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Mervyn King: helping savers would push Britain back into recession

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    Mervyn King: helping savers would push Britain back into recession

    Sir Meryvn King also suggested that growing household savings rates are one reason for Britain’s recent poor economic performance. (AtW's comment: so this banker suggests people should not save money that would have been kept in banks that would invest them etc etc)

    He also warned that the UK economy is set to “zig-zag” between growth and contraction this year, partly because of an additional bank holiday for the Diamond Jubilee.

    The Governor was speaking amid growing public and political unease about the impact of the Bank’s emergency measures – pumping £325 billion of new money into the economy and Bank rate at a historic low – on savers and pensioners.

    Those policies have cut the returns on savings and annuities to record lows. Saga, a campaign group, estimates that more than 1 million pensioners have retired with permanently lower retirement incomes because of the impact of the Bank’s quantitative easing programme.

    Savers have also been hit by high inflation, though the bank predicted that inflation will fall back to 1.8 per cent by the end of 2014, easing the recent squeeze on household budgets.

    Sir Mervyn insisted he understood the problems facing savers, but made clear he believes he can do nothing to help.

    “I have deep sympathy with those who are totally unconnected with the origins of the financial crisis who suddenly find that the returns on their savings have reached negligible levels,” he told a press conference. "These are consequences of the painful adjustment prompted by the financial crisis and the need to rebalance our economy." (AtW's comment: so in his view "rebalancing" economy is shafting prudent savers to bail out those who got into debts they can't handle? )

    The Bank could respond by increasing Bank rate from its current level of 0.5 per cent to 4 or 5 per cent, he said. But that would push up the exchange rate, depress investment and consumer spending “and we would go back into a recession.”

    “All groups in society are suffering from the financial crisis,” Sir Mervyn said, insisting that there can be no special help for particular groups. “Difficult though it is, we have to make a difficult judgement about the right course of action for the economy as a whole.”

    During periods of economic turmoil, many people save more because they are worried about their future prosperity.

    According to the Bank’s latest Inflation Report, the household savings ratio increased sharply during the recession. Even though it has fallen back since, the latest figures show households are still saving 6.6 per cent of their disposable income on average, well above the pre-crisis levels of 2007. (AtW's comment: good news - finally money get saved and job of banks is to invest them well)

    The report also suggested that saving may yet rise again, because “households may want to increase the amount that they save due to other factors, such as the need to save more for future retirement provision.”

    Sir Mervyn said that savings were effectively acting as a brake on the economy: “One of reasons for slow growth in the last year was weakness of consumer spending and higher savings by household.”

    The economy shrank in the last quarter of 2011, but the Bank predicted there will not be a second consecutive contraction, meaning no “double-dip” recession.

    Growth this year will be around 1.2 per cent, but the expansion will be uneven. “For much of this year, there is likely to be a zigzag pattern of alternating positive and negative quarterly growth rates,” Sir Mervyn said.

    Source: Mervyn King: helping savers would push Britain back into recession - Telegraph

    FFS savers don't need help, they need BoE do to it's job in keeping inflation under control via rates - if inflation greater than set target then rates should go up and Sir Merv should be fired if he can't do his job properly!

    #2
    This bust has been expected for a while. Myself among others knew back in 2001 it would definitely happen, however I was thinking 2005/2006 for the crash, so I'm surprised it took so long.

    My point is, why are savers angry when they are the mentally retarded ones? Savers had ample warning of the bust, so they could either invest their money in sources that would track above inflation or use their money as a lending source in these times.

    But instead some keep their money in an ISA and then moan about the low interest rate. That is not anyone else's fault but their own for being so retarded and unable to handle their money in shifting economic times. They should be shoved in asylums to keep them away from the general public.

    The low interest rate benefits everyone, INCLUDING savers. It benefits those on sensible mortgages from previous disasters of 15%+ base rates, it benefits the economy stimulating business and lending. It even benefits savers because if they managed their money properly, a fortune is to be made in shares that really have been a sure/100% thing and the lending market itself. A saver with any intelligence can make MORE money than they could at a credit high just through gains and interest dividends.



    Really would be nice if those retards were better educated before spouting off.

    Comment


      #3
      Originally posted by AtW View Post
      FFS savers don't need help, they need BoE do to it's job in keeping inflation under control via rates - if inflation greater than set target then rates should go up and Sir Merv should be fired if he can't do his job properly!
      PS: Inflation affects everyone, not just savers. That really is a dumb comment!

      Savers can actually make a fortune and retire in the future, taking advantage of inflation, interest rates and the capital they already possess, if only they werent so lazy or retarded.

      Unfortunately though, whinging savers are too retarded to grasp that simple fact, so we are stuck in a never ending loop.

      Comment


        #4
        Low interest rates make mortgages look attractive in the short term but how many people budget for rates to go up to 4-5%? If rates stay near 0% then it would mean endless inflation - at some point wages will have to catch up and that would really push the prices up.

        Comment


          #5
          Originally posted by wim121 View Post
          PS: Inflation affects everyone, not just savers. That really is a dumb comment!

          Savers can actually make a fortune and retire in the future, taking advantage of inflation, interest rates and the capital they already possess, if only they werent so lazy or retarded.

          Unfortunately though, whinging savers are too retarded to grasp that simple fact, so we are stuck in a never ending loop.
          Inflation is good if you have no savings and lots of debt, because (assuming your wage increases in line with price rises) your debt is gradually smaller relative to your earnings. The opposite is true for savers.
          "A life, Jimmy, you know what that is? It’s the s*** that happens while you’re waiting for moments that never come." -- Lester Freamon

          Comment


            #6
            Originally posted by AtW View Post
            Low interest rates make mortgages look attractive in the short term but how many people budget for rates to go up to 4-5%? If rates stay near 0% then it would mean endless inflation - at some point wages will have to catch up and that would really push the prices up.
            You're talking about new mortgages?

            Im talking about current mortgages. I purchased during the credit high when the base rate was above 4.5%. The slump in rates gives me extra money per month. I can deal with rates going up to 10%, however after that, I might be very nervous!

            With new mortgages, you now need a goldmine as you need a far bigger deposit to get an attractive rate now. Those taking out such mortgages due to curbed bank lending, DO have the funds to cope with rising rates.


            Raising rates is not the answer though. I agree at some point they must either rise up to a suitable level OR the government MUST curtail spending and welfare drastically, perhaps with enforced workhouses which Ive always been a personal fan of.

            At the moment what must be done is:
            - Encourage people to pay off debts while rates are low and one can dig themselves out of a hole.
            - Regulate the industry better. It is disgusting that some of these loan companies prey on people and charge 5,000% APR. Maximum limits in the realms of sanity must be enforced, as consumers are stupid, but there is no need to exploit that stupidity.
            - Encourage growth and inject as much money as possible in to the economy. That is only one part though, lenders must be encouraged to lend to businesses more.
            - Keep rates under control at the sacrifice of inflation. The more people that dont lose their homes or are declared bankrupt the better. If too many people cannot keep up with their obligations because of a rampant base rate, then that will only further hurt the economy.


            In the long term, the stock market needs an entire overhaul. We should not be in a global situation like the past couple of decades where we are at the whim of a feat of technology. Also a compromise between gambling and playing it safe needs to be reached. The financial sector at the moment isnt making the calculated risks it NEEDS to.

            Comment


              #7
              Originally posted by Freamon View Post
              Inflation is good if you have no savings and lots of debt, because (assuming your wage increases in line with price rises) your debt is gradually smaller relative to your earnings.
              Yes, but that wont happpen. Wages as a whole arent going up and tracking inflation at all, many people are even taking cuts or re-adjustments in pay scales.

              We all need energy, food, etc, so inflation affects everyone.








              Originally posted by Freamon View Post
              The opposite is true for savers.
              There are many ways to beat inflation with ones savings. You can be surer of a greater return than you ever could during boom times either. For the saver with intelligence, these are glorious times!

              Comment


                #8
                Originally posted by AtW View Post
                Sir Meryvn King also suggested that growing household savings rates are one reason for Britain’s recent poor economic performance.
                Mervyn needs to be put in an asylum - he just has no clue. Household are not saving more - they are just less indebted. I seem to think that in 2007 it was at 146% and by 2011 at 134%. It is reckoned that about 110% is sustainable so economy flat lining should end by 2019.

                Though Mervyn might make it quicker by pushing up inflation - punishing savers even more.

                I think Mervyn King the darts player could do a better job than this muppet.

                Comment


                  #9
                  Originally posted by wim121 View Post
                  This bust has been expected for a while. Myself among others knew back in 2001 it would definitely happen, however I was thinking 2005/2006 for the crash, so I'm surprised it took so long.

                  My point is, why are savers angry when they are the mentally retarded ones? Savers had ample warning of the bust, so they could either invest their money in sources that would track above inflation or use their money as a lending source in these times.
                  Most people probably expected a house price crash rather than a continuance on the same course for ever and to bail out mortgage holders and bankers. Maggie would have had interest rates up to 15% by now.

                  Comment


                    #10
                    I agree with AtW who said in another thread Merv knew what was going on but did as he was bidden and put his own interests first. He should have resigned 10 years ago, but instead got a knighthood.

                    Comment

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