Last year I put 200k under my matress and my mate put 200k in Icesave.....

confused_landlord

1694 wrote: »

Provocation but factually accurate. The 4% interest you are offered is in exchange for risk....the risk of keeping your money in a company with a level of leverage that would be illegal in any other business.

I dont think it is a coincidence that the richest nations in the world have modern banking systems, whilst the poorer nations have only just got round to setting up banks complete with debit cards etc. Putting your money in a bank allows it to be lent out to small business, students needing to study etc. If everyone put their money under their mattress, the whole nation would be poorer as a result.

confused_landlord

dkmax wrote: »

A more suitable analogy is with insurance - as the compensation scheme is - high risk people normally pay higher premiums. Those people seeking higher returns from these risky Iceland banks should have been paying more into the scheme.

Is it fair that their unsustainable interest payments have to be covered by the tax-payer too? Good job they weren't offering 50% APR.

The rate of interest was nothing extraordinary. B&B, Birmingham midshires were offering the same rates.

JohnnyW_3

danny69 wrote: »

I told him, long term, I would have a lot more money than him. Eggs, baskets........

So your friend has earned an extra £12,000+ pounds. Not bad. I wouldn't mind an extra £12,000, good for him! In 10 years in any reasonable savings account he'll have earned an extra £100,000+. Wise move on his part, I'd say.

1694

MrExample wrote: »

Your analogy is overly simplistic. You have also failed to notice that putting your money under the mattress also has risks associated with it; such as:

- The risk of theft.
- The risk of destruction (fire/flood, etc.)
- Inflation taking a huge chunk of if each year, even more so in times of crisis when fiat currency is being pumped out in huge volumes).
- The risk of simply losing bits of it (can you count all those pennies every day?).

The probability of all of my bank's depositor's wanting their money at the same time is very slim indeed. Even if they did, it's hardly as simple as your analogy makes out. Major banks pay very little in interest, but rake it in from loans.

The governement isn't printing more money is it? NO.
Where does new money come from? The method of fractional reserve described.
Does more money in existence lower the buying power of a fixed value? Yes
So if it requires your savings to increase the amount of money in existence....why would you allow it?

Of course you get, 4% interest or whatever, but 4% interest on £100 is £104 right, look at the original explanation of fractional reserve, the bank can create upto £900, so your extra £4 is outwieghed by somone elses new £900 that didn not exist before you deposited your £100.

1694

confused_landlord wrote: »

I dont think it is a coincidence that the richest nations in the world have modern banking systems, whilst the poorer nations have only just got round to setting up banks complete with debit cards etc. Putting your money in a bank allows it to be lent out to small business, students needing to study etc. If everyone put their money under their mattress, the whole nation would be poorer as a result.

Yes the system magics into existence loads of new money which creates a short term boom, but not enough money is created to repay the interest on the loans. Bust.

So you get ahead now, only to fall behind again later.

You could just lend your money to businesses direct yourself and charge them interest if you wanted to. Of course you wouldn't be able to spend it whilst they had it. But then the money would retain its value.

1694

OracleXe wrote: »

So - his money has gained interest in a bank with a decent rate, and he'll be fully compensated (including interest), suffering little or no loss, with some inconvenience of having to claim his money back.

On the other hand, your money has fallen in value due to inflation, been put at risk of theft and damage, and now also smells funny.

You could have put it into one of the many 'safe' UK banks and it would have been worth more. Even if you had put it in some bog standard Government savings scheme it would have been worth more than it is now.

If I were your mate I'd be laughing at your financial ineptitute.

Every bank owner in the world is !!!!ing himself at you, and using your money to mop up the !!!!.

Guranteed....are you an imbecile who guarantees it? The government, where does the governement get its money taxes. Worse yet the government isn't using tax reserves to guarantee it is borrowing AT INTEREST. Didnt you hear the news, every man woman and child has just picked up atleast £8000 of NEW national debt + interest that they will have to repay with taxes. No one has even been told what the interest rate is. What if we cant cover the repayment + interest, the debt widens. How are the babies born today who wont earn for 16 years going to pay off the debt they were born into?

danny69

MrExample wrote: »

The interest rates have !!!!!! all to do with risk. Most of us put our money into Icesave because it seemed like a SAFER place, out of the way of the chaos engulfing the US/EU.

Iceland was previously seen as an extremely stable, safe place to put money -- low inflation, low taxes, a decent properly-funded pension system (unlike over here).

Your argument is destroyed somewhat by your claim that putting £200,000 under your bed is safe and/or sane.

I hope your £192,000 under the bed is still safe. :-)

£192,000? Also, I cannot believe claims that Iceland was such a safe place compared to the UK. I mean, our Government has ensured our money is safe all along, so whyh keep it in a foreign country? Further to somebody saying we were made aware of their financial plight 2 years ago, I would like to add that around 3 years ago they stgruggled to get investment from their usual sources (due to instability) and so offered UK savers higher rates to attract money. As I said before- hook, line, and sinker.

danny69

MrExample wrote: »

The interest rates have !!!!!! all to do with risk. Most of us put our money into Icesave because it seemed like a SAFER place, out of the way of the chaos engulfing the US/EU.

Iceland was previously seen as an extremely stable, safe place to put money -- low inflation, low taxes, a decent properly-funded pension system (unlike over here).

:-)

Yes, previously as in more than 3 years ago. My only problem now is what to spend my 200k on, as opposed to been worried about losing all my money forever. Cheers (raises his glass of champers)

steadysaver

danny69 wrote: »

What I would like to add to this point, is that if you dont want any risk, put the money under your matress or in a safe.

Fire, theft, inflation, the tax man :rolleyes:

confused_landlord

Not only do you have 200K in your home, but you feel the need to advertise in on a public forum. I just hope you have not been out drinking (and talking) too much lately. Any gaps in your memory should cause you concern.