Savers you've never had it so good?

gozomark

Am I missing something??

only the point of this thread :-)

every time capital isn't increased by the rate of inflation, capital is being eroded. Thats true whether your personal inflation rate is 5% or -1% - if you have 100,000 and inflation is 5%, you need to increase it to 105,000 in a year to stand still. If inflation is -1% you can afford to see it go to 99,000 and stand still - they are fundamentally the same thing. Capital is eroded as much by inflation as by spending it, its just not so obvious

holidays, house repairs, replacing electrical goods and repairing or replacing their car - they are all included in the CPI inflation basket

GeorgeHowell

Let's too not lose sight of the fact that there's a political dimension behind the interest rates policy. Ostensibly it's Mervyn King using the only tool at his disposal (till Brown authorises printing money) to try to head off the threat of deflation.

But this Labour government is pretty happy with it politically too I would imagine. Firstly they are predominantly ageist. Blair was the most ageist PM that we have ever had, and probably the most ageist leader ever of a western democracy (remember all that "Cool Britannia" rubbish ?). Clearly low rates tends to favour the young (mortgages, loans) over the older (savings, pensions). In addition, underneath the skin Brown is an old-fashioned, unreconstructed, redistributionary socialist, and Harriet Harperson, among others, even more so. In their minds savers represent "the rich" because they have "spare funds" to call on. So these spare funds should be used up, in order to help subsidise "the poor", which includes the lazy, the f e ckless, and the irresponsible. Politically speaking Labour will not be in a hurry to see rates go up again. So when someone says "savers have never had it so good" I think that they are overlooking the political dimension in this, whereby treating savers punitively is all part and parcel of the ideology.

gozomark

but savers aren't being punished are they ?

3.5% 1 year fixed rate v 1% CPI inflation over the next 12 months = 2.5% real rates, which is better than "normal". Does everyone face 1% inflation, no of course, not, but that was equally true when inflation was 5%, but for some reason some savers prefer high inflation, even if real rates are lower than now.

Thats my last post on this point - if anyone doesn't get it by now, they never will.

Good bye and good night !

GeorgeHowell

If you can grab 3.5% now (2.8% net) all well and good. It remains to be seen where inflation ends up -- the 1% CPI is just a forecast, and what about RPI which is more relevant to our actual cost of living ? But once everybody's bonds etc expire. if bank rate is by then zero then the best you will get will be perhaps 1.5% net. I reckon that will just about equate with RPI, at best, at the bottom of the trough. I agree with the concept that it's real rates that count, and people should not be too paranoid about the nominal rates, per se. The danger is however that for political reasons Labour will try to engineer a situation where real rates are kept low going forward. The Bank of England has effectively lost its independence at the moment ("Do you want to be seen as the man obstructing recovery from this deep recession, Mervyn ?"), and it remains to seen whether and when they get it back.

The silver lining in the cloud is that this atrocious government will probably be out of office within fifteen months, and their replacements will not have the same ideological, ageist, redistributionary prejudice against people supplementing their incomes with interest.

LesU

gozomark wrote: »

but savers aren't being punished are they ?

3.5% 1 year fixed rate v 1% CPI inflation over the next 12 months = 2.5% real rates, which is better than "normal". Does everyone face 1% inflation, no of course, not, but that was equally true when inflation was 5%, but for some reason some savers prefer high inflation, even if real rates are lower than now.

Thats my last post on this point - if anyone doesn't get it by now, they never will.

Good bye and good night !

So what do you think is going to happen to inflation rates in 2009 that would cause the BoE to raise interest rates from 0.5% to 2% in Q1 10? (Your figures)

Reaper

Don't reply Gozomark - I know you are itching to but you've retired from this thread twice now and I'm sure your doctor would advise against it!

LesU

Reaper wrote: »

Don't reply Gozomark - I know you are itching to but you've retired from this thread twice now and I'm sure your doctor would advise against it!

OK. Reply in the other thread, where I got this from.
http://forums.moneysavingexpert.com/showthread.html?t=1517105
I'm just interested.

kingmonkey

Im thinking of goin 100% gold cause I heard something about a super wash cycle. Will this decrease or increase infaltion or deflation? Where can I buy gold? Will tesco give me clubcard points as change from a 1kg bar of gold?

harryhound

I seem to remember that clubcard points are given by Tesco in Calais, but when I was in Bratislava, I'd forgotten to take my clubcard key ring with me.
Now there is a thought: are club card points a more reliable currency than GBP's

Being a bit more serious for a moment; most consumers have no concept of planning for the depreciation of their physical capital assets, let alone giving them current cost accounting treatment. All these things wear out you know: "moth and rust doth corrupt even if thieves don't break in and steal",
I did it once in 1981, just before North Sea Oil (with a bit of help from M.Thatcher) killed inflation, and I was horrified at what inflation was storing up for the Hound household.
Fortunately most pensioners die before all their stuff has become complete junk and don't have to face up to the real fall in their standard of living caused by inflation in the price of "big ticket" items.
Anyone needing a new central heating system or a car would be well advised to get it now, before inflation comes back.

Just_landed

Have a look at this


http://forums.moneysavingexpert.com/showthread.html?t=1518909
:whistle: