SAGA's position on Interest Rates debunked

HAMISH_MCTAVISH

s there any chance Dr Altmann's statements could be fact checked?

Dr Altmann has repeatedly claimed that the Bank of England's monetary policy stance via QE and 0.5% short term interest rates are harmful to pensioners.

To date Dr Altmann has presented no evidence that this is the case.

To my knowledge Dr Altmann has published no research or has any expertise in the effects of monetary policy.

Dr Altmann statement above continues to mislead, for example:

"Saga's analysis suggests low rates, coupled with high inflation, have actually harmed growth via falling consumer confidence in our ageing population. Older generations are cutting discretionary spending, for example on eating out, cinema, theatre, hairdressers or buying clothes, thus reducing job opportunities for the young."

If Saga has some exceptional economists or statisticians who have estimated the effects of monetary policy, I would be interested to read their analysis. As far as I am aware, Saga has not published such an analysis.

Until Dr Altmann publishes some credible evidence to support her claims I will continue to consult the Bank of England’s estimates in working papers 442-444 see here.

They estimated that the first £200bn of QE increased real GDP by 1.5% and inflation by 1.25%.

No evidence here that QE has caused "falling consumer confidence".

Contra to Dr Altmann's beliefs there is little evidence that pensioners' consumption has fallen. Adjusted for inflation pensioners' consumption rose by around 1% per year between 2007-2010, whereas 21-30 year olds' fell by around 3.5% per year.

Even worse is the comparison of the boom years 2003-2007, when pensioners' consumption adjusted for inflation rose by 4.5% per year whereas 21-30 year olds' real consumption fell by just under 1% a year. These facts were recently highlighted by Dr Weale of the Bank of England, see chart 5 page 7.

Note that the basic state pension was raised by 4.6% this year, on average workers (who pay for these otherwise unfunded benefits to the elderly) had pay rises of had pay rises of 1.9% in the year to October.

The most credible evidence available suggests that QE increased output; the most credible evidence suggests that in contrast to younger age groups, pensioners have increased their consumption during this recession.

The basis or evidence for Dr Altmann's beliefs about the effects of QE and pensioners consumption rates is unclear.

I am unsure why the Guardian chooses to publish Dr Altmann's statements given that they are empirically false.

Dr Altmann's demand for tighter monetary policy is somewhat counter intuitive, particularly given 8% unemployment and the fact that state benefits on which many pensioners depend will only be remotely affordable in the future if the economy grows.

http://www.guardian.co.uk/money/poll/2012/mar/05/interest-rates-mortgage-rates

5th comment down. A cracker. :beer:

PasturesNew

Those in care homes will spend their own capital quicker, leaving the Govt to pick up the tab sooner. Don't forget that.

HAMISH_MCTAVISH

I'm sure Graham posted something recently about SAGA claiming low rates were bad for savers spending, and thus the economy.

Strange, now it's been debunked he's nowhere to be seen....

the_flying_pig

Hamish

This thread title, and post, are both potentially misleading.

I assumed that the bit you'd quoted was from a guaridan article & that you were also drawing attention to the 5th post down on the page.

But no, you've actually started a new thread just about a comment by some bloke calling himself 'asdasdasd'.

All the poster really does is say 'no empirical evidence' and 'no economic/statistical credentials', i.e. puts the Saga bloke [who, lest we forget, is speaking for an advocacy group] to proof. I could make exactly the same comment on any of the stuff you post on here. Absolutely no new thread needed.

Graham_Devon

HAMISH_MCTAVISH wrote: »

I'm sure Graham posted something recently about SAGA claiming low rates were bad for savers spending, and thus the economy.

Strange, now it's been debunked he's nowhere to be seen....

What?

Do you actually need this quantified with "evidence", as the poster of that comment does?

"Saga's analysis suggests low rates, coupled with high inflation, have actually harmed growth via falling consumer confidence in our ageing population. Older generations are cutting discretionary spending, for example on eating out, cinema, theatre, hairdressers or buying clothes, thus reducing job opportunities for the young."

Ok, so it seems you need it quantified.

A fixed income and high inflation erodes the amount you can buy with that income. Therefore, it's plainly obvious that some expenditure is going to have to be forgone in order to keep buying essentials at the higher price.

This reduces spending, and therefore reduces the amount of money circulating in local business.

It's not hard. Do you actually need evidence of the above presented in statistics for you to believe the outright obvious?

HAMISH_MCTAVISH

Graham_Devon wrote: »

A fixed income and high inflation erodes the amount you can buy with that income. Therefore, it's plainly obvious that some expenditure is going to have to be forgone in order to keep buying essentials at the higher price.

This reduces spending, and therefore reduces the amount of money circulating in local business.

Except of course, it turns out that this is just more unsubstantiated bollox.

Pensioners spending and consumption rose, in real terms, by 1% per year even through the low rates of the last few years. The only group in fact whose spending did rise by more than inflation.

-Adjusted for inflation pensioners' consumption rose by around 1% per year between 2007-2010, whereas 21-30 year olds' fell by around 3.5% per year.

So pensioners were able to increase their spending/consumption, even adjusted for inflation, during the recent recession.

Pretty much the exact opposite of what you claim....

julieq

There is also the obvious point that increased prices increases spending and therefore boosts the amount of money circulating in local businesses.

That is the complaint in fact, that savings are being eroded because the above interest rate returns of the boom years have disappeared.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Except of course, it turns out that this is just more unsubstantiated bollox.

Pensioners spending and consumption rose, in real terms, by 1% per year even through the low rates of the last few years. The only group in fact whose spending did rise by more than inflation.

-Adjusted for inflation pensioners' consumption rose by around 1% per year between 2007-2010, whereas 21-30 year olds' fell by around 3.5% per year.

So pensioners were able to increase their spending/consumption, even adjusted for inflation, during the recent recession.

Pretty much the exact opposite of what you claim....

Define spending and consumption.

Just because spending and consumption rises, it doesn't mean pensioners have more money. It could be they are consuming more gas as it's cold and prices have increased therefore thye have spent more.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Define spending and consumption.

Just because spending and consumption rises, it doesn't mean pensioners have more money. It could be they are consuming more gas as it's cold and prices have increased therefore thye have spent more.

Wow.... Desperate clutching at straws there Graham.

The key words are "adjusted for inflation".

Why do you find this so hard to believe? Actually, never mind, we know why already, as mentioned in the other thread.

I do feel sorry for you.... You've been having an absolutely torrid time of it lately.

Must be tough, what with your worldview being demolished on a weekly basis as all these figures come out.:)

julieq

But you're claiming spending is reducing Graham. Look, this is what you said:

"This reduces spending, and therefore reduces the amount of money circulating in local business."

You didn't say anything about consumption.

I think you probably ought to trot out those statistics. You seem to be a bit muddled.

ILW

I think he may have a point,

I would have thought that pensioners spend a higher percentage on such things as heating and food, which have inflated more than many discretionary items such as electonics, which have hardly gone up at all. Therefore their spend will have increased.