Friday, Jul 17, 2020

Money diverted from Mortgages

Moneywise: Good news for savers as NS&I told to raise more money

There has been a lot of speculation on how the Government will pay for all their recent expenditure.
Now we know part of the answer. Great news for savers. Bad news if you are expecting to borrow money from a bank or building society. I would imagine money flowing out of them far faster than it goes in.

Posted by tenyearstogetmymoneyback @ 04:39 PM (1002 views)
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4 Comments

1. mombers said...

"Cash raised will help the Government fund its borrowing from the coronavirus pandemic."
Wot? Currently the highest rate the gvmt is paying on gilts is 0.673% and that's for a 25 YEAR bond. Paying 1.16% on a product that is much more expensive to administer (hundreds of thousands of small investors) is a costly exercise, giving a selective subsidy. At least it's not limited to the over 65s like the election bribe in Jan 2015

Monday, July 20, 2020 12:18AM Report Comment
 

2. stillthinking said...

This is kind of interesting. Its a big jump from 6-35 billion in savings but i wondered how much cash savings there are and its here
https://www.statista.com/statistics/824450/average-cash-saving-united-kingdom-by-age/

There are 30 million workers so any 30 billionish figure is a grand per worker.

I think Rishi must be giving up on banks as a transmission mechanism because loan demand has collapse for one thing, and the banks presumably don't want to lend as well when nobody knows how many businesses are going to go bust. So by that reasoning, all the cash pumped into to avoid the deflationary shock goes into the banks, and is not lent, and ends up sat at the BoE doing nothing. This new 35 billion must come from somewhere and of course its cash savings held by the BoE on behalf of banks. Rishi can then spend this, instead of printing and then having to worry about excess cash when velocity picks up.

However, it does seem like the logic is a bit disconnected because in order to get savers to switch you have to raise interest rates (as stated) and higher interest rates have a number of different effects, presumably the effects are considered unimportant with the current situation. Or this explanation is wrong. Plus considering printing is now being used cash savings are all smoke and mirrors anyway.

More stimulus en route!!

(check out the cash savings for 35-44, its 16K, so at 40 average is 16K in cash savings. If you spent 15 years building that amount up, then ever that period you would have given 15K over total EU and foreign aid budget ! )

Monday, July 20, 2020 07:59AM Report Comment
 

3. tenyearstogetmymoneyback said...

The Statistca chart was hidden behind a paywall but I got the idea. The key question is how much money going to NS&I will be new, and how much will be withdrawn from peoples existing savings accounts.

Sunday, July 26, 2020 07:22AM Report Comment
 

4. stillthinking said...

@tenyearstogetmymoneyback
A lot of these paywalls rely on javascript running in the browser, because they want google etc to index the article, but they don't want people to read it for free. So the article or whichever is downloaded to your pc first, and then hidden with javascript. I have found that disabling javascript and reloading the page often shows me the content on many many sites. I haven't paid for any subscriptions
https://chrome.google.com/webstore/detail/disable-javascript/jfpdlihdedhlmhlbgooailmfhahieoem?hl=en
Happy Hunting!

Monday, July 27, 2020 08:43AM Report Comment
 

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