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Mervyn King: helping savers would push Britain back into recession
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Originally posted by gingerjedi View PostAverage joe now pays £1.40 for a litre of fuel and his utility companies treat him like an open cheque book, not to mention how Tescos are taking the pissComment
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I never said that.
The cost of living has risen sharlpy, how will increasing rates right now help average joe?Science isn't about why, it's about why not. You ask: why is so much of our science dangerous? I say: why not marry safe science if you love it so much. In fact, why not invent a special safety door that won't hit you in the butt on the way out, because you are fired. - Cave JohnsonComment
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Originally posted by gingerjedi View PostThe cost of living has risen sharlpy, how will increasing rates right now help average joe?Comment
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Originally posted by gingerjedi View PostI never said that.
The cost of living has risen sharlpy, how will increasing rates right now help average joe?In Scooter we trustComment
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Originally posted by sasguru View PostBut enough about me. We're all curious how many years you claimed the dole while developing SKA?
Hector?
Knock first as I might be balancing my chakras.Comment
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Originally posted by Jeff Maginty View Post
If you know of some clever way to get an above-inflation return on savings without taking big risks or tying the money up for a long time, then please explain it. And don't just say "shares" because any fool knows that picking the right shares is about as difficult as picking the jackpot-winning lottery numbers.
Peer to peer lending - RateSetter.com: A better way to save or borrow, peer to peer.
Lend money online with Zopa the peer to peer lending marketplaceComment
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Originally posted by gingerjedi View PostDo you think your 'average joe' who's struggling to survive during a period of high inflation on a stagnant wage could cope with a rate rise right now?Originally posted by gingerjedi View PostWell if you want people to pay down personal debt you need to give them the conditions to do so.Originally posted by gingerjedi View PostAverage joe now pays £1.40 for a litre of fuel and his utility companies treat him like an open cheque book, not to mention how Tescos are taking the piss.
Try putting yourself in his shoes rather than just preaching with the benefit of hindsight.Originally posted by gingerjedi View PostI never said that.
The cost of living has risen sharlpy, how will increasing rates right now help average joe?
Inflation or rates could be higher, but if they were, they would hurt all the average people, aka the majority. If the majority default on borrowings completely, we're all screwed!Comment
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Originally posted by Jeff Maginty View PostEr, maybe because the buying power of their savings is being gradually destroyed by inflation, with hardly any savings accounts currently available that pay enough interest to break-even with inflation, never mind exceed it.
Let's say you work in IT and tomorrow, machines similar to those in the matrix come and destroy all electronics and remove all materials like sand (silicon) needed to build more, do you sit there and cry (like a saver who refuses to do anything but keep their money in a savings account) saying "I worked in IT, I don't know how to do anything else. I refuse to do anything else! Instead of retraining or working elsewhere, I will stubbornly look for only IT jobs, even though that industry no longer exists. If anyone asks why I don't work as a paper pusher like others, I will insist that the government should have protected us against alien overlords and rebuild IT equipment even though we lack the materials". A silly notion as I'm sure we can all agree, instead, one must start pushing paper or starve. The same can be said for if one wants to beat inflation on their savings or profit from interest payments, adapt to the climate or sit there complaining.
Originally posted by Jeff Maginty View PostI'm a saver, and I could see that things were getting out of hand, particularly with the property bubble, as early as 2001. I knew a bust was coming. However, I didn't know exactly when it would happen (and I doubt anyone else did).
Originally posted by Jeff Maginty View PostI also expected that the BOE would act so as to keep inflation under control, as was supposedly their main objective. However, they have failed to do this. By failing to keep inflation under control, the BOE have wrong-footed a lot of people. Maybe it was naive to believe that the BOE would raise interest rates when inflation rose above 2%, but it was supposedly their main job (at least, that's what I read in the newspapers so many times for several years).
Regardless of whether inflation remains static or fluctuates a little, it looks to be under control at the moment as this graph shows and in comparison to the past century, or even the past few, is very stable:
Originally posted by Jeff Maginty View PostYou seem to be stating the opposite view to what many people are saying.
Originally posted by Jeff Maginty View PostI've read loads of articles in the newspapers and on the web over the last year or two, which state how bad the situation is for savers and how they are being sacrificed in order to bail out the reckless/heavily-indebted. It is often stated that the (low-interest-rate + high-inflation) economic climate that we currently have has the effect of taking money from savers and handing it to debtors.
When economic conditions change, the BoE and government must do something to limit the damage.
Bailing out banks seems idiotic, but the consequences of banks collapsing would have far more dire consequences. Look at the damage some collapses of smaller institutions has done. Just imagine if a major bank like RBS folded. Welcome to the Kingdom of Zimbabwe everyone!
No-one is entitled to a base rate to maintain their ignorance and laziness with controlling their surplus money. Such a notion is as idiotic. That is like standing in Hiroshima after Little Boy was dropped and blaming the government for being exposed to fallout, instead of running home and getting as low down as possible in a sealed up house underneath mattresses.
Originally posted by Jeff Maginty View PostAre you disagreeing with that, or are you saying that it is somehow good for savers?
If you know of some clever way to get an above-inflation return on savings without taking big risks or tying the money up for a long time, then please explain it. And don't just say "shares" because any fool knows that picking the right shares is about as difficult as picking the jackpot-winning lottery numbers.
For instance, in Jan 2009, I was finishing paying off debts from a family members illness so had limited surplus cash. That infuriated me when RBS shares dropped to pennies (10.9p per share down from an annual high of 354p). I advised two branches of my family to use all the cash they could lay their hands on to buy shares. One family member, the poorer one, ignored me. One had the same advice and pounced on it quickly. During 2009 the share price rose and by mid 2010 was up to 40p per share. There is no way the government would ever permit the collapse of RBS, that was a certainty.
This became known as the Blue Monday Crash and affected RBS, Lloyds, Barclays and HSBC. Shares rose again following recoveries to the market and bailouts. A lot of people became very rich off the back of that, well those that weren't retarded or poor.
There is still much money to be made, even now as RBS shares fell by 3.5% and Lloyds by 4.1% in January over backlash surrounding bonuses. People may lose faith and panic around major institutions but they will be bailed out so long as we can print money.
But back to lending money. Zopa and others, after defaults, offer rates of above 8% which is good for even boom times. One can also take more risk and bypass the middle man by lending themselves. Some people can repay their debts but cant get credit from banks and cant afford 4714% APR. That is where your wallet, a contract and a hammer come in to play. You may see that as extreme, but in an article I wrote against the extortion of thousand % APR lenders, I proved that one could borrow money off a loan shark with a hammer, default and have a leg broken, reset in a private hospital at cost and pay back the loan late at a cheaper rate than all these instant cash loan companies.
Then you are forgetting about the most obvious investment of all. Bricks and mortar baby! Ignore all the nay sayers that say house prices will make all home worthless, forever! They couldn't be more wrong. Yes, prices have suffered a readjustment or slump and will take a long time to recover, but we have an ever expanding population and a lack of housing. That will not change. People will always want a nice house instead of a scummy rented flat. Buy somewhere from someone desperate in a run down condition now for pennies. Either buy it outright with your savings or take a small mortgage, using your savings as a large deposit to get a low rate. It is still a buyers market and some sellers are desperate, let's say from the death of a parent and having to sell their unused house to pay off funeral bills (pretty much how we got our house during boom times). Contractors are also feeling the pinch. Less people have less liquid funds, so getting tradesmen/contractors really is very easy at a great rate. Following that, rent the property to make the payments on the small mortgage and insurance. Once prices recover in the next boom, perhaps decades from now when one comes to retire, they can sell the house and make a massive profit, or keep the regular income and retire to a country which allows them permanent residence under some visas.
I would agree that other routes are not guaranteed such as trading currencies, however some make that work very well.
Sources for figures:
Taxpayers lose £900million as RBS and Lloyds share prices fall over bonus backlash fears | Mail Online
Blue Monday Crash 2009 - Wikipedia, the free encyclopedia
Government may start sale of RBS stake in 2011, says chief executive | Business | The GuardianLast edited by wim121; 17 February 2012, 01:58.Comment
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