Mark Carney on Savings in Speech ...

meunier

From today's Independent reporting on Mark Carney's Liverpool Speech yesterday:

“The thrifty saver and the rich asset holder are often one and the same," he said, pointing to Office for National Statistics survey data showing that only 2 per cent of households have bank deposits worth more than £5,000 while also having no other significant financial assets and no house.

“Has monetary policy robbed savers to pay borrowers? Has the MPC [Monetary Policy Committee] been Robin Hood in reverse? In a word, no”.

I am - admittedly - a fiscal simpleton - and I, for just one, think the answer to his question should be a resounding YES!

This man and his Committee have left UK society with no incentive to save.

Surely saving is crucial in a British world where debt - both for the country and the vast majority of its citizens - is already such a debilitating problem - or so I read.

This man and his Committee who - through their QE - levied in the name of protection - especially that after the Brexit Referendum - has - as far as I can see - rendered the retail banking system in this country totally redundant. Why did they do it? Surely it was just another chance to aid a historically debt ridden government (i.e., the UK) pay the current interest on their mounting debts ... ones forged in greed. it is - again as far as I can see - an uncertain plaster. Whatever happened to the calls and debate over separating the retail from the commercial banking sector? Why are they not screaming about that?

A better question for Carney to have formed I think might (from my simpleton's perspective of course) be: What is this teaching this country's children?

When these poor tots reach their political maturity they will not be able to participate in such a fudge as Carney - who I always thought of as playing he role of Osborne's henchman - enjoyed. Sadly the wall built through their forefathers' music will then have to be faced. It won't I think be a pretty sight.

I propose that these same offspring now playing blithely in their pens will know poverty in their political maturity that my parents - whose fiscal ethics were formed during the depression - NEVER dreamed of.

That I fear is an even more ugly prospect.

Please feel free to rip what I have said to shreds. In so many ways I wish I did not feel this way.

Certainly i would prefer NOT to.

Joe_Bloggs

Here is a link to Children's Savings accounts.
http://www.moneysavingexpert.com/savings/child-savings-tax-free

The lesson you learn is that it is OK for children to earn interest, but not the rest of the population.
J_B.

themanfromamarillo

Sorry, that's not his job. His job is to make sure that inflation is kept at about 2% and that the economy is still growing. If savings rates are low that's not Mark Carney's fault, it's the government's fault for slow economic growth. He has to keep rates low to avoid deflation, if the economy was stronger he could raise rates. Unfortunately we've had the slowest recovery in god knows how long and have internationally apalling worker productivity. Those things need fixed before Carney has space to raise interest rates.

Malthusian

You don't look at interest rates on savings if you want an incentive to save. You look at the interest rates on credit cards, car finance and Wonga.

SailorSam

They were talking to Mr Carney earlier on Radio Merseyside, and he was warning about the future where even those in work today could lose their jobs to robots.

http://www.liverpoolecho.co.uk/news/liverpool-news/bank-england-governor-gives-key-12277563

Rich2808

themanfromamarillo wrote: »

Sorry, that's not his job. His job is to make sure that inflation is kept at about 2% and that the economy is still growing. If savings rates are low that's not Mark Carney's fault, it's the government's fault for slow economic growth. He has to keep rates low to avoid deflation, if the economy was stronger he could raise rates. Unfortunately we've had the slowest recovery in god knows how long and have internationally apalling worker productivity. Those things need fixed before Carney has space to raise interest rates.

Carney's real but not stated job is to keep house prices high and rising - that's why Osborne appointed him as Canada under his watch delivered just about the highest housing prices in the world.

If he really was concerned about inflation rates would have risen long ago. The priority is more debt and more house price rises as that's the only way we now deliver GDP growth - and that's why he cut rates in July when it wasn't needed,

Cos house prices and ever expanding debt are now effectively the UK economy!

Eco_Miser

“Has monetary policy robbed savers to pay borrowers? Has the MPC [Monetary Policy Committee] been Robin Hood in reverse? In a word, no”

Robin Hood robbed the rich (savers) to pay the poor (borrowers); so Carney has his metaphor the wrong way round - the MPC allegedly acted like Robin Hood (not in reverse).

... rendered the retail banking system in this country totally redundant.

The retail banking system's major purpose is to move money around. It is not redundant in this purpose, rather it is doing an excellent job, now that so much of that movement is by near instantaneous (or three days for Bank Giro) electronic means.

This man and his Committee have left UK society with no incentive to save.

My incentive to save is being able to pay my way for the next forty years without doing a stroke of work. The 5% I get paid for (some of) that saving is just a bonus.

Mogley

Malthusian wrote: »

You don't look at interest rates on savings if you want an incentive to save. You look at the interest rates on credit cards, car finance and Wonga.

Eco_Miser wrote: »

My incentive to save is being able to pay my way for the next forty years without doing a stroke of work. The 5% I get paid for (some of) that saving is just a bonus.

I agree with these two points entirely. It's is something a lot of people forget about saving. Even if you save money in cash at 0% interest that erodes with inflation over time, you still have money saved, avoiding the need to purchase on credit when the time comes. It's not the most efficient way to save money but an incentive at least! Think of how your future self will thank you for it too.

grey_gym_sock

meunier wrote: »

Surely saving is crucial in a British world where debt - both for the country and the vast majority of its citizens - is already such a debilitating problem - or so I read.

this is a common way of thinking, but it's fundamentally confused, because one person's savings is another person's debt. if i have savings, then somebody else has debt. if you advocate lower levels of debt, then you're implicitly advocating lower levels of savings. and contrariwise, if you advocate higher levels of savings, you're implicitly advocating higher levels of debt.

so can there be too much debt in aggregate (i.e. this is distinct from the case of an individual being in too much debt)? in sense, yes: there can be too much debt of specific kinds.

for instance, household debt remains far too high in the UK, at (something like) 170% of GDP. when 40 years ago, it was more like 50% of GDP. anything over 150% seems to cause problems. household debt has not been growing since c. 2007, but it hasn't fallen significantly either, and at this high level, paying the interest is a big drag on the economy.

this is a major, unsolved problem. and it is mainly about house prices, since most household debt is in the form of mortgages.

Surely it was just another chance to aid a historically debt ridden government (i.e., the UK) pay the current interest on their mounting debts

no. despite the constant propaganda about UK government debt being too high, it isn't a problem at all. unlike a household's mortgage, government debt never needs to be repaid. it's actually essential that there is government debt, to allow the financial system to function. and the interest rate the government pays on its debt is usually (i.e. not only in the current very low interest rate environment) less than the rate the economy grows, which means government debt has no real cost.

one purpose of low interest rates is to prevent households without mortgages from struggling. which is valid, but doesn't actually solve the problem of high household debt - it just keeps the problem going.

another alleged purpose of low rates is to encourage banks to lend to businesses and business to invest. this one is a complete joke, because there are other reasons why businesses aren't investing a lot (e.g. weak household spending, given their debt burden and falling real wages).

however, i don't see any case for higher interest rates at the moment. most of our economic problems can't be solved by interest rates alone. we need things such as: higher real wages, a universal basic income, building lots of council houses, improved energy efficiency for existing buildings, better local transport (rather than big vanity projects, like HS2), far more investment in clean energy (especially tidal power: very little has been done with this, the UK is superbly placed for it, and it's more reliable than wind or solar). as well as doing something about the sticky problem of high household debt. almost all of this is outside the bank of england's remit.

bowlhead99

grey gym sock, get out of here with your "salient points" and "voice of reason"! This thread is a witch hunt and the pitchforks will not go back into the barn until Carney's head is on a spike at the end of London Bridge.

Haven't you heard, monetary and fiscal policy is teaching our children Very Bad Things. If we can't rely on the Governor of the BoE to educate our children, who can we? Must we take responsibility for guiding our own children in sensible financial matters, just like every previous generation??!

Pincher

I have always seen Carney as a highly paid actor, whose role is to say soothing words so people don't panic and just horde gold.

We are now in the "Post Truth" era, and the job of those in charge is to "manage expectations". Hard truths are just vote losers.

When the end comes, your children will have no choice but to roam in gangs, and eat other people in a world without cheap oil to transport food grown in far flung lands.

This is the natural way of population reduction. Even bunny rabbits become cannibals when they run out of grass.

Or, join the Pincher Empire. We will take over the planet. Illegal pregnancies will be crimes against the planet. No more foreign holidays, jet fuel is bad. Dumping toxic waste will be met with hellish torture that last a life time.

I will train your children to become efficient Eco-warriors, and learn that the health of the Planet is the only currency that matters.