Interest rates 'may hit 8pc' in two years

ILW

Cleaver wrote: »

I asked you whether you thought it would be good for the wider, whole economy though. You've answered in relation to savers.

By the way, savers don't make investments, savers save their money (which is where they get their name from I believe). Investors invest their money, and many will have got a return well over 8% over the past year or so.

Savers money is generally invested for them, albeit in low risk investments. Banks don't just stick it in a vault.

Cleaver

ILW wrote: »

Savers money is generally invested for them, albeit in low risk investments. Banks don't just stick it in a vault.

Regardless of what the bank does with your money, if you're a saver who has put their money in to a savings vehicle then you're a saver who is saving. I appreciate there is some risk involved, but this is what makes saving different from investing in my eyes.

ILW

I believe there is no clear line between savings and investments, it is possible for either to be high or low risk.

Cleaver

ILW wrote: »

I believe there is no clear line between savings and investments, it is possible for either to be high or low risk.

You really think that there is no clear line between savings and investments in relation as to how the terms are generally used?

I would quite easily draw a line between the two by saying that a savings account or savings vehicle is one by which you have a fixed or variable rate of interest and, unless the financial institute with which you save goes bust, you are guaranteed to get your capital back plus whatever interest you are owed. There is pretty much no risk against your capital, only risk against the savings being eroded by inflation.

Although I know you can get some investment vehicles where your capital can be protected, the vast majority of investments would see your capital at risk because you are speculating on your asset rising or making returns through income. Generally, you're lending your money for some purpose to generate a hopeful return.

I'd see that as a fairly clear distinction between the two.

Just out of interest, what would you give as a 'high risk' savings product? Do you mean high risk in terms of not keeping up with inflation (for example), or actual high risk to your capital?

ILW

Fair enough, if the definition of savings is a vehicle where ones capital is protected.
The point I was making was that money put into savings accounts is then used to invest in businesses, property etc, so is not just dead money. I fact the banks can make very good profits on it.
A definition of high risk savings may have been Icelandic banks.

Cleaver

ILW wrote: »

Fair enough, if the definition of savings is a vehicle where ones capital is protected.
The point I was making was that money put into savings accounts is then used to invest in businesses, property etc, so is not just dead money. I fact the banks can make very good profits on it.

Oh, okay, I see what you mean. I think most people know that when you save money the bank then use this money for other purposes, hence why banks make / lose money.

I think it's save to use the definition of savings as being protected capital (albeit not against inflation) in this country, as pretty much every savings account is.

ILW

Cleaver wrote: »

Oh, okay, I see what you mean. I think most people know that when you save money the bank then use this money for other purposes, hence why banks make / lose money.

I think it's save to use the definition of savings as being protected capital (albeit not against inflation) in this country, as pretty much every savings account is.

There seems to be a number who think that "savers" should not expect a rate that keeps up with inflation because they are doing nothing to help the economy. I would suggest that as their savings are being invested in the economy then a real return is not an unreasonable expectation.

Procrastinator333

marklv wrote: »

Yes, because savers would at least be able to get an inflation beating return on their investment, feel wealthier and be able to spend more without worrying about their future as much.

:rotfl:Must be nice living on planet Marklv

Cleaver

ILW wrote: »

There seems to be a number who think that "savers" should not expect a rate that keeps up with inflation because they are doing nothing to help the economy. I would suggest that as their savings are being invested in the economy then a real return is not an unreasonable expectation.

It's a difficult one really. Part of me thinks that if you're not prepared to take any risk, why should you expect a return that keeps up with inflation if inflation happens to be high and interest rates low? But I agree that it's unfortunate situation for savers at the moment.

However, with the internet and such wide availability of products nowadays there's not really much excuse for not having a certain part of your portfolio that enables you to hedge against inflation.

What return are savings accounts offering at the moment? About 2-3% instant and around 4% for a year fixed or more? It isn't really that bad.

Anyway, the start of this debate was Mark saying it'd be a good idea to have a base rate of 8%. Which is a stupid idea.

ILW

I agree, it just seems that a 70 year old who has put a bit away for their old age and is unlikely to be able to search the net for the best accounts or have a good idea of what to invest their savings in, should be seeing their capital eroded by inflation. It does seem to be punishing those that did "the right thing".