Brexit and savers interest rates
Discussion
Mr GrimNasty said:
Mr Whippy said:
fblm said:
Mr Whippy said:
Unless some economy has a currency that isn't being actively devalued where we can all run to for safety?
How is GBP being 'actively devalued'?Buying power is being eroded massively, unless of course you buy the basket of crap the government uses to measure inflation.
fblm said:
crankedup said:
...I happen to believe that the artificially low rate that has been sustained for so long is damaging rather then helping.
Had the BoE hiked rates to a worthwhile level for savers (say 3-4% ?) any time since 2008 they would have put hundreds of thousands, if not millions out of work. You think the public sector 'cuts' you have now are 'too much, too fast'?crankedup said:
It has encouraged borrowers to once again become over indebted.
Not true. Total household debt is more or less unchanged since the recession. Per capita debt has obviously fallen and debt as a % of income has fallen sharply.
crankedup said:
We have been here before and it always ends in tears, and we are heading for another storm soon.
hI think you would enjoy Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay. Its 150 years old and just as relevant today as it was then. Contrary to Gordon Browns own epic delusion he did not end boom and bust.
crankedup said:
...those sitting on a debt mountain are being subsidised...
Where do you think the money has come from to pay savers interest for the last 2000 years? crankedup said:
Bonds are fine, quite agree...
I certainly never suggested that! If you're worried about rates going up (fixed income) bonds are just about the worst place to put your money.Borrowers are becoming over indebted, I appreciate what the chart you posted argues this is not so, but it is three years out of date. My reading was indicating that banks are loosening the restrictions for mortgage applications a and borrowers are taking advantage of this.
Borrowers have of course paid savers the point is it's not enough at the moment, borrowers are getting a free ride on the backs of savers It is the level of reward for savers that is punishingly low, some is negative when taking into consideration inflation. This suggests an imbalance as I have previously mentioned BOE was suggesting that rates could rise in small increments of perhaps .25% but this was six months ago and still nothing changes.
I wish I had your confidence regarding the state of our National finances, my concerns are not , as you suggest, delusionary.
I see almost nothing on the horizon that suggests good times are around the corner, I do see plenty of obstacles presenting risk. But that is my perogative as it is your to take an opposite POV. Even economists cannot agree the future.
Guaranteed Government bonds are fine, I am not concerned that rates are about to rise. The problem for savers is just that, rates are going nowhere.
Like I've said a few times now, rates will only rise when people notice they've had a big wealth/income buying power haircut.
Best to either have no debt, or have had a big load of debt for some years on assets bought pre 2012 or so at the latest, at that point.
I'm not sure where you're best with savings though.
In practice when rates rise it'll be good, but it'll only be helping savings return to parity to where they should have been... so it'll still be like a lost decade in savings growth.
I suppose the only real answer is that if you've just had savings sat in the bank earning nothing, it's already too late
Best to either have no debt, or have had a big load of debt for some years on assets bought pre 2012 or so at the latest, at that point.
I'm not sure where you're best with savings though.
In practice when rates rise it'll be good, but it'll only be helping savings return to parity to where they should have been... so it'll still be like a lost decade in savings growth.
I suppose the only real answer is that if you've just had savings sat in the bank earning nothing, it's already too late
Mr Whippy said:
Like I've said a few times now, rates will only rise when people notice they've had a big wealth/income buying power haircut.
Best to either have no debt, or have had a big load of debt for some years on assets bought pre 2012 or so at the latest, at that point.
I'm not sure where you're best with savings though.
In practice when rates rise it'll be good, but it'll only be helping savings return to parity to where they should have been... so it'll still be like a lost decade in savings growth.
I suppose the only real answer is that if you've just had savings sat in the bank earning nothing, it's already too late
But it's only a lost decade out of choice. No one has been forced to keep their savings on deposit. Since interest rates have been at current levels, there have always been investment opportunities to outperform inflation. If people don't have the appetite for risk to invest in this way, it's no ones fault but their own.Best to either have no debt, or have had a big load of debt for some years on assets bought pre 2012 or so at the latest, at that point.
I'm not sure where you're best with savings though.
In practice when rates rise it'll be good, but it'll only be helping savings return to parity to where they should have been... so it'll still be like a lost decade in savings growth.
I suppose the only real answer is that if you've just had savings sat in the bank earning nothing, it's already too late
ClaphamGT3 said:
Mr Whippy said:
Like I've said a few times now, rates will only rise when people notice they've had a big wealth/income buying power haircut.
Best to either have no debt, or have had a big load of debt for some years on assets bought pre 2012 or so at the latest, at that point.
I'm not sure where you're best with savings though.
In practice when rates rise it'll be good, but it'll only be helping savings return to parity to where they should have been... so it'll still be like a lost decade in savings growth.
I suppose the only real answer is that if you've just had savings sat in the bank earning nothing, it's already too late
But it's only a lost decade out of choice. No one has been forced to keep their savings on deposit. Since interest rates have been at current levels, there have always been investment opportunities to outperform inflation. If people don't have the appetite for risk to invest in this way, it's no ones fault but their own.Best to either have no debt, or have had a big load of debt for some years on assets bought pre 2012 or so at the latest, at that point.
I'm not sure where you're best with savings though.
In practice when rates rise it'll be good, but it'll only be helping savings return to parity to where they should have been... so it'll still be like a lost decade in savings growth.
I suppose the only real answer is that if you've just had savings sat in the bank earning nothing, it's already too late
But those savers have low risk outlook, and given UK governments projections for improving growth and raising interest rates (but being wrong and not raising rates) each year since 2009, it's tough to have expected these moderate to low risk savers to have moved out into stocks and shares actively.
Yet government seems to have actively supported assets via QE, so the riskier investments have had support, while the low risks ones have apparently had none.
Lets put it this way, I don't blame people for falling foul of low interest rates. I blame government for distorting the ROI landscape.
Dave
Mr Whippy said:
ClaphamGT3 said:
Mr Whippy said:
Like I've said a few times now, rates will only rise when people notice they've had a big wealth/income buying power haircut.
Best to either have no debt, or have had a big load of debt for some years on assets bought pre 2012 or so at the latest, at that point.
I'm not sure where you're best with savings though.
In practice when rates rise it'll be good, but it'll only be helping savings return to parity to where they should have been... so it'll still be like a lost decade in savings growth.
I suppose the only real answer is that if you've just had savings sat in the bank earning nothing, it's already too late
But it's only a lost decade out of choice. No one has been forced to keep their savings on deposit. Since interest rates have been at current levels, there have always been investment opportunities to outperform inflation. If people don't have the appetite for risk to invest in this way, it's no ones fault but their own.Best to either have no debt, or have had a big load of debt for some years on assets bought pre 2012 or so at the latest, at that point.
I'm not sure where you're best with savings though.
In practice when rates rise it'll be good, but it'll only be helping savings return to parity to where they should have been... so it'll still be like a lost decade in savings growth.
I suppose the only real answer is that if you've just had savings sat in the bank earning nothing, it's already too late
But those savers have low risk outlook, and given UK governments projections for improving growth and raising interest rates (but being wrong and not raising rates) each year since 2009, it's tough to have expected these moderate to low risk savers to have moved out into stocks and shares actively.
Yet government seems to have actively supported assets via QE, so the riskier investments have had support, while the low risks ones have apparently had none.
Lets put it this way, I don't blame people for falling foul of low interest rates. I blame government for distorting the ROI landscape.
Dave
Do any of these posters have any Social experience or knowledge at all I wonder.
Well we know the idea of ZIRP and so on are to get people spending money too.
Or to move savings into the stocks/shares world and 'investing' the money. That'd work too if the whole stock/share world wasn't a malinvested bubbly mess.
There is no way to get yield back from that lost decade.
There is no way to compensate for it in the future.
There are no 'safe' gambles left because I think the ammo of central government/banking has run out now.
The irony is, it'll be those in the 'safe' bank deposits with their large sums of money that will be bailing the banks in now!
And for everyone else inflation will turn their remaining savings into a fraction of what they were worth.
The big question I have on my lips is, how will the billionaires be protecting their wealth. What are they buying into right now (not in the past 6 years, but now)?
Or to move savings into the stocks/shares world and 'investing' the money. That'd work too if the whole stock/share world wasn't a malinvested bubbly mess.
There is no way to get yield back from that lost decade.
There is no way to compensate for it in the future.
There are no 'safe' gambles left because I think the ammo of central government/banking has run out now.
The irony is, it'll be those in the 'safe' bank deposits with their large sums of money that will be bailing the banks in now!
And for everyone else inflation will turn their remaining savings into a fraction of what they were worth.
The big question I have on my lips is, how will the billionaires be protecting their wealth. What are they buying into right now (not in the past 6 years, but now)?
Big money is going into top end cars both new and classics, sales of top end ocean going tugs. Personal aircraft and of course land ad property. Top end bling, travel, racehorses and more besides. Of course it's so much money it cannot be spent out as such. Our lad works for a multi billionaire, a genuinely decent family.
fblm said:
V8A*ndy said:
A Brexit will rise rates a lot faster that remaining.
Why?BOE has moved from QE to Funding for lending. Your bank and B/S doesn't need to rely upon deposits as much. BOE lend them very cheap money and the banks fund business and mortgages.
If the UK leaves the EU it is a given there will be inflationary pressures. There will also be some market turmoil. How much turmoil we don't know but everyone knows markets don't like uncertainty so there will be pain.
The BOE will not be able to keep base rates low (as before when inflation was stubbornly high) and keep lending cheap money to the banks at the same time/amounts. So either base rates rise or banks get limited cheap money. Savers will get better returns either way.
This will also be compounded if the markets really tank as the BOE will certainly introduce Indexed Long-term Repos to protect the banks as it's also a given that the markets will most likely close it's doors to British lenders.
How long will super cheap money be there and which lenders will get it. The banks will very quickly upping rates for deposits.
Credit crunch V2.0.
Add in a risk of all our EU cousins pulling money out and heading home right down to the workers especially if forced out.
That's a lot of dosh going out of UK banks.
Edited by V8A*ndy on Wednesday 25th May 15:30
crankedup said:
I am not suggesting BOE rates should rise to 3 or 4% that is your pure speculation and an almost impossible scenario at the present time.
I didn't say you did. I suggested 3-4% as a level worthwhile to savers because any less was below inflation for most of the last 7 years.
crankedup said:
Borrowers are becoming over indebted, I appreciate what the chart you posted argues this is not so, but it is three years out of date.
The graphs clearly show your assertion is wrong. Not only are households on average less indebted than before but compared to income they are much less indebted. Out of date? OK I'll do your googling for you...
http://www.economist.com/news/britain/21685499-wor...
Honestly cranked if you want to be an investor now, you can't just dismiss reliable data that completely contradicts your macro opinon.
crankedup said:
Borrowers have of course paid savers the point is it's not enough at the moment, borrowers are getting a free ride on the backs of savers...
It's symbiotic, one doesn't exist without the other. I'm also a saver not a borrower, so I lose a good few k a year in deflation. To make any kind of return on our cash we need rates at a level that puts a few million in negative equity and a few million out of work. I thought you were the socialist and I was the rapacious capitalist!crankedup said:
I wish I had your confidence regarding the state of our National finances, my concerns are not , as you suggest, delusionary.
Dear god cranked did you hit the sherry early today? I was agreeing with you regarding an inevitable correction. I certainly didn't say you were delusionary, unless your name is Gordon Brown. The relevant part of the book I recomended regards financial manias and crashes. So long as we are free to buy and sell things or borrow and lend money there will be booms and crashes, fear and greed, it's human nature.crankedup said:
I see almost nothing on the horizon that suggests good times are around the corner, I do see plenty of obstacles presenting risk. But that is my perogative as it is your to take an opposite POV.
I agree. WTF?crankedup said:
...rates are going nowhere.
That's what I said in answer to your threads main question!V8A*ndy said:
fblm said:
V8A*ndy said:
A Brexit will rise rates a lot faster that remaining.
Why?BOE has moved from QE to Funding for lending. Your bank and B/S doesn't need to rely upon deposits as much. BOE lend them very cheap money and the banks fund business and mortgages.
If the UK leaves the EU it is a given there will be inflationary pressures. There will also be some market turmoil. How much turmoil we don't know but everyone knows markets don't like uncertainty so there will be pain.
The BOE will not be able to keep base rates low (as before when inflation was stubbornly high) and keep lending cheap money to the banks at the same time/amounts. So either base rates rise or banks get limited cheap money. Savers will get better returns either way.
This will also be compounded if the markets really tank as the BOE will certainly introduce Indexed Long-term Repos to protect the banks as it's also a given that the markets will most likely close it's doors to British lenders.
How long will super cheap money be there and which lenders will get it. The banks will very quickly upping rates for deposits.
Credit crunch V2.0.
Add in a risk of all our EU cousins pulling money out and heading home right down to the workers especially if forced out.
That's a lot of dosh going out of UK banks.
. I'd add that in addition to the inflationary pressures you mention, presumably as a result of a weaker currency (?), there would be significant deflationary pressures, specifically stemming from the uncertainty surrounding employment and investment. It's anyones guess which wins out. Secondly I'd agree there would be pressure on maintaining deposits; IMO the BoE will flood the system with unlimited cash without the slightest hesitation the day after a Brexit. I hope you're right and I'm wrong by the way 
fblm said:
crankedup said:
I am not suggesting BOE rates should rise to 3 or 4% that is your pure speculation and an almost impossible scenario at the present time.
I didn't say you did. I suggested 3-4% as a level worthwhile to savers because any less was below inflation for most of the last 7 years.crankedup said:
Borrowers are becoming over indebted, I appreciate what the chart you posted argues this is not so, but it is three years out of date.
The graphs clearly show your assertion is wrong. Not only are households on average less indebted than before but compared to income they are much less indebted. Out of date? OK I'll do your googling for you...http://www.economist.com/news/britain/21685499-wor...
Honestly cranked if you want to be an investor now, you can't just dismiss reliable data that completely contradicts your macro opinon.
crankedup said:
Borrowers have of course paid savers the point is it's not enough at the moment, borrowers are getting a free ride on the backs of savers...
It's symbiotic, one doesn't exist without the other. I'm also a saver not a borrower, so I lose a good few k a year in deflation. To make any kind of return on our cash we need rates at a level that puts a few million in negative equity and a few million out of work. I thought you were the socialist and I was the rapacious capitalist!crankedup said:
I wish I had your confidence regarding the state of our National finances, my concerns are not , as you suggest, delusionary.
Dear god cranked did you hit the sherry early today? I was agreeing with you regarding an inevitable correction. I certainly didn't say you were delusionary, unless your name is Gordon Brown. The relevant part of the book I recomended regards financial manias and crashes. So long as we are free to buy and sell things or borrow and lend money there will be booms and crashes, fear and greed, it's human nature.crankedup said:
I see almost nothing on the horizon that suggests good times are around the corner, I do see plenty of obstacles presenting risk. But that is my perogative as it is your to take an opposite POV.
I agree. WTF?crankedup said:
...rates are going nowhere.
That's what I said in answer to your threads main question!As for the 3 or 4% BOE rate, I did not suggest anything of the sort!! I said that rates are so low and have been for seven years that it is punishing savers. The elderly in the main cannot be expected to be able to cope with more sophisticated investments (no disrespect intended) obviously some are well capable. The rate has caused an inbalance.
I am a Socialist in a rinsed out blue way, Prosecco Socialist perhaps. My concern is for those that have and continue to be victims of the finance crash. I have a modest sum of cash in the Natipnwide BS, I see the CEO has enjoyed another salary increase to three million a year. Yes I have objected but apathy amongst members means the Board get away with this. I could leave of course and I expect that is what I will do. Meanwhile the BS has recently cut savers rates down to about .25% It is this type of piss take that really upsets me. Didn't want to bring in the pay bit because I have done it to death, but just couldn't contain myself.
Perhaps this new financial environment has caught me out, well it seems it has as I do not seem to have a handle on it. Been a private investor since mid eighties and never seen so many clouds as what appears now. It's not a fortune but retirement means loses are not easily replaced.
crankedup said:
Looks like my reading material needs to change regarding the indebtedness of folk. It's strange that in view of the housing costs inflation together with wage stagnation and the fact people are desperate to get onto the housing market, the banks freeing up restrictions on lending people are able to reduce debt!! How the hell is that? Perhaps the indebtedness statistic will show next year?
Indebtedness is still a huge problem, it's just that it's less of a problem than it was 7 years ago. It's the main reason the recovery, globally, has been so lethargic.crankedup said:
As for the 3 or 4% BOE rate, I did not suggest anything of the sort!!
No it was me, anything less being a waste of time for savers.crankedup said:
I said that rates are so low and have been for seven years that it is punishing savers. The elderly in the main cannot be expected to be able to cope with more sophisticated investments (no disrespect intended) obviously some are well capable. The rate has caused an inbalance.
I agree except they arn't being punished, they just arn't being rewarded for taking no risk. On the other hand todays pensioners have pensions their overindebted children can only dream of (public sector excepted natch).fblm said:
V8A*ndy said:
fblm said:
V8A*ndy said:
A Brexit will rise rates a lot faster that remaining.
Why?BOE has moved from QE to Funding for lending. Your bank and B/S doesn't need to rely upon deposits as much. BOE lend them very cheap money and the banks fund business and mortgages.
If the UK leaves the EU it is a given there will be inflationary pressures. There will also be some market turmoil. How much turmoil we don't know but everyone knows markets don't like uncertainty so there will be pain.
The BOE will not be able to keep base rates low (as before when inflation was stubbornly high) and keep lending cheap money to the banks at the same time/amounts. So either base rates rise or banks get limited cheap money. Savers will get better returns either way.
This will also be compounded if the markets really tank as the BOE will certainly introduce Indexed Long-term Repos to protect the banks as it's also a given that the markets will most likely close it's doors to British lenders.
How long will super cheap money be there and which lenders will get it. The banks will very quickly upping rates for deposits.
Credit crunch V2.0.
Add in a risk of all our EU cousins pulling money out and heading home right down to the workers especially if forced out.
That's a lot of dosh going out of UK banks.
The markets will effectively tell the banks to jog on.
QE hammered the Pound down to Euro levels but we all know that was a protectionism stunt but look where inflation went.
The markets know UK will skew the numbers they just don't know what that will do in real terms. Uncertainty and confidence is what controls the markets add in a bit of panic
Lets see what the FED does next month. A US rate rise and the threat of Brexit
crankedup said:
I am not suggesting BOE rates should rise to 3 or 4% that is your pure speculation and an almost impossible scenario at the present time.
Borrowers are becoming over indebted, I appreciate what the chart you posted argues this is not so, but it is three years out of date. My reading was indicating that banks are loosening the restrictions for mortgage applications a and borrowers are taking advantage of this.
.
More recent numbers do indeed show debt levels rising rapidly. Borrowers are becoming over indebted, I appreciate what the chart you posted argues this is not so, but it is three years out of date. My reading was indicating that banks are loosening the restrictions for mortgage applications a and borrowers are taking advantage of this.
.
http://www.bbc.co.uk/news/business-35261373
as an example for household debt excluding mortgages
and as you say there is a big gap between 0.5% and 3-4%
What we should have seen is a co-ordinated rise in interest rates closer to more normal levels a few years back, combined with a fiscal stimulus and additional QE as required.
As an example the Eurozone has usually had a contractionary fiscal policy since the immediate aftermath of the crises. According to the FT in 15 of the 19 members fiscal policy is contractionary. This has left monetary policy to do all the work and has led us into this unheard of experiment in zero, or close to zero interest rates.
The problem with this has been that while we can all agree a cut in interest rates from 6% to 4% say stimulates the economy, the closer you get to zero the less effective it appears to be. That is why someone coined the phrase "pushing on a piece of string" to describe the use of interest rates alone to fight a severe recession when those rates get close to zero.
Edited by JagLover on Wednesday 25th May 17:57
"Pushing on a string" often attributed to Keynes (but perhaps incorrectly)
http://conversableeconomist.blogspot.co.uk/2015/07...
http://conversableeconomist.blogspot.co.uk/2015/07...
I find myself wanting Brexit more out of curiosity than anything else!JagLover said:
crankedup said:
I am not suggesting BOE rates should rise to 3 or 4% that is your pure speculation and an almost impossible scenario at the present time.
Borrowers are becoming over indebted, I appreciate what the chart you posted argues this is not so, but it is three years out of date. My reading was indicating that banks are loosening the restrictions for mortgage applications a and borrowers are taking advantage of this.
.
More recent numbers do indeed show debt levels rising rapidly. Borrowers are becoming over indebted, I appreciate what the chart you posted argues this is not so, but it is three years out of date. My reading was indicating that banks are loosening the restrictions for mortgage applications a and borrowers are taking advantage of this.
.
http://www.bbc.co.uk/news/business-35261373
as an example for household debt excluding mortgages
and as you say there is a big gap between 0.5% and 3-4%
What we should have seen is a co-ordinated rise in interest rates closer to more normal levels a few years back, combined with a fiscal stimulus and additional QE as required.
As an example the Eurozone has usually had a contractionary fiscal policy since the immediate aftermath of the crises. According to the FT in 15 of the 19 members fiscal policy is contractionary. This has left monetary policy to do all the work and has led us into this unheard of experiment in zero, or close to zero interest rates.
The problem with this has been that while we can all agree a cut in interest rates from 6% to 4% say stimulates the economy, the closer you get to zero the less effective it appears to be. That is why someone coined the phrase "pushing on a piece of string" to describe the use of interest rates alone to fight a severe recession when those rates get close to zero.
Edited by JagLover on Wednesday 25th May 17:57
I really do need to start posting links regarding some of the stuff that I regurgitate in here, but then it's just who can find what suits the argument quickest to the draw. Thanks again.
crankedup said:
I really do need to start posting links regarding some of the stuff that I regurgitate in here, but then it's just who can find what suits the argument quickest to the draw. Thanks again.
Seriously? You are suffering from a terminal case of confirmation bias!"The figures... exclude mortgages."
"The average amount owed by households is now £11,800, the highest level yet.
However, debt was proportionately greater in 2008, when it reached more than 30% of household income."
I give up. If you only want replys to your posts that agree with your own assertions I'll leave you to Jaglover, you guys are going to make millions betting on what should have happened!
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