Interest rates could drop to 1% - what's the point of risking money in savings?

Those who are against low BoE rate, never understand that to get interest on savings, some organizations need to invest money on business and then they pay customers savings interest from the profit of their businesses.

High lending rate = less money circulating is business = less profit = less return on savings :mad:

Banks can pay good interest on savings only on a rolling economy - not in a stagnant economy.

The 3 year fixed rate ISA I took out in February at 6.1% is looking a better bet every day.

I think savings rates will drop more in line with the base rate as credit eases towards the end of next year.

Primrose wrote: »

Being retired, we rely heavily on the interest from our savings to top up our pensions. Interest rates falling to 1% would be a nightmare scenario.

Im retired as well. Banks havent exactly put themselves out in paying good Interest over the last few years. So Interest on £100, would be a quid.. No thanks is my reply! With low Interest rates, I see Inflation soaring, and Capital will fall?

So I think its worth the added risk in buying Shares :beer:

If someone has such a high volume of saving that they can live of the interest, it would make far more sense for them to do something with it like buy a house as rental vehicle.

Um ... er ... no ....

Round where I live, even if you had enough cash to buy a house without a mortgage, the interest you'd get from having that money in a high-interest savings account is still far more than the rent you would have to pay to live in a rented house of roughly the same size. And that's even after tax is deducted from that interest. And, yes, even after that 20% house price crash that the newspapers say we're supposed to have had recently.

So, given that that's the way it is right now, how do you suppose it's possible to "buy a house as rental vehicle"? Surely if you can pay your way from the interest on your savings, you'd want to keep it that way, wouldn't you? Why would that be a spur for anyone to blow their savings on something as worthless as, say, a house?

And therein lies the problem. No-one wants to invest in property or businesses right now, because cash savings are better. Hence the need to devalue the currency by dropping interest rates. Mind you - there's a risk this could backfire, by getting people to invest in gold instead. Gold is not devalued quite as easily as currency.

A period of rapid deflation, caused by a lack of demand for goods and services, which is looming, is a sure-fire indicator of a nightmare to come.

To my way of thinking, the fact that house prices are plummeting is already a sign that we are experiencing a type of deflation. Correct me if I'm wrong anyone, but the only reason why the falling house prices are not considered to be "deflation" is because what we call "inflation" was only been measured on retail prices of consumer goods.

Why on earth would you not want to include the cost of accommodation in your inflation measures? Call me a conspiracy theorist if you like, but I can only speculate that it's because we have wanted to kid ourselves that the property bubble thus created was not really a bubble at all. If houses were included in our inflation measure, then I think the way we talk about "inflation" would make a lot more sense.

Another issue is that euroland does not belive this is going to happen, and that the opposite to severe deflation - hyper-inflation is the arch enemy. This assumes that the state loses control of the currency, prints money like theres no tommorow, and so on (see zimbabew)...

True, I agree that deflation is a risk, but Iceland's problem has been more one of their currency collapsing rather than hardening.

I think the bigger problem is the currency volatility. If we could be sure that deflation is the only problem we'll have, we could fix it. Similarly, if we could be sure that hyper-inflation will be the only problem, we could fix that too. But we can't be sure either way. Neither hyper-inflation nor deflation by itself would be as difficult to manage as currencies going up and down like yo-yos.

I'm no economics expert, but I suspect that the currencies in which the largest number of transactions regularly take place in (such as the US dollar, and possibly to a lesser extent the Euro) are probably less volatile than currencies that don't make up quite such a share of the global economy. UK Sterling and the Japanese Yen are probably more stable than a lot of developing world currencies, but I don't think they're up there with the US dollar.

But then - the US dollar isn't immune either. If the US dollar starts fluctuating about wildly, then it will drive more people towards gold. In the unlikely event that we find that there's absolutely no stability in any established currency system in the world at all, then I think we could see gold becoming the new de-facto currency for the entire globe - but right now, I think this is very unlikely.

Uncle_Ben wrote: »

But now he's BACK

To show you he can REALLY shake 'em down

Isn't that a quote from Do you Love me by Brian Poole and the Tremeloes? You're showing your age!!