Tuesday, February 24, 2009

Is old money propping up the economy

Savers withdraw record amount from banks

British Bankers' Association says that customers withdrew £2.3bn in January, the biggest drop since records began. Bankers have their own version of where the money is going but I think it's probably being spent before it's worth less or being used to prop up falling incomes.

Posted by enuii @ 06:15 PM (1587 views)
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12 thoughts on “Is old money propping up the economy

  • *hopes* Maybe this will induce some more competition in the market for savings.

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  • I wonder if it is someone with 52k moving the excess 2k to another bank ; that way, if the 50k bank folds then there is at least a belief that the government will cover the lost 50k (the limit). Net, the banking system has lost no money, in a sense; but maybe these statisticians did not measure that effect.

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  • Yes 51ck I expect it will send the message to the bank that savers are more astute than borrowers and in the long term a safer bet.

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  • “sales of corporate bond funds, which are paying yields of 5pc or more are proving popular among investors looking for a lower risk investment that pays an income. Bonds funds accounted for two in every three unit trusts bought in December and they continue to attract the lion’s share of investors’ money in 2009” – that may very well end in tears!

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  • alternatively, people are burning through their savings to pay off their debts…

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  • Will be interesting to see the take up on ISA’s this year.

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  • growler, talking of burning, it is cold and quiet around here just now

    oops what was that?

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  • Techieman @4 , these bonds are described as lower risk. In a bad scenario, what could happen that would cause tears?
    A bank suggested a bonds type of investment to me recently while I try to help a friend with money. And I don’t know enough about the subject to state the pros and cons.

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  • ‘investors looking for a lower risk investment’.
    Don’t like that word ‘investment’ any more.

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  • mark wadsworth says:

    This is the sort of blitheringly stupid special pleading that will have The Badger reaching for his (our) chequebook.

    Savers withdrew, did they? What did they do with it…

    1. Put it in coins and notes under the mattress (hurray, interest free loan to the government, possibly never to be repaid)

    2. Use it to pay off mortgage, which might explain why mortgages are being paid off so quickly – it’s better to lose 0.05% interest on your savings and save 3% on your mortgage interest.

    3. Spent it on wine women and song (or indeed wine, men and song)? Methinks not. And even if they did, the business takes that money, pays it to employees or suppliers, who pay it into the bank etc??

    4. Or what, exactly?

    To sum up, the headline is B0LL0CK5

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  • mdmick – not all “low risk” bonds are…. low risk. There is a reason why corporate bonds are paying higher rates – so its just a remark to be carefull about the possible default risk. A while back you would have said PIBS in B&B was low risk…..

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  • An investment grade corporate bond bubble is building up.

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