Wednesday, September 29, 2010

The Charles Beans on saver

Should savers really spend?

Read the full interview and absoutely outraged that this chap is on board of BoE, especially this one: " first that the banking system in Britain did not collapse, wiping out their savings, precisely because the Bank of England acted as lender-of-last-resort to the private banks to demand high interest rates now is like having one's cake and eating it. " Mr Bean seemed to have forgotten that had we had a total melt down, he and his MPC friends would be out of job and pension as well. He also have taken no responsibility whatsoever for failure to prevent us to get into this mess. Astonishing.

Posted by easybetman @ 06:23 PM (1647 views)
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17 thoughts on “The Charles Beans on saver

  • general congreve says:

    No, he is absolutely right. That is why I have dutifully followed his wishes and withdrawn the majority of the savings (that the BoE saved by propping up the banks) and spent it into the economy as he wishes. I used it to buy gold and silver (That’s is what he meant right?).

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  • general congreve stop ramping gold!!

    (I don’t own enough yet)

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  • what’s yellow and shiny and…….

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  • Why should savers be grateful to the BoE for their bailout?

    The author of this article is a complete moron. Doesn`t he get it. The reason that the BoE had to bail out the banking system is because they did not do their job properly in the first place. They let debt get out of control. They house prices get out of control. They did this to cover up the fact that net wages (after tax) were not rising as fast as inflation and jobs were being moved offshore.

    So to make people feel richer and to keep them entertained (dosile) they engineered a fraudulent boom in house prices. A Ponzi Scheme. But a boom in house prices was not enough, for the scam to work the so called home owners needed access to credit to squander on cheap rubbish made in China. This made them feel good and everyone was happy. A bit like a game of musical chairs before the music stops playing.

    Like all Ponzi Schemes, they can only function with exponential growth. Like out fiat monetary system.

    The author mentions that people have benefited from increased asset prices. True, some have. But is he talking about a worker who has bought a house and has a mortgage? Is it a gain if you buy a house and the price goes up. It`s not unless you downsize. What this clueless monkey doesn`t understand is that if you sold your house at a higher price than what you bought it for, it is not a gain because you could not buy the same house back with the sales proceeds. So for many people a house price rise is in fact a loss as it just increases the debt they need to take on in order to move up the ladder and also transaction costs such as stamp duty.

    The Government, the BoE and the press constantly peddle this lie that rising house prices is real wealth. It`s a house of cards.

    The author has learnt nothing from this crises, I suppose that`s why he writes for the guardian, maybe when he`s done there he could get a job at the bbc, world business report or some junk like that.

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  • I think he meant for us to withdraw our savings and spend it on a decent holiday abroad – maybe even a round the world trip so as to maximally stimulate the global economy.
    Or perhaps to go online to buy goods from the cheapest supplier (eg. a small business in Hong Kong).
    Or maybe he meant for us to stock up somehow on good old British utilities which are pumped ashore so efficiently by their foreign owners.
    Or maybe he meant us to buy goods from multinationals with a HQ in the UK and power base elsewhere.
    He can’t have meant spending it at the pub because a pint is too expensive these days…

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  • “He can’t have meant spending it at the pub because a pint is too expensive these days…” and Newcastle Brown isnt brewed in Newcastle anymore!

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  • I agree with all of the above. Most forms of spending will result in products bought abroad…..so why is he saying it?

    Perhaps buying stuff with a credit card means the banks will benefit via high interest rate changes…

    So, is the real aim of all this, to transfer the wealth of all the savers in the country to the banks alone? And isn’t it some of the investment banks who have been shorting metals to keep the price low? Asset stripping and theft on a grand scale of most of the people of the UK and the US….

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  • “many of the savers are individuals who own houses and other assets that have benefitted massively from under-regulation and relaxed monetary policy in the past 15 years, increasing the division in British society between the asset-heavy and the asset-light.”

    And the BoE’s policy is assisting in trying to keep things that way.

    “High earners can console themselves with the thought that any spending now is money that would have been raised in higher taxes in the future.”

    Now that’s just scary.

    “very low interest rates are probably here to stay for many years to come.”

    See my first comment.

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  • hi TC – like your post on “Red Ed”. Personally i would liked to have seen Dave square up with er Dave over the dispatch box. But alas its not to be…. for now….

    To me Ed is Labours answer to IDS – but maybe thats uncharitable and we should give him a chance!?!?!

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  • Copy this idea from the economist – BoE can announce a spend one get one free week where half of any spend on credit or debit card are refunded by BoE newly printed money.

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  • This bit is patent nonsense: “the banking system in Britain did not collapse, wiping out their savings, precisely because the Bank of England acted as lender-of-last-resort to the private banks.”

    As an old fashioned bookkeeper who has taken the time and trouble to actually look at bank balance sheets, let me point out…

    Fact: savers’ deposits only represent about a fifth of total bank financing – four-fifths is bonds, loans, share capital, retained profits etc.

    Fact: even in a nightmare/ideal (delete according to taste) scenario where property values fall by forty per cent, the value of banks’ assets (mainly mortgages) would only have fallen by a fifth (assuming that the nequity element of all loans were written off, which is unlikely)

    Conclusion: savers’ deposits were not seriously at risk for one second – these losses might have wiped out shareholders’ equity, and might have required that some bonds (which are already trading at a lot less than par) be converted to equity (aka debt-for-equity swap).

    Conclusion: the Home-Owner-Ist alliance spearheaded by the banks is lying, yet again. The whole things is based on lies – starting with the notion that ‘house prices can only go up’ or ‘Britain is a crowded island’ or ‘banks create wealth’.

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  • Next Big Fat Lie: “For those without savings, there is an urgent need to start saving and build funds for a pension, otherwise in the future Britain will face an enormous old-age poverty crisis.”

    Nonsense, nonsense, nonsense. The cheapest and best way of funding retirement is a halfway decent taxpayer-funded Citizen’s Pension. All these so-called pensions savings schemes are a massive scam – they only appear to make sense because of the massive tax breaks, which are creamed off in their entirety by the pensions companies, actuaries, accountants, advisors, salesmen, trustees yada yada, and in most cases, you are lucky to get back what you paid in.

    To put it in perspective – the basic state pension does an enormous amount to enable people to retire and/or avoid poverty in old age, and it costs £50 billion a year. The total value of all the tax breaks for pensions is also about £50 billion a year – we’d be better off doubling the basic state pension and scrapping the tax breaks.

    Of course, on planet MW there would be no income tax (only land value tax, from which pensioners’ main residences would be exempt) and so there couldn’t possibly be any tax breaks for ‘pensions’ either.

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  • @titaniccaptain – excellent article (I know you didnt write it due to the absence of any spelling mistakes! – LOL)

    I think Mr Wadsworth needs to join the Labour Party – it’s his only realistic chance of getting in as Chancellor !! (especially now that David Milliband has for now dropped out of frontline politics)

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  • slartibartfast says:

    “the banking system in Britain did not collapse, wiping out their savings, precisely because the Bank of England acted as lender-of-last-resort to the private banks”

    It’s obvious why everyone is angry at his remarks, but this is correct. Banks have insufficient reserves to pay all depositors at once. Most of the deposit money is long gone and invested in housing.

    I fully understand why I will be unpopular saying this here, but the value of bank deposits is tied up in house prices. If house prices are inflated so are everybodys savings. If houses true value is 30% lower, the same can be said for savings.

    If house prices go seriously south and there is no major bank run you could pull out savings before the banks are technically bankrupt. But as the Government printing money to bolster bank reserves it won’t actually happen.

    If savers want to have their money and then spend it. Unfortunately it is necessary for the Government to print more money. I’m sorry but that’s just the way it is.

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  • slartibartfast says:

    Mark,

    Well said you are correct. (except the term taxpayer funded is technically innaccurate)

    “Nonsense, nonsense, nonsense. The cheapest and best way of funding retirement is a halfway decent taxpayer-funded Citizen’s Pension.”

    Yes! Private pensions are an unnecessary, farsical and inefficient method to administer pensions. Serving to enrich the financial sector, allowing them to run an additional private taxation scheme on your pension.

    All pensions will be redeemed against future goods and services. You can store money easily, but you will find it harder to store goods and services. It is far better to place pension savings in a Government account. This account would serve no useful purpose, other than to tally who has deposited what. Pensions would be paid out somewhat in proportion to deposits with a minimum threshold for social cases.

    Governments would simply credit pensioners accounts with a socially equitable ammount. The quantum dependent on the number of pensioners, deposits paid in and the state of the economy. Of course it won’t work if we distrust Government, but it’s better than the risky private system in place.

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  • etrader,
    LOL. Agreed, I should buy more Au and Ag too 🙂

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  • slartibartfast, I disagree; your idea would be worse while there is still inflation and taxation provides inadequate revenue!

    If you are smart and manage which funds you are currently invested in, the fees can be more than compensated for by gains, I’m doing pretty well so far!

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