No Point In Keeping Hold Of Money Now - Has Gordon Won?

[volvos60]

Does anyone else feel the same - such low interest rates mean there is no incentive to save or keep substantial sums of cash - might as well spend it before it is inflated away - on a house maybe. This means Gordon has won. Does anyone else feel the same way?

[Errol]

One word.

Gold.

[Bloo Loo]

Does anyone else feel the same - such low interest rates mean there is no incentive to save or keep substantial sums of cash - might as well spend it before it is inflated away - on a house maybe. This means Gordon has won. Does anyone else feel the same way?

You have to ask the question...Why are interest rates so low?

The answer is they need to be low because the demand for money is falling throught the floor.

This is a sign of a major Bust cycle and also of a deflation in the money supply.

Cash is King. Keep it.

[Boughtin95]

No, I don't think Gordon's won.

I suspect the current period of low interest rates is simply the next phase in allowing the banks to continue to make money.

It wouldn't surprise me if, having encouraged people to spend their savings and buy houses, at still inflated prices, we then see a sharp rise in interest rates.

The banks would, once again, have a captive source of income they can continue to squeeze and less interest to pay out to fewer savers.

[interestrateripoff]

Japan has had low interest rates for over a decade and guess what, people still saved.

[volvos60]

I hear the deflation argument but not sure if I buy it for anything longer than short term. Sterling being trashed as it is will bring inflationary pressures. The so called quantitive easing will bring inflationary pressures eventually - if QE startes to reflate the economy & put the government in some sort of heroic light do you really think they will suddenly decide 'ah good, that's worked - lets withdraw some of that extra liquidity as it's job done' or will they conclude that even more medicince is even better. Sorry, but in 12 months time inflation will be the problem & interest rates will not be going up any time soon. Therefore, as stated, why keep cash?

[Leonard Hatred]

Well, you can keep it in the bank (return: 0%) or invest it in property (return: minus 15%).

[1888]

One word.

Gold.

2 words Gold/silver

[abaxas]

With ever day the 'risk' of assassination increases.

It's all the keeps me going

[Bloo Loo]

I hear the deflation argument but not sure if I buy it for anything longer than short term. Sterling being trashed as it is will bring inflationary pressures. The so called quantitive easing will bring inflationary pressures eventually - if QE startes to reflate the economy & put the government in some sort of heroic light do you really think they will suddenly decide 'ah good, that's worked - lets withdraw some of that extra liquidity as it's job done' or will they conclude that even more medicince is even better. Sorry, but in 12 months time inflation will be the problem & interest rates will not be going up any time soon. Therefore, as stated, why keep cash?

THERE IS NO QE IN THE UK

Price Rises are caused by other factors, as well as inflation.

[petrodollar]

No, I don't think Gordon's won.

I suspect the current period of low interest rates is simply the next phase in allowing the banks to continue to make money.

It wouldn't surprise me if, having encouraged people to spend their savings and buy houses, at still inflated prices, we then see a sharp rise in interest rates.

The banks would, once again, have a captive source of income they can continue to squeeze and less interest to pay out to fewer savers.

Agree he wont win and cant win.

Cash is king just protect it and try to keep it inflation proof.

Dont spend it on pointless crud live like your skint i buy most meat and fish when reduced half price or less it tasts better!

Gold is out of bounds due to its own bubble and associated costs.

i have spent 30 years saving, have a sum which i intent to buy another property with at the bottom of the cycle 2013 will then sell my current home of 30 years at the top 2024 to fund my old age.

Gordon wont win but people need to adapt to the game.

[MSWHPC]

While assett prices are falling 0% is a good return.

[urban_hymn]

One word.

Gold.

+1

[tiggerthetiger]

Does anyone else feel the same - such low interest rates mean there is no incentive to save or keep substantial sums of cash - might as well spend it before it is inflated away - on a house maybe. This means Gordon has won. Does anyone else feel the same way?

People do not save just to gain interest alone.Rainy days are catered for,even if the cash is devaluing.. cash will always be needed just in case.It gives people a sense of security.

[repetitive bleats]

whats wrong with just putting it in other currencies? then gordon doesnt get to inflate it all away and you get whatever interest rate is being offered in that currency as well. admittedly the interest rates on my euro, yen and swiss accounts arent all that clever either but it only costs me a few quid a month 'admin fee' and (touch wood) since they are all up 30%+ at the mo i can accept that.

[Sinking Feeling]

One phrase -"social control" and yes it does look like he's getting his own way. People are too weak or too stupid to see what's happening and to act!

[blankster]

Of course it's still worth saving. Interest has always just been the icing on the cake for savers. If I save £200 per month, by the end of the year that's £2400, but the interest earned during that time is probably around £20.

One phrase -"social control" and yes it does look like he's getting his own way. People are too weak or too stupid to see what's happening and to act!

People have always said this sort of thing - they said it about the Thatcher government, and Blair's - and before that Wilson, Callaghan and probably Heath too. It's an old chestnut but I haven't seen any increase in 'social control' during my adult lifetime. More red tape, maybe - but I don't feel any more socially controlled than I did 30 years ago. Edited January 3, 2009 by blankster

[Once in a lifetime]

Does anyone else feel the same - such low interest rates mean there is no incentive to save or keep substantial sums of cash - might as well spend it before it is inflated away - on a house maybe. This means Gordon has won. Does anyone else feel the same way?

Agree.

Demographics change so do personal circumstances, people here would be foolish

to rule-out purchasing property on the basis prices are falling.

You might lose you job. (you would get more help as a homeowner than renter with money)

More Bank runs (you could lose you deposit)

Your money is making nothing much in this environment.

Meanwhile your landlord’s mortgage is getting paid.

Why do people think you only get crash prices later. 30% down is being achieved now.

Do the Math, protect your money as best you can. Don’t believe the best scenario for you will come true.

That’s why I’m buying.

[winkie]

When cash can do more for you than debt even at 0%...you know then that it is game over.

edit: game over not give over.

Edited January 3, 2009 by winkie

[Sour Mash]

Nothing wrong with keeping cash - just keep it as physical cash somewhere safe (deposit box) and not in a bank account where you'll get insignificant returns.

This will have the added bonus of depriving the bank of the use of your cash to make cheap loans.

Once the inflation starts then get it into hard assets pronto.

[winkie]

Nothing wrong with keeping cash - just keep it as physical cash somewhere safe (deposit box) and not in a bank account where you'll get insignificant returns.

This will have the added bonus of depriving the bank of the use of your cash to make cheap loans.

Once the inflation starts then get it into hard assets pronto.

I can imagine it...there won't be a queue for the cashiers, it will be a queue to withdraw the safe deposit box.

[Wol]

The answer is they need to be low because the demand for money is falling throught the floor.

Demand for money (cash) is going through the roof. Just ask any high-street bank. Availability is low. Otherwise, spot on.

[MrB]

One word.

Gold.

Most are saving for houses here, thus real interest rates are very high (once falling house prices are factored in), even with nominal rates of close to zero.

Nothing wrong with keeping cash - just keep it as physical cash somewhere safe (deposit box) and not in a bank account where you'll get insignificant returns.

This will have the added bonus of depriving the bank of the use of your cash to make cheap loans.

I agree, this seems sensible.

***************************************

The odd thing is this:

In monetary terms deflation is the order of the day, however we are likely to start importing price inflation as the £ weakens.

This isn't inflationary for house prices at all, it means more money is diverted to the cost of living rather than going into housing.

See this article by Fred Harrison:

http://www.cooperativeindividualism.org/sa...s_reviewed.html

Harrison coins the term "the law of economic absorption" to describe the process whereby improvements in economic efficiency, such as the liberalisation of world trade and capital movements, tend to be at least partly captured by the owners of land rather than by labour and capital. This in turn induces speculative purchases of land. Unlike speculation in reproducible commodities, speculation in land does not induce an increase in its overall supply to bring down its price. It is a zero sum game. Eventually there is a price collapse as hoarders become offloaders, and this plunges banks into crisis.

If any 'spare money' is soaked up by land owners, then the scacity of this money means less will be channelled into proeprty. The squeezing of the sponge i guess.

[Wol]

I hear the deflation argument but not sure if I buy it for anything longer than short term. Sterling being trashed as it is will bring inflationary pressures. The so called quantitive easing will bring inflationary pressures eventually - if QE startes to reflate the economy & put the government in some sort of heroic light do you really think they will suddenly decide 'ah good, that's worked - lets withdraw some of that extra liquidity as it's job done' or will they conclude that even more medicince is even better. Sorry, but in 12 months time inflation will be the problem & interest rates will not be going up any time soon. Therefore, as stated, why keep cash?

Even QE failed to bring inflationary pressure in Japan. Money went abroad.

This time, all the money that has been "created" is currently sitting within a mile of Threadneedle Street (as ?...! has pointed out). I can't see any conduit for it to escape from there right now.

The cost of many raw materials has also dropped -- oil, base metals, etc. The labour market will follow, especially in the West. I'm pretty sure this will be THE story of 2009.

[Prof]

Of course it's still worth saving. Interest has always just been the icing on the cake for savers. If I save £200 per month, by the end of the year that's £2400, but the interest earned during that time is probably around £20.

If you do a little "homework", and open the right account, you can bag yourself about £61 in interest, and if you`re a HSBC customer, you can get £82.