Simon Rose on BBC TV news explaining why interest rates should rise
Today while the Monetary Policy Committee sat around eating biscuits and deciding to issue a further £75 billion of quantitative easing, we took the opportunity to illustrate the impact that their decisions over the past 3 years have had on the UK’s Savers.
So in front of numerous press photographers and several film crews we hit Bertie the paper-mache piggy bank with a big hammer. He crumbled under the blow.
Savers are being made to pay for the debt crisis. In an interview for Channel four later in the day Mervyn King said “ I have enormous sympathy for savers and pensioners, suffering from the consequences of a crisis they did not create”. Not that he is prepared to do anything about it.
And as long as UK savers remain quiescent those who manage our economy will always find it more palatable to devalue savings than to make borrowers pay the true price of borrowing too much. That is why savers must continue to protest and make their voices heard.
We would like to say a big thank you to all the savers who turned up and for all the messages of support we received from those that couldn’t make it.
For the 30th month in a row, the Bank of England’s Monetary Policy Committee has kept base rate at the record low of 0.5%. Although tasked with keeping inflation at the Government’s target of 2%, inflation is over double that level and expected to go higher. With the price of so many essentials of everyday life climbing so high, many of us will feel that the real level of inflation is considerably higher than that.
Savers are suffering hugely as inflation eats away at their capital. Base rates have been below CPI inflation for almost three years. In the past year alone, inflation has reduced the buying power of our savings by something like £60 billion. We keep hearing from politicians about the importance of reducing our debt yet, despite talk of “cuts”, it is still increasing. For the Government, inflation is massively convenient, of course, as it eats away at the real value of our national debt – at the expense of savers. … Continue Reading
The minutes of the Bank of England’s last Monetary Policy Committee meeting are released on Wednesday, 20th July. All but two MPC members are expected to have voted to keep bank rate at 0.5%, as for the previous 28 months. After last week’s slight inflation dip, most City analysts do not expect bank rate to rise until July 2012 at the earliest.
It’s a depressing prospect for the saver, of course, who is suffering the effects of inflation theft just as surely as if they were bound to a chair and compelled to watch a burglar filling his sack with their most treasured possessions.
Many afflicted savers expressed their opinions either on this website or reacting to articles about our protests about the MPC’s inaction. We thought it would be interesting to collect some of them here, regretfully omitting a few of the more colourful and imaginative suggestions as to what to do about – or indeed to – Sir Mervyn King and his colleagues who, as some pointed out, belong to a pension scheme that moved heavily into index-linked gilts over two years ago, hardly a sign of faith in the MPC’s ability.
Most were exasperated with the MPC and its inability to see things from the savers’ point of view.
“It is time the Bank of England took note of the millions of small savers who have seen their savings eroded, but I do not expect anything from Bankers.”
“The Bank of England’s remit is quite simple: it is to control inflation. Its remit is not about ecomonic growth, government debt or anything else. Savers and pensioners, the prudent people, are being made to pay for the sins of those who incurred this debt.”
“King’s remit is to keep inflation below 2%, He has failed so sack him.”
The recent issue by National Savings & Investment (NS&I) of index linked certificates is proving very popular amongst savers and with RPI inflation currently running at 5% are probably providing the highest return on the high street.
These certificates make good financial sense for risk averse savers who want to protect the value of their money. But with interest rates so low at the moment does it make as good economic sense for the Government?
NS&I have just published their quarterly results that show the cost of their borrowing (£102.7 billion last quarter) was £200 million cheaper than if the Government had borrowed the equivalent amount through issuing gilts via the Debt Management Office (DMO), to be bought by institutional investors.
CPI inflation has practically doubled since the MPC first reduced the Bank Rate to 0.5%. Now, 28 months later, CPI inflation is running at 4.5% and there is no sign at all of any intention from the MPC to act to reduce it.
Simon Rose was interviewed on Radio 5 Live to give Save Our Savers view that the MPC should stick to their remit and act to reduce inflation to the 2% target. Along side him, to give the other side of the argument was Graeme Leach the Chief Economist from the Institute of Directors
It is no surprise that the Bank of England’s Monetary Policy Committee has kept the bank rate at 0.5% for the 28th month. No surprise, but still deeply disappointing, with CPI inflation at 4.5% and the “real” inflation we’re all experiencing much higher. In contrast, the European Central Bank today raised interest rates from 1.25% to 1.5% to curb inflation, just as China, Brazil, India, Poland and others have done recently.
In the UK, inflation has reduced the buying power of our savings by £57 billion in the past year alone. The cynical amongst us might point out how convenient it is that it has also reduced the real value of the national debt by £48 billion. The Aztecs believed that human sacrifices would ensure bumper harvests. Perhaps the MPC believes that sacrificing our savings will magically restore economic growth.
Maybe the MPC and the Government are banking on savers being meek and mild, unwilling to make a fuss as their savings are eroded to help out over-extended borrowers and enable the banks to rebuild their balance sheets.
Why should we taking it lying down? It’s time to get angry, to make a noise, to yell out, much like Peter Finch’s character in the film Network, “We’re mad as hell and we’re not going to take it any more.”
If you’re as fed up as we are, please help to spread the word. Encourage others to come to the website and to follow us on Twitter and Facebook. In return, we promise to make a right royal nuisance of ourselves.
It isn’t only a question of self-interest. Whether the MPC members understand it or not, a country without savings is a country without a future.
On Wednesday and Thursday this week, nine grey-suited men will meet at the Bank of England and discuss inflation and interest rates. They are Sir Mervyn King; Charles Bean; Paul Tucker; Ben Broadbent; Spencer Dale; Paul Fisher; David Miles; Adam Posen and Martin Weale.
We can only speculate whether they have a preference for Hobnobs, Digestives or those weird pink wafers you get in biscuit assortment boxes. What we can be pretty certain of, however, is that all but Martin Weal and Spencer Dale will vote to keep bank rate at just 0.5%, as it has remained since March 2009.
The MPC is charged with keeping inflation at the Government’s target of 2%, yet CPI is 4.5% and appears to be heading higher. By our estimate, the real value of the country’s savings has lost over £50 billion in the past 12 months. With an effective transfer of wealth from savers to borrowers, the thrifty and the responsible are involuntarily subsidising the profligate and foolish. As David Cameron said, while in opposition, increasing debt and undermining savings is “both economically stupid and morally indefensible”.
We have written to the nine members of the MPC, highlighting the pain being endured by savers and those on fixed incomes. … Continue Reading
Yesterday’s released minutes of the Bank of England’s Monetary Policy Committee show that another round of quantitative easing is being considered, with a call for another £50 billion of QE on top of the previous £200 billion. The bankers must be planning how to spend their record bonuses already.
The MPC’s doggedness is great for heavy borrowers and those with massive mortgages. It’s not such good news for savers and pensioners. But then we’re getting used to the MPC ignoring the pain of the nation’s savers, pretending that the current CPI rate of 4.5% – over double the Government’s 2% target – is a mere blip. Some blip.
I’m tempted to stand outside the Bank of England the next time the MPC meet holding a placard saying: “Unfair to Savers”. As savers outnumber borrowers at least six to one, it wouldn’t need many of us to make the point that savers are not only losing money fast – but are being taxed on those losses.
If you want to read up on quantitative easing, you might start with the Bank of England’s own Noddy guide.
It might not be good for your blood pressure, though. “Large cuts in Bank Rate and quantitative easing provide the economy with a substantial boost, and reduce the risks of inflation falling below the 2% target…But the Bank will not let inflation get out of control. Just as the Bank takes the steps necessary to contain the risks of below-target inflation, it also acts if it thinks inflation looks set to rise above 2%. In that case, the MPC could put downward pressure on spending and inflation by raising Bank Rate and removing the extra money by selling the assets it previously purchased.” … Continue Reading
Any insurance salesman will give you the ‘you can never have too much insurance’ patter. While this isn’t technically true, one de facto form of cover has long been wrongly ignored by many retirement savers because of potential cost and opaque information on whether to ‘buy’ it. We’re talking about defined contribution pension pots being ‘fire-proofed’ and the insurable event is inflation, specifically the RPI. Unfortunately, the majority of retirees don’t take out an index-linked pension because the financial hit is so great, yet its implications are far-reaching.
An RPI-proofed policy is the only investment guaranteed to beat inflation for pensioners, yet many prefer not to invest in them.
However, retirees who take out a ‘level’ fixed annuity (or annual income for life in exchange for a lump sum) can be pole-axed by the annual rises in the cost of living. With only a set sum of cash every month, the creeping price of fuel, food, bills et al can clobber the finances over the years. … Continue Reading
Dear Mervyn – the real letter
Bank of England rolls the printing presses again
State pension delays for women
Savings Accounts: Past, present and future
Mervyn King misleads on household debt
The dangers of prolonged low interest rates
Why we need sound money and a restoration of savingsMPC holds base rate at 0.5% for 35th month in a row
Are low interest rates the answer – or the problem?Why the MPC has failed
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