Savers take more than £8bn from accounts

Sir_Humphrey

Old_Slaphead wrote: »

Lower interest rates aren't being passed on in full to companies as banks are increasing their margins significantly on renewal.

The primary reasons companies are suffering and hence being forced to downsize is lack of demand, the almost universal tightening of credit limits issued by insurers and lack of overdraft credit availability from banks.

6% IRs would mean some people who are currently in work would be made unemployed. That is the main way that high IRs reduce demand.

I agree that improving demand is the most important thing, but fiscal stimuli need low IRs in order to work. IRs are a prerequisite for helping the economy in current times, not the solution itself.

In deflation, a pensioner can run down her savings and retain their wealth in real terms. It makes no difference if inflation is -1% and her IR 0% than if inflation was 5% and her IR 6%.

Another policy would be for government to send pensioners spending vouchers for a few grand each paid for out of the budget deficit. But then the tin-foil hat brigade would start banging on about socialism.