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Prudent savers being punished - reply from governor boe office
HUMBUG
Posts: 470 Forumite
Hi All
Just thought I'd post a reply from Mark Carney's office to my email rant to him about destroying savings culture by manipulating interest rates (plus QE) to refinance Banks.
Imho, it is a hypocritical statement saying they "decide for the good of the British people as a whole". They have printed and lent cheap money to Banks, who in return, are just stashing it and not loaning out to businesses (which is why they don't need our money and are offering pittance interest rates).
There are also a much greater number of savers vs borrowers yet they punish the majority. I don't know why I bother complaining to people who are 'in bed' with their financial brothers but I can only hope Mr Carney and his mates are put on the scrapheap asap.
Thank you for your email to the Governor of 20 January regarding the Bank of England’s current monetary policies. The Governor is always interested to hear from those who take the time and trouble to write to him with their views. However, as I am sure you will also appreciate, he receives numerous communications and is unable to respond to them all personally. As such, your letter has now been passed to me for reply.
To begin, let me assure you that both the Governor and members of the Monetary Policy Committee (MPC) at the Bank are very much aware that some decisions, such as changes in interest rates, can sometimes have an adverse effect on certain individuals in the economy. They have huge sympathy for those who have worked hard and done the right thing by putting money aside. We understand that returns on savings have been low for many years now and are likely to remain so for some time. These low rates are a worldwide phenomenon, which are driven by a number of global developments and the legacy of the financial crisis. It is the job of the Bank’s MPC to take account of these global developments in setting policy.
I should explain that the MPC has taken action to improve the economic outcomes for this country, lower unemployment, increase activity and improve the prospect of a successful adjustment to the new realities that the UK faces. We have taken the action we have to support the UK economy against the risks it is currently facing. We do not target policy for specific groups in society. We take these decisions for the good of the British public as a whole. Any scheme or programme designed to improve the situation for a specific group would be something for the Government to design and decide upon. The Government has given the Bank of England the objective to achieve price stability, which is defined by them as an inflation target of 2%.
As you may be aware, at the MPC’s meeting of 14 September, the committee voted unanimously to maintain the Bank Rate at 0.25%. The committee’s view of the contours of the economic outlook following the EU referendum had not changed from its August decision and a majority of MPC members expected to support a further cut in Bank Rate later in the year. The MPC judged that the lower rate would be close to, but a little above, zero.
Since then, on the updated assessment of the UK economy, demand growth has been materially better than expected. As the Governor said at the release of the November Inflation Report; “The MPC had expected consumption to continue to grow solidly throughout the remainder of 2016. But consumption has been even stronger, with households appearing to entirely look through Brexit-related uncertainties. For households, the signs of an economic slowdown are notable by their absence. Perceptions of job security remain strong. Wages are growing at around the same modest pace as at the start of the year. Credit is available and competitive. Confidence is solid.”
Despite this, financial markets have taken a less sanguine view of the UK’s Brexit prospects. Sterling is now around one-fifth lower than its peak a year ago with the latest sharp move appearing to reflect market expectations of an even less open set of trading arrangements than anticipated in the immediate aftermath of the referendum. While the Committee now expects stronger short-term growth, it is the fall in sterling that will have the more significant implications for the path for inflation at the monetary policy horizon. CPI inflation is now expected to be higher throughout the three-year forecast period than the MPC forecast in August - largely as a result of the renewed depreciation of sterling. Although the direct impact of sterling’s depreciation on inflation will ultimately prove temporary, in the MPC’s judgement, attempting to offset it fully with tighter monetary policy would be excessively costly in terms of foregone output and employment growth. The MPC is therefore choosing a period of somewhat higher consumer price inflation in exchange for a more modest increase in unemployment. In light of these developments, and in keeping with its Remit, the MPC at its November meeting agreed unanimously that Bank Rate should be maintained at its current level.
To again quote from the Governor’s speech at the release of the November Inflation Report; “The UK is a highly flexible, dynamic economy. These characteristics will help it to move to a new equilibrium as its future relationship with the European Union becomes clearer and new opportunities with the rest of the world open up. Many of the adjustments needed to move to that new equilibrium are real in nature, and are not in the gift of monetary policymakers.
“Monetary policy cannot construct the edifice of lasting prosperity. But it will help build the foundations by achieving the inflation target in a sustainable fashion and in a way that helps to smooth real adjustment in the economy, to stabilise growth, and to support jobs in the wake of much larger forces. This is the best contribution the MPC can make to the good of the people of the United Kingdom.”
I hope that the above has added some clarity to the decisions made by the MPC. For further reading please follow the links to the November Inflation Report (http://www.bankofengland.co.uk/publications/Documents/inflationreport/2016/nov.pdf) and the November Monetary Policy Summary (http://www.bankofengland.co.uk/publications/minutes/Documents/mpc/mps/2016/mpsnov.pdf). Please also note that the first MPC base rate decision and Inflation Report for 2017 are due to be released on Thursday.
Thank you again for taking the time to write to the Bank and for sharing your views. You may be interested to know that the Governor is made aware of all correspondence addressed to him, along with the points that correspondents make.
Just thought I'd post a reply from Mark Carney's office to my email rant to him about destroying savings culture by manipulating interest rates (plus QE) to refinance Banks.
Imho, it is a hypocritical statement saying they "decide for the good of the British people as a whole". They have printed and lent cheap money to Banks, who in return, are just stashing it and not loaning out to businesses (which is why they don't need our money and are offering pittance interest rates).
There are also a much greater number of savers vs borrowers yet they punish the majority. I don't know why I bother complaining to people who are 'in bed' with their financial brothers but I can only hope Mr Carney and his mates are put on the scrapheap asap.
Thank you for your email to the Governor of 20 January regarding the Bank of England’s current monetary policies. The Governor is always interested to hear from those who take the time and trouble to write to him with their views. However, as I am sure you will also appreciate, he receives numerous communications and is unable to respond to them all personally. As such, your letter has now been passed to me for reply.
To begin, let me assure you that both the Governor and members of the Monetary Policy Committee (MPC) at the Bank are very much aware that some decisions, such as changes in interest rates, can sometimes have an adverse effect on certain individuals in the economy. They have huge sympathy for those who have worked hard and done the right thing by putting money aside. We understand that returns on savings have been low for many years now and are likely to remain so for some time. These low rates are a worldwide phenomenon, which are driven by a number of global developments and the legacy of the financial crisis. It is the job of the Bank’s MPC to take account of these global developments in setting policy.
I should explain that the MPC has taken action to improve the economic outcomes for this country, lower unemployment, increase activity and improve the prospect of a successful adjustment to the new realities that the UK faces. We have taken the action we have to support the UK economy against the risks it is currently facing. We do not target policy for specific groups in society. We take these decisions for the good of the British public as a whole. Any scheme or programme designed to improve the situation for a specific group would be something for the Government to design and decide upon. The Government has given the Bank of England the objective to achieve price stability, which is defined by them as an inflation target of 2%.
As you may be aware, at the MPC’s meeting of 14 September, the committee voted unanimously to maintain the Bank Rate at 0.25%. The committee’s view of the contours of the economic outlook following the EU referendum had not changed from its August decision and a majority of MPC members expected to support a further cut in Bank Rate later in the year. The MPC judged that the lower rate would be close to, but a little above, zero.
Since then, on the updated assessment of the UK economy, demand growth has been materially better than expected. As the Governor said at the release of the November Inflation Report; “The MPC had expected consumption to continue to grow solidly throughout the remainder of 2016. But consumption has been even stronger, with households appearing to entirely look through Brexit-related uncertainties. For households, the signs of an economic slowdown are notable by their absence. Perceptions of job security remain strong. Wages are growing at around the same modest pace as at the start of the year. Credit is available and competitive. Confidence is solid.”
Despite this, financial markets have taken a less sanguine view of the UK’s Brexit prospects. Sterling is now around one-fifth lower than its peak a year ago with the latest sharp move appearing to reflect market expectations of an even less open set of trading arrangements than anticipated in the immediate aftermath of the referendum. While the Committee now expects stronger short-term growth, it is the fall in sterling that will have the more significant implications for the path for inflation at the monetary policy horizon. CPI inflation is now expected to be higher throughout the three-year forecast period than the MPC forecast in August - largely as a result of the renewed depreciation of sterling. Although the direct impact of sterling’s depreciation on inflation will ultimately prove temporary, in the MPC’s judgement, attempting to offset it fully with tighter monetary policy would be excessively costly in terms of foregone output and employment growth. The MPC is therefore choosing a period of somewhat higher consumer price inflation in exchange for a more modest increase in unemployment. In light of these developments, and in keeping with its Remit, the MPC at its November meeting agreed unanimously that Bank Rate should be maintained at its current level.
To again quote from the Governor’s speech at the release of the November Inflation Report; “The UK is a highly flexible, dynamic economy. These characteristics will help it to move to a new equilibrium as its future relationship with the European Union becomes clearer and new opportunities with the rest of the world open up. Many of the adjustments needed to move to that new equilibrium are real in nature, and are not in the gift of monetary policymakers.
“Monetary policy cannot construct the edifice of lasting prosperity. But it will help build the foundations by achieving the inflation target in a sustainable fashion and in a way that helps to smooth real adjustment in the economy, to stabilise growth, and to support jobs in the wake of much larger forces. This is the best contribution the MPC can make to the good of the people of the United Kingdom.”
I hope that the above has added some clarity to the decisions made by the MPC. For further reading please follow the links to the November Inflation Report (http://www.bankofengland.co.uk/publications/Documents/inflationreport/2016/nov.pdf) and the November Monetary Policy Summary (http://www.bankofengland.co.uk/publications/minutes/Documents/mpc/mps/2016/mpsnov.pdf). Please also note that the first MPC base rate decision and Inflation Report for 2017 are due to be released on Thursday.
Thank you again for taking the time to write to the Bank and for sharing your views. You may be interested to know that the Governor is made aware of all correspondence addressed to him, along with the points that correspondents make.
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Comments
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If you're so worried about rates then maybe you should be making the most of the decent ones available. Until this year all my cash was at 5%, it's still at over 3% and my mortgage is just over 2%.
Investments have done fantastically since 2009 so it's definitely not been bad or destroyed savings culture as you claim.Remember the saying: if it looks too good to be true it almost certainly is.0 -
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Mr Carney and the MPC failed spectacularly to see the crisis coming in 2008 and made the wrong call on Brexit so nobody should be surprised they just follow the rest of the clueless financial 'experts' around the world such as Lagarde and try to maintain the illusion that they know what they are doing and interest rates need to be kept ultra low for the good of everyone.
Yes there is a small minority of people who are clued up on investing and can maintain their income via investments. There are the rich who can pay an adviser to do the same.
However the vast majority of ordinary people are not familiar with this area and understandably regard it as risky so they stick with what they know which is cash savings. They have been shouldering the burden of getting the economy back on track seeing their savings interest decline by around 80% year after year whilst the real culprits seem to get off lightly.
There needs to be some big changes and hopefully Brexit will be the start.0 -
Mr Carney and the MPC failed spectacularly to see the crisis coming in 2008 and made the wrong call on Brexit so nobody should be surprised they just follow the rest of the clueless financial 'experts' around the world such as Lagarde and try to maintain the illusion that they know what they are doing and interest rates need to be kept ultra low for the good of everyone.
Yes there is a small minority of people who are clued up on investing and can maintain their income via investments. There are the rich who can pay an adviser to do the same.
However the vast majority of ordinary people are not familiar with this area and understandably regard it as risky so they stick with what they know which is cash savings. They have been shouldering the burden of getting the economy back on track seeing their savings interest decline by around 80% year after year whilst the real culprits seem to get off lightly.
There needs to be some big changes and hopefully Brexit will be the start.
I think you will find the Mr Carney only took up his roll as gov of the Bank of Canada in 2008, and did rather well to get Canada through that crisis rather better than others like the U.K. end the US.
You don't have to be rich to use an advisor, but using one 8 or 9 years ago rather than staying in cash would have undoubtedly made you richer today.0 -
So you reckon the banks have a business model of paying interest on something and then not lending it out?They have printed and lent cheap money to Banks, who in return, are just stashing it and not loaning out to businesses
What's in it for them then?
(Text removed by MSE Forum Team)0 -
I don't know why I bother complaining to people who are 'in bed' with their financial brothers but I can only hope Mr Carney and his mates are put on the scrapheap asap.
Your complaint was met with a reply that was detailed, accurate and well-reasoned. If you were to sit down and read it carefully you might learn something.
FWIW the BoE responded brilliantly to BREXIT. Whatever the long-term consequences (which might or might not be good for the UK), it was reasonable to expect a short-term slump. That did not happen and in fact the economy sustained growth, mainly because the BoE was prepared for the surprise result and acted to maintain market confidence, in part by lowering interest rates.
While savers (many of us) would benefit from higher interest rates, this would throw the economy into recession and cause far more pain. For example, my first mortgage was a bargain at 9.5 per cent: if most borrowers now had to pay that much interest image what would happen to them!0 -
The idea has always been to voice your grievances/concerns to collect like-minded people, and form a fighting force to pursue a cause.
WASPI
Transport and General Workers Union (TGWU)
I would like people to join CPR (Campaign for Population Reduction), where we would like to achieve the David Attenborough threshold of 1 billion humans, for a sustainable future. Just imagine, if we remove 90% (reverse decimate) of the population, there would be no more housing crisis for a start.
It just takes an asteroid strike, which is non-partisan, non-racist, neither anti-Semitic, nor pro-Islam. All we need is to develop ion drive technology, put an engine on a suitably massive asteroid, steer it to Earth, and job done. Donate generously, to save the planet.
I expect there would a faction that prefer less short term damage, and just have people kill each other, so we could go for a zombie plague. There's movie called Cell, where a signal causes the mobile phone user to go zombie, which I really like, because I really hate phone addicts.0 -
To be fair there is a logic in that posters point, though it's not well expressed.
Funding for lending had the effect of providing banks with cheap money which meant that they didn't need savers money.
Banks were also rebuilding their balance sheets which also meant that they were happy to pay the massive sums of maybe 0,75% to achieve that, bit cheaper than raising ,only on open money markets by a business that wouldn't appear to actually be very stable or profitable.0 -
Voyager2002 wrote: »Your complaint was met with a reply that was detailed, accurate and well-reasoned. If you were to sit down and read it carefully you might learn something.
FWIW the BoE responded brilliantly to BREXIT. Whatever the long-term consequences (which might or might not be good for the UK), it was reasonable to expect a short-term slump. That did not happen and in fact the economy sustained growth, mainly because the BoE was prepared for the surprise result and acted to maintain market confidence, in part by lowering interest rates.
While savers (many of us) would benefit from higher interest rates, this would throw the economy into recession and cause far more pain. For example, my first mortgage was a bargain at 9.5 per cent: if most borrowers now had to pay that much interest image what would happen to them!
That's your interpretation of the boe response, we don't know what would have happened should their responses have been different, and they were predicting Armageddon, so we in a no lose situation.
The economy is still being saved by consumer spending on borrowed money, just kicking issues down the line and means that the heroin of zero interest rates can't be withdrawn as there is so much indebtedness.
Continued asset price inflation is the consequence just make the pound worth less in terms of what is actually buys.0
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