce debt when you borrow more and more....

Not really. If I done some work for you and you paid me £100 and I then paid a £100 pound off my mortgage that money has now disappeared into thin air therefore it can't circulate. If however you had borrowed the £100 you had paid me no debt would have been paid off just the debt would have moved.

[mfp123]

Not really. If I done some work for you and you paid me £100 and I then paid a £100 pound off my mortgage that money has now disappeared into thin air therefore it can't circulate. If however you had borrowed the £100 you had paid me no debt would have been paid off just the debt would have moved.

no that money still exists, stored in the banks reserves, the iou on your mortgage has simply dropped £100.

[OnlyMe]

no that money still exists, stored in the banks reserves, the iou on your mortgage has simply dropped £100.

Surely not they don;t have reserves to cover the level of lending (or other gambles they make) - if gearing up and taking on debt increases the effective money supply via the banks increasing their lending/deposit ratio then when debt is paid down the money goes out of circulation and effecively reduces the bank's leverage by a miniscule amount.

[mfp123]

Surely not they don;t have reserves to cover the level of lending (or other gambles they make) - if gearing up and taking on debt increases the effective money supply via the banks increasing their lending/deposit ratio then when debt is paid down the money goes out of circulation and effecively reduces the bank's leverage by a miniscule amount.

depends what you mean by "money supply".

£50,000 in a savings account isnt £50,000 in real money its just an iou. so although lots of people might have a bank statement showing £50,000, that money doesnt all exist, you couldnt all spend it at the same time, its just an iou.

in terms of "real money" - the stuff that gets moved about and circles round and round, it remains the same. only the government can increase this by printing "real money" and injecting it into the economy.

[OnlyMe]

depends what you mean by "money supply".

£50,000 in a savings account isnt £50,000 in real money its just an iou. so although lots of people might have a bank statement showing £50,000, that money doesnt all exist, you couldnt all spend it at the same time, its just an iou.

in terms of "real money" - the stuff that gets moved about and circles round and round, it remains the same. only the government can increase this by printing "real money" and injecting it into the economy.

OK talking money in broad terms - amount amount (either borrowed or printed) that is sloshing (or has sloshed around) the system.

[gf3]

no that money still exists, stored in the banks reserves, the iou on your mortgage has simply dropped £100.

I was talking about broad money not notes and coins

If I had a debt of £1000 and I had £1000 in a savings account. If I pay off my debt the £1000 disappears into thin air. which is the same place the money for the loan came from in the first place.

[mfp123]

if you mean if money stops circulating then people cant pay off debts - yes thats true. but it doesn't necessarily require savers to save less, or spend more.

it might help since they are spending more and thus circulating more money around quicker - but saving less isnt the solution to rising debts i.e its not a zero sum balance in that respect.

debts are massive because people dont save is more the point.

Edited June 11, 2011 by mfp123

[gf3]

fixed

money wealth is the mirror image of debts

We all know credit money comes into existence when a loan is made. Credit money is a credit derivative - there are two parts to it...a plus and a minus. The minuses are the burgeoning debts. The pluses somehow become accumulated by others. Because they fail to trade in balance. i.e. they get more in than they pay out, they 'save'. Government tries to push 'money' round the system using frb...money from base money holders is pushed round the system to people who want to use it. FRB also has the effect of inflating the worth of savers money away. Then there is taxes and default, the only other ways to restore balance to the monetary system.

Things like taxing the super rich and having more equal remuneration would go a very long way to bringing stability to the monetary system. The last time we had these problems was in the Great Depression when many of the same problems regarding balance between rich and poor existed. I don't think it is a coincidence.

+1

This is what I was trying to say.

So if there is a trillion pound of debt there must be a trillion pound of savings. If the savers don't spend their money the debt wont go down. I suppose with a lot of the borrowers going onto interest only this is what is happening. the savers aren't releasing enough money to enable the borrowers to pay the capital off.

If saver refuse to spend then I don't see any other choice than the government doing printy printy to pay back the debt steal the saving through stealth.