Saving Not Easing

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Amidst all the talk of austerity, it is sobering to think that the Government still plans to spend £91 billion more this year than it will receive in income. The Treasury forecasts expenditure for 2012-13 to total £683 billion with total income at £592 billion.

This means the Government must continue to borrow; at the end of February public sector net debt stood at £955 billion. The Office of Budget Responsibility (OBR) forecast that public sector net debt will reach £1.04 Trillion by April 2013 and will continue to increase until 2016-17 when it will stand at £1.48 Trillion. This – the equivalent of £22,500 for every man, woman and child in the UK– is the point at which it expects the Government will finally balance its budget.

Skewing the economy in pursuit of low interest rates

The one thing a Government with such a high level of public debt wants above all else is a low interest rate. George Osborne repeatedly claims our current low interest rate is a vote of confidence by the international financial markets. But, in reality, it is the direct and desired result of the Bank of England’s foray into Quantitative Easing (QE).

Artificially creating £325 billion and using it to buy Government bonds drives up the price of those bonds and depresses the yield, hence reducing the cost of borrowing for the Government.

It also has the peculiar result that the Government owes 34% of its current £955 billion debt to itself.

As the MP Steve Baker rather neatly summarised during a parliamentary speech:

“…A housing bubble became a banking crisis… which became a sovereign debt crisis, which has now been turned into an asset bubble in the bond market. The Bank of England has deliberately inflated bond prices in order to suppress long-term interest rates.”

We are lurching from one disaster to another.

Monetary Viagra

Quantitative Easing is the economic equivalent of Viagra, an artificial boost to a flagging economy and, like many drugs, it comes with unwelcome side effects and a risk of dependency.

The immediate side effects manifested themselves as a bonus to bankers, who received commission from the Government as it bought its own debt, and massive losses to pensioners who rely on the returns from Government bonds to pay their pensions. The most major effect, however, is upon inflation with the Bank of England estimating that it has increased CPI by anything up to 2.6%.

Betrayal

Mervyn King has strongly denied that the programme of QE is sending out a message that saving is not worthwhile.

But what incentive is there to save any money you put aside is worth less a year later? It is hardly a productive form of saving. And pensioners having difficulty making ends meet because their real incomes are falling are hardly likely to inspire a new generation of savers.

We live in a country where people are expected to live off their savings in retirement; that is why we have a pension system. The biggest generation ever is now starting to retire yet we have not saved enough to pay for it. Those who have tried to make their own arrangements for retirement are being penalised for it.

The Government has, through its monetary policy, broken the unwritten contract with savers to the detriment of the whole economy. This is a major political issue and George Osborne needs to stop hiding behind Mervyn King’s coattails on the issue of QE and low interest rates.

There are no quick fixes. The one economic policy this country needs above all others is more saving; saving provides investment and investment leads to economic growth. Saving is the way out of the morass, not a luxury to return to at some distant time in the future.

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16 Comments

1. drrdf

   April 9, 2012 at 7:35 pm

   It seems that the best that SOS can still do (to supposedly save savers) is publish yet another article on this web site each fortnight or so! Do you really think this is money well spent? Do you really believe that this will make any difference to the continued government policy of the gradual theft of peoples’ savings in the UK, particularly of pensioners by the government and BoE? Will this in any way “save savers”?

   Whoever is continuing to fund SOS clearly has money to burn. You are accomplishing absolutely nothing at all and yet they continue to sink funds into non-achievement. I ask this question: what objectively has SOS actually achieved so far? Savers are still being exploited; pensioners are still being exploited; savings rates in the UK are still way below the level of REAL inflation even before income tax. So what so far objectively has been achieved to save savers? I would accuse you that the answer is absolutely nothing objectively. Publicity and exposure is not any objective achievement in this scenario.

   Get real, and realise that this is a battle between savers, speculators and the present disastrous government, who are in dire financial straights and have decided to use pensioners and savers as cash cows to fund their continued profligacy (not only in terms of their savings). You need some new EFFECTIVE tactics, but I fear the key proponents of SOS do not have any, nor the capability to think of any? I wish you could prove me wrong, but I fear that I am not wrong.

   Recommend (8)
2. Johnd

   April 9, 2012 at 8:10 pm

   Some interesting comments, perhaps drrdf. could outline
   the approach he would adopt to protect the interests of both
   savers and pensioners he refers too, rather than just
   critising the efforts of SOS.

   After all, it is important to shine a light on the problem and
   arose public interest in the matter before starting to focus
   on a suitable and effective solution to this matter.

   Although I agree that a greater sense of urgency might be
   appreciated by many supporters.

   Recommend (3)
3. frances

   April 10, 2012 at 8:31 am

   I think every single saver needs to keep bombarding their MPs and the B of E with E Mails and letters demanding to know when

   David Cameron
   Nick Clegg
   George Osborne

   are going to honour the pledge in all of their speeches to HELP SAVERS as well as reminding them that the latest Bank of England Quarterly builletin says Briian needs to save more

   Whats been happening over the last 3 years is savers and pensioners have been killed by 0.5% iBank rate and QE

   and then killed furthur by the devastating granny tax and other changes to pension and saving credit

   Recommend (8)
4. Edward

   April 10, 2012 at 9:01 pm

   The power of the pen and knowledge is might weapon. Meaning we must keep our press on the Bank of England and their puppet masters, HM Treasury, so writing to our MPs and signing petitions are good things to be doing. Rallying support and educating the people is also useful. Perhaps we should see if we can join forces with AgeUK for a match or something, as we have a lot of common ground with them.

   What I have been finding really annoying is these banks and credit card companies offering cash back deals and incredibly long 0% deals, it gets up my nose these sweeteners for borrowing more, as it isn’t help the (personal) debt crisis we find ourselvees in. Where is the savers reward for being prudent and our hard effort?

   Recommend (2)
5. John.

   April 10, 2012 at 9:02 pm

   Politicians are mostly dim or corrupt, they’re broadly speaking either party political yes men being paid to regurgitate a party line or power hungry, fork tongued reptiles looking to do and say anything to get their claws on so called power.

   Any politician with real common sense and integrity who isn’t afraid to debate an “off message” dialogue is kept well away from the mainstream lime light and any access to power, they’re simply marginalised or ignored by the party political and corporate media machinery. It just won’t do to have voters united and of one opinion that the whole party political circus is just a divisive pantomime acting as a smoke screen for the establishment behind it all, who are laughing all the way to the offshore tax haven bank, with the money they’re empowered to pick from everyone’s pocket.

   Recommend (6)
6. John H

   April 12, 2012 at 4:49 pm

   I think drrdf is being a bit unfair to SoS as there is to my knowledge no other organisation working to raise the profile of savers. You never see or hear anyone else on the TV or radio making the case and they have organised demonstrations outside the BoE. Institutions rely on savers’ inertia and apathy to continue with accounts paying comedy interest rates, with some shopping around you can find accounts, though not ideal, much better than the worst – and not all of these are internet-based, you can get some walk-in deals. Given the level of apathy any talk of more exotic investments such as gold and of mass withdrawals etc is pointless. People merely shopping around effectively could in itself be very effective.

   Recommend (4)
7. frances

   April 12, 2012 at 6:10 pm

   Having done the calculations and filed the SA Claim to reclaim the tax illegally deducted at source on my savings today without even touching the capitol my interest has plumeted 35% in the last year and this damm stupid chancellor says Pensioners have not suffered any Austerity

   If a 35% drop in income from savings in just the last year despite every penny being at the best possible rates whether branch or online does not equal Austerity I would like to know what is

   George Osborn and his cohorts all live in the lap of luxury while pensioners like me are ripped off wholesale
   Theres simply no point whatever being frugal or prudent and saving the Government has stolen everything

   David Canmeron today boasted the UK has LOW SAVINGS RATES ………….yet another nail in our coffins and outright denial of the speeches he , Nick Clegg and George Osborn made pledging to HELP SAVERS

   They would not know help if they fell over it

   Recommend (6)
8. drrdf

   April 12, 2012 at 8:27 pm

   Hi John H,

   All I can point out further is that the truth is often seen as being “unfair” by those who do not wish to see it! I note in your comment apart from glib compliments applauding the passive and ineffective activities of SOS you have not pointed to any one real achievement that SOS has implemented which has actually improved the plight of savers? Quod erat demonstrandum!

   Recommend (4)
9. John H

   April 13, 2012 at 11:17 pm

   Fair enough drrdf, if you have any ideas about brilliant new tactics then why not contact SoS yourself and suggest a new approach. What would you like to see? We’re all in this together so I’m not getting into an unproductive flame war.

   Recommend (3)
10. John.

    April 14, 2012 at 2:08 pm

    The reason that the establishment can get away with what they do, is because the vast majority of the population are herd animals. They are being shepherded whether they realise it or not. If that sounds incredibly arrogant then so be it, most people don’t want to have to read and learn, it’s too time consuming or just too much effort. They want to be told what to think and vote for someone they like the sound of. In other words someone who panders to their prejudices, which the corporate media beams into peoples living rooms constantly. Whether those views are accurate or even truthful seems largely irrelevant.

    If everyone was independent minded, sought their own opinion through reading, education and truth, then made up their own minds, much of the nonsense we have all allowed to develop would have been stopped many decades ago. Party politics run by the establishment has the population effectively locked down and paralysed in a puerile pitched battle with itself when it comes to any truly democratic process. Politicians act more like landed barons squabbling about how to sustain themselves and their cronies privileges than representatives, Thieving the wealth of the serfs through tithe and imposing the rules all lesser mortals must obey. Their squabbling subsides only when their admiration and unerring subservience to the establishment that elevated them to walk the halls of power is discussed.

    It also grants the real powers that be, the institutions of the establishment, a sort of immunity to any change and allows them free reign to continue their plunder. Protest becomes frustrated and its protagonists fractious, faced with a seemingly impervious opponent. Any breakout threatening to expose the lies or affect the status quo is soon dealt with by the media.

    The problem for SoS as with any single issue protest is that it will only ever appeal to a few converts capable of making up their own mind. Unless it can offer an attractive solution that the herd can see is perfectly reasonable and demonstrates a clear benefit, as well as showing the current situation to be unjust, then nothing will change. The huge challenge is how to get that message across when the whole corporate mass media enterprise is concentrated in a few wealthy hands who are all heavily invested in and geared towards maintaining the wealth redistribution status quo.

    Anything even slightly controversial or off message, no matter how perfectly reasonable, is either ignored or marginalised, sidelined or ridiculed in print or TV scheduling. The internet is the only portal available to free thinkers and it’s little wonder the global establishment leviathan is rapidly bearing down on it and seeking complete control in order to stifle dissent.

    Recommend (8)
11. Neil

    April 14, 2012 at 6:53 pm

    John’s comment is so right. The apparent acceptance of the current financial distortion is being exaggerated by the lack of media reporting of the matter by financial commentators who themselves are caught up in the borrowing binge and do not want to compromise this by reporting the unfairness to responsible saving and prudent long term financial planning. Many, many people bought into the theory that your house is not only your home but also your pension, your investments and your savings.

    I suspect that the next real opportunity for right thinking people to express their anger at how the current mess was allowed to develop will be the General Election in 2015. Who to vote for will be the real question.

    Recommend (7)
12. Cheated Dave

    April 18, 2012 at 12:06 am

    One thing is certain . All Savers are being ripped-off and cheated by this gang of crooks masquerading as a government . Remember this betrayal at the ballot box , People. WE’LL TEACH THEM FOR CHEATING US .

    Recommend (9)
13. frances

    April 18, 2012 at 9:12 am

    Problem is it was Gordon Brown who created this unmitigated mess so the last thing we need is Labour back again

    The Treasury Select Commitee have finally woken up to the hell the MPC etc has caused savers but will it have any effect on that clown George Osborn i doubt it

    He has a hatred for pensioners and savers and it seems David Cameron supports everything he does
    My MP wont even deign to reply to my emails

    Its certainly true that the grey vote will stick 2 fingers up to the Conservatives at the next election unless something radical is done to help us
    Cleggs lot are no better so where does that leave us all ………….out in the cold to starve if the current bunch have their way

    Recommend (4)
14. John.

    April 18, 2012 at 10:57 am

    UK plc is bankrupt and politicians are either too corrupt, dishonest or stupid to come clean. They’re simply colluding with central banking crime partners and whoever else they can find to try maintaining the illusion that the ship is not sinking – by throwing as many people as possible, who can’t fight back, over board.

    Blaming Gordon Clown for the country’s financial mess is just short sighted party political nonsense. Don’t get me wrong, he’s an idiot and did some incredibly stupid and reckless things but he’s not alone in that regard and certainly not the architect of the financial meltdown.

    I won’t be voting, it makes no difference anyway, politicians don’t serve any purpose other than to squabble, divide and paralyse public opinion, maintain the status quo and keep the criminal establishment in power.

    Recommend (8)
15. Steve

    April 20, 2012 at 5:15 pm

    Latest news: Osborne has just promised an extra £10 BILLION to the EU on top of the £30 BILLION he’s promised already. I can’t believe that I’m saying this, but he’s as bad as Gordon Brown for throwing our hard earned money away.

    All the while pensioners and savers are being screwed big time.

    I’m voting UKIP like a very fast growing number of dissatisfied people with the corrupt LibLabCon alliance. LibLabCon ALL have their snouts firmly in sight of the EU trough.

    If you want your savings protected the DO NOT vote Lib/Lab/Con. No vote at all is almost as bad. Your choice…

    Recommend (31)
16. frances

    May 26, 2012 at 3:43 pm

    “stock gains ”

    You really have to be kidding

    Not one single one of a wide portfolio has made any gain since 2007
    if only they did i would sell the bloomin lot and it still would not offset the losses of those that have folded or are about to be taken over cheaply
    As for dividends they are pathetic
    Nothing but Nothing makes up for the low interest rates that are wrecking the lives of so many prudent savers /pensioners
    We are being ripped off to benefit the RICH and those in debt

    Recommend (0)