Why are savings rates on the floor?

ILW

morrisoscar wrote: »

So the answer to my question is the government have given cheap money to the banks and building societies, they then use this to screw people who have some savings.:T

That's about it. BoE thinks savers are evil and are doing their best to wipe them out.

They would rather anyone with savings put them into a buy to let property so that house prices went even higher.

Thrugelmir

morrisoscar wrote: »

So the answer to my question is the government have given cheap money to the banks and building societies, they then use this to screw people who have some savings.:T

Many who have savings also have a mortgage. Given their low mortgage rate have been saving the money rather than repaying capital to the banks.

So the banks are not seeing an improving balance sheet position.

gadgetmind

Thrugelmir wrote: »

So the banks are not seeing an improving balance sheet position.

They are because more old loans are being paid off than new ones taken out. As the banks have been ordered to improve their balance sheets, it was hard to imagine any other outcome.

CLAPTON

the government and BoE was to recapitalise the banks
and they want the electorate to believe they want the banks to lend lots of money

ffl meets both objectives although it doesn't actually do much new lending but then, that wasn't the one of the objectives.

grey_gym_sock

CLAPTON wrote: »

the government and BoE was to recapitalise the banks
and they want the electorate to believe they want the banks to lend lots of money

ffl meets both objectives although it doesn't actually do much new lending but then, that wasn't the one of the objectives.

spot on.

my question is: how long are we supposed to keep draining the real economy in order to prop up the banks? i can believe it might have been the right thing to do in the depths of the financial crisis, but is this going to go on for decades?

melbury

As has been said before, it would be interesting to see what would happen if savers starting withdrawing their money from banks/building societies in droves.

The way rates are going, your wouldn't be much worse off sticking it under the mattress:(

grey_gym_sock

melbury wrote: »

As has been said before, it would be interesting to see what would happen if savers starting withdrawing their money from banks/building societies in droves.

as i think has also been said before, nothing much.

there might be a temporary shortage of physical currency.

the banks might be so short of money that the government / BOE would decide to pump a little more money (i.e. the money they have borrowed in our name and hope to repay with our children's taxes) into the banks to compensate.

in some ways it appears that it is the banks telling the government what to do, not vice versa. however, the correct place to apply pressure is on the government, not the banks.

Glen_Clark

grey_gym_sock wrote: »

spot on.

my question is: how long are we supposed to keep draining the real economy in order to prop up the banks? ........ is this going to go on for decades?

Apparently, yes. As was said at the time, the banks are hiding an astronomical amount of sub prime debt on their books. Money printing , inflation, and negative real interest rates are all part of the ongoing hidden subsidy to stop borrowers defaulting on the bank's bad debts.
So far the British Government has bailed out investors in British Banks. (except for ordinary shareholders) Spain can't print money so needs an EEC bailout. The EEC has said that investors in the Spanish Bank Bankia will have to shoulder some of the losses as a condition of the EEC bailout.

gozomark

Glen_Clark wrote: »

Spain can't print money so needs an EEC bailout. The EEC has said that investors in the Spanish Bank Bankia will have to shoulder some of the losses as a condition of the EEC bailout.

the EEC hasn't existed since 1993

CLAPTON

melbury wrote: »

As has been said before, it would be interesting to see what would happen if savers starting withdrawing their money from banks/building societies in droves.

The way rates are going, your wouldn't be much worse off sticking it under the mattress:(

well what would the effects of allowing the banks to fail?

banks are only really made up of

-deposits i.e. the savings of ordinary people and of companies and of pension funds etc.

-debtors i.e. people and companies that owe them money -mortgages, company ODs etc etc.



which part of the banks do you want to fail?
what do you thinks would happen to the depositors and to the debtors?
what would happen to the people they employ?