Rising interest rates on Carney Street

 

                  Early in May as Mr Carney was preparing to take up his full duties as Governor of the Bank of England, the interest rate for the government to borrow 10 year money was just 1.6%. Yesterday the 10 year interest rate hit 2.7%, almost double the low point of September 2012.

                   We need to ask if this matters. After all, Mr Carney’s one major intervention in the monetary debate so far has been promise us the continuation of ultra low interest rates for the next three years, whilst unemployment comes down a bit and the economic recovery strengthens.  Mr Carney actively sided with the borrowers against the savers in his statement, because he clearly thinks we need more borrowing to promote recovery.

                  Some might say the rise in government borrowing rates does not have any impact on individuals, families and private sector companies. After all, mortgage rates are still between 4.5% and 6%, as they were three months ago. Banks and Building Societies still offer a concessionary first couple of years at much lower rates.  Savers can still pick up 1% for 1 year savings, and 2.5% for 3-4 year savings, levels well above the official 0.5% short term interest rate, as they could three months ago.  As I have written before, Quantitative Easing and low Bank base rate were devices which have kept the cost of government borrowing artificially low, whilst creating a parallel private sector market in money and credit at higher rates.

                  However, Mr Carney would be wrong to simply ignore the markets.  People in property are already talking about higher borrowing rates for new projects on the back of rising government rates. Savers canny enough to have cash will be able to buy into bonds or other financial assets at lower prices and on better income yields, whilst invested savers will lose on their current holdings. The government has been out of the main savings market for some time, refusing to issue National Savings products at the higher rates prevailing in the savings market when they can borrow so much more cheaply in the government bond market.

                 Mr Carney has three options from here. He could welcome the rising rates and help steer the whole market to more realistic rates for savers and borrowers. There is a bigger adjustment needed in the government market than in the private sector one. He could defy the markets, and state that when he said he wanted low interest rates to prevail he meant it. He will then have to initiate substantial new bond buying programmes to force the rates back down. Or he could largely ignore it, and take the line that he is relaxed about the cost of government borrowing going up all the time it does not hit the cost of private sector borrowing in ways which will derail his strategy.

                      I favour the first of these courses. I would couple it to more vigorous prosecution of the plans to break up and sort out RBS for the reasons often described here. We need competitive banking with more banks allied to rates of interest more subject to market selection. The ultra low government rates of quantitative easing have to end sometime. The quicker they are in mending the commercial banks, the quicker the special measures can be removed. It does need to be worthwhile to save. Many  borrowers would like greater certainty more than a temporary period of ultra low rates followed by a rush upwards in rates.

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72 Comments

  1. Leslie Singleton
    Posted August 18, 2013 at 5:43 am | Permalink

    It worries me the weight being given to what Carney wants. When the Bank was given operational independence with rates set by a Committee of the gr8 and the good with the sole remit, as I thought, of stabilising inflation I was rock solid in favour but what do we have now? We have one man (and a foreigner at that) talking about everything but inflation (including, amazingly, the further homogenisation of women) which rather derogates from the role I thought the MPC was supposed to have. I do not like this because it seems to me that if we are to have a single man in control and with a wide remit that man almost by definition should be the Chancellor.

    Reply The Chancellor chose Mr Carney. I assume what Mr C says has the blessing of Mr O.

    • lifelogic
      Posted August 18, 2013 at 8:05 am | Permalink

      To reply:- well the absurd utterances on enforced gender balance are certainly in the Cameron, Libdem and BBC type of non think mode.

      Why on earth do they need a committee when nearly all of them foolishly agreed to fix rates in relation to unemployment rates. Just put one woman such as Ruth Lea in charge then we will have common sense and 100% women, and save on the cost of all the others too.

      • Bazman
        Posted August 18, 2013 at 5:59 pm | Permalink

        How about your reply to foreign millionaires buying holiday homes in London and avoiding council tax? Are they good for the country? If they are you can tell us why or stop writing fantasy right wing propaganda can’t you?

        • libertarian
          Posted August 18, 2013 at 6:39 pm | Permalink

          Bazman

          Please explain how they avoid paying council tax

        • livelogic
          Posted August 18, 2013 at 9:03 pm | Permalink

          I cannot see that many millionaires avoid council tax, if they ever do then clearly the local authorities are failing in their duties to collect it.

          Yes it is good for the UK. They pay stamp duty on purchase, do the properties up, spend money locally and use few public services – how could it not be a net benefit on balance?

          • Bazman
            Posted August 19, 2013 at 4:47 pm | Permalink

            They do not spend much money locally. This is the problem. Are you pretending holiday homes do not cause problems for local economies? Telling us no such problem exists?

    • Denis Cooper
      Posted August 18, 2013 at 9:15 am | Permalink

      Maintaining price stability is not the “sole” objective laid down for the MPC, but it is certainly supposed to be their paramount objective under Section 11 of the Bank of England Act 1998, which has not been amended to say otherwise.

      http://www.legislation.gov.uk/ukpga/1998/11/section/11

      “11 Objectives.

      In relation to monetary policy, the objectives of the Bank of England shall be –

      (a) to maintain price stability, and

      (b) subject to that, to support the economic policy of Her Majesty’s Government, including its objectives for growth and employment.”

      If Parliament passes a law then it should not be casually disregarded by the government, or by the Bank with the government turning a blind eye.

      Indeed the illegal use of royal authority for “… Assumeing and Exerciseing a Power of Dispensing with and Suspending of Lawes and the Execution of Lawes without Consent of Parlyament” was the first grievance specified in the 1688 Declaration, later Bill, of Rights, that part of which is still on the statute book:

      http://www.legislation.gov.uk/aep/WillandMarSess2/1/2/introduction

      and still forms the basis of our parliamentary democracy.

    • Bob
      Posted August 18, 2013 at 10:14 am | Permalink

      ” I assume what Mr C says has the blessing of Mr O. “

      Or is Mr O. pulling Mr C’s strings?

      Reply The Governor has to work within the framework of government economic policy and under the instructions issued by the government of the day.

    • Deborah
      Posted August 18, 2013 at 10:52 am | Permalink

      Reply to Reply

      Then how is the Bank of England independent?

      Reply I have often explained that it cannot be independent. Mr Brown changed its remit, Mr Darling correctly overrode its interest rate judgements, Mr Osborne changed its powers and remit etc. The government is always ultimately in charge and responsible, as it can change personnel, remit and rules any time it likes.

    • Leslie Singleton
      Posted August 18, 2013 at 11:01 am | Permalink

      Thanks for Reply–My point was that the MPC seems no longer to have the function it was set up for. Are they still going to meet each month? Will they now come under pressure (for the good name of the Bank or somesuch) not to vote to raise rates even if they think that the right thing to do? And although Mr O did indeed hire Mr C, that does not necessarily mean that Mr O blesses Forward Guidance. Has he said he does? If so I haven’t seen it. If he didn’t he can hardly fire Mr C just after hiring him.

      Reply I am sure Mr O supports forward guidance. The MPC will continue to meet, with the same duties and remit. It did disagree at its last meeting, with one member against the form of forward guidance and some members wanting more QE. The Governor is the chairman of the MPC, not a monetary dictator.

  2. Mike Stallard
    Posted August 18, 2013 at 5:44 am | Permalink

    This doesn’t seem to affect me much actually because I have my (tiny) savings invested with Nationwide and they seem to get me interest well above 0.%!

    What a lost opportunity it was when the Coalition first came to power not to introduce a crash programme to sort out the finances! If there had been a real attempt then to cut out all the New Labour frills – international aid, welfare payments to fit people, the rampant growth of government payrollers, the spendthrift NHS, the 1970s education system…

    Now it is too late. Debt: 0.76 trillion 2010: now 1.6 trillion. Interest on that? About the same as we spend on either defence, public order, or the environment/housing. And it is rising fairly quickly too. Goodbye AAA rating!

    • alan jutson
      Posted August 18, 2013 at 9:19 am | Permalink

      Mike

      Nail, Head.

      Absolutely

      A once in a Governments lifetime opportunity missed !

    • Mike Wilson
      Posted August 18, 2013 at 11:24 am | Permalink

      Mike Stallard – as Alan Jutson said – spot on.

      With the mess we were in, they could have got away with anything. Even public sector pension reform!

      But, no, massive opportunity missed. Now people think it is normal, acceptable and sustainable to borrow 120, thousand, million pounds a year.

      • Lifelogic
        Posted August 18, 2013 at 1:55 pm | Permalink

        Far worse than that – they not only borrow £120,000,000,000 a year, but then use it to just waste it on HS2, expensive quack energy, much pointless government activity, a 150% over paid & pensioned state sector (doing little of much use), payments to the feckless (so they thus remain so), the EU costs, pointless & counter productive wars, the nonsense gender & enforced equality agenda, endless daft regulations, much corruption, a dis-functional (safe in my hands & free at the point of rationing) NHS ………..

    • uanime5
      Posted August 18, 2013 at 12:22 pm | Permalink

      There are currently 2.5 million fit people who cannot find work because there’s only 450,000 jobs available. Had the Government removed their benefits for no real reason there would have been a major riot.

      Also Gove had been trying to reform education by creating a new curriculum. Oddly this curriculum only applies to state schools and not academies. You’d think if Gove’s curriculum was an improvement he’s want all schools to follow it, rather than encourage them to become academies so they can opt out of it.

      • Lifelogic
        Posted August 18, 2013 at 1:57 pm | Permalink

        Jobs available is not some fixed number, it can and will increase hugely, if the right policies are adopted and confidence returns.

        • Bazman
          Posted August 18, 2013 at 6:01 pm | Permalink

          This is true, but cleaning my car for free is not the way forward.

          • alan jutson
            Posted August 18, 2013 at 6:58 pm | Permalink

            Bazman

            Whilst I agree with your example of washing cars for next to nothing.
            Many wash cars for a sensible amount of money.

            Unanime5 seems to think that the only work avaiable is structured employment, and that you should sit at home waiting for jobs to appear in the paper or on a computer.

            This clearly is not the case as many millions of Self Employed people prove every week.

            When self employed you need to search for work all of the time, otherwise you do not earn.
            Indeed I was self employed myself for many years and always found work (none of it advertised).

            Every one has some skills to offer the market place, but it is a question of attitude.
            Sometimes some of us took on work that we would perhaps normally refuse, but in the short term it paid to be busy, rather than do nothing and earn nothing.

            Many jobs do not require a large investment at all, as some equipment can be hired after you have gained customers.(from knocking on doors, which is free of cost)

            Wouldcertainl;y agree life and employmentt is more difficult in some areas than others, but in many cases (not all) it really is a question of work ethic and attitude.

          • JimF
            Posted August 18, 2013 at 7:13 pm | Permalink

            No, you can clean your own car, but somebody can compete with the French and Germans at making things given the right environment. This government, like the last one, lets the somebody remain on the dole rather than create those conditions. Wages don’t need to fall, but tax and regulation does.

      • Denis Cooper
        Posted August 18, 2013 at 2:26 pm | Permalink

        “There are currently 2.5 million fit people who cannot find work”

        Yes, because most of the new jobs created have been taken by foreigners.

        I would blame just the Labour party for that, if I didn’t know that the Tory party is equally committed to ensuring that businesses are provided with ad lib supplies of cheap and biddable workers from abroad, with the taxpayer bearing the cost of keeping British workers idle and on welfare.

        • zorro
          Posted August 18, 2013 at 5:35 pm | Permalink

          The Coalition’s record on the percentage of jobs going to non – British nationals has been just as bad, if not worse, than Labour.

          zorro

        • Bazman
          Posted August 18, 2013 at 7:34 pm | Permalink

          Who can blame business for this or the foreigners coming here? Ram it.

      • libertarian
        Posted August 18, 2013 at 6:41 pm | Permalink

        Total and utter drivel there are more than one million job vacancies available in UK right now. Most of them paying well above a living wage

  3. lifelogic
    Posted August 18, 2013 at 6:45 am | Permalink

    You are quite right, the fist of the options is surely the best. At the same time please get some real competition in the banking sector. The banks are currently are able to force huge margins and fees from perfectly solid and good customers. Also encourage people to cut the banks out, relax pension investment terms for example, so that people can invest their own pensions in their own businesses without restrictions.

    Meanwhile we see that The Institute for Economic Affairs expects HS2 could cost taxpayers £80bn, almost double the current estimated costs. Now they will also have to borrow at the still higher rates you indicate too (and rising). Also they will have to borrow it for ever, as the project will clearly never repay the investment. Meanwhile vast damage is being caused all over the country from the pointless blight (outrageously including even some of my properties) and they do not even any proper compensation scheme terms agreed yet. What sort of fools are actually pushing this patent nonsense? Kill the project and cut taxes accordingly so it can be invested by the productive rather than wasted by Osborne and Cameron on this nonsense.

    • lifelogic
      Posted August 18, 2013 at 11:07 am | Permalink

      Just 1% in Switzerland for 10 year money, outside the EU and with little borrowing needed anyway. Still we would not want that would we, it might upset Mr Cameron. Has he given us any reasons yet for not wanting a greater Switzerland?

      • Bazman
        Posted August 18, 2013 at 2:19 pm | Permalink

        To many absurd taxes and regulations, besides we are not a middle class country.

        • Robert Taggart
          Posted August 19, 2013 at 9:58 am | Permalink

          It sometimes pays to be underclass – believe me !

  4. john ward (@nbyward)
    Posted August 18, 2013 at 6:51 am | Permalink

    Agree 100%.
    Masters of the Universe think they can control the very markets they claim must decide. They cannot.
    Confident predictions of eternal Zirp are undone (1) By lack of market confidence in ability to deal with debt and (2) the folks in the rowing boat whose interests lie in rowing in the exact opposite direction.

  5. Steve Cox
    Posted August 18, 2013 at 7:15 am | Permalink

    Last week I spent several hours with an investment banker from Barclays. I have a major offshore investment maturing at the end of the year and we were discussing what best to do with it. The best medium-risk investment he could offer me was a complex structured note based on the FTSE. As far as cash-based investments are concerned he said that Barclays is not very interested in taking deposits at present since they can get as much money as they want more cheaply from the government’s Funding For Lending scheme. As with QE the government’s deliberate policy has a hugely distorting effect on what should be a free market. This, of course, will result in widespread misallocation of capital and excessive risk taking by people who cannot afford it. If Mr. Carney believes that he can buck the markets’ views and manipulate interest rates back down to whatever level he wishes I suspect he is mistaken this time. In any case, I thought that Britain was supposed to be one of the champions of the free market economy? The last five years have put paid to that notion, we have a government and central bank with its interventionist policies that would have happily fitted into the old Soviet Union. And we all know how that ended.

    • margaret brandreth-j
      Posted August 18, 2013 at 7:58 am | Permalink

      I would be interested to know what your decision is re investment.

    • lifelogic
      Posted August 18, 2013 at 8:13 am | Permalink

      Personally if it were me I would avoid middle men, investment bankers and all complexity & fees and either lend the money directly to people who need for business taking good security and at a good margin (just as the banks now charge so 5%-10%+ returns or so) or buy large world class company equities directly and hold long term. Why have the middle man taking a cut or “advising” you ? The hardly have a good record with their own investments.

    • libertarian
      Posted August 18, 2013 at 10:48 am | Permalink

      Totally agree Steve, this socialist manipulation of fiat money has been the long term cause of our problems, and all the while it continues we will not recover economically as quickly as we would otherwise

    • Richard1
      Posted August 18, 2013 at 9:58 pm | Permalink

      Full marks to your banker for having the honesty to admit it’s the unlimited supply of cheap state funds which stops his bank having any interest in taking your deposits. Most I’ve come across spout rubbish about how reassured clients should be that they don’t need deposits. Govt policies inc the manipulation of interest rates are causing all sorts of distortions in the economy. We can’t say now exactly where these are, but we will surely all find out. I would certainly be cautious of any structured product issued by any highly leveraged bank.

  6. alan jutson
    Posted August 18, 2013 at 7:18 am | Permalink

    One of the more silly things Mr Carney announced was that he would like link interst rates to unemployment rates. and that he would not like interest rates to rise whilst unemployment was above 7%.

    Perhaps this may have been sensible in Canada, or indeed elswhere for that matter where they do not have freedom of movement of people from one Country to another, but here that is just plain daft, as we at the moment have absolutly no control of our population, and who comes in and when.

    I agree with our host when he says we need more Banks to form some sort of competition, but if more banks are formed, it may just be more snouts in the trough, after all the existing Banks have increased their margins by 50% over the last number of years with the help of Government compliance (they own two of the big Five)

    The Official Bank rate is now almost meaningless to most people.

    Reply: the point of more banks in competition would be to establish more competitive pricing

    • lifelogic
      Posted August 18, 2013 at 8:14 am | Permalink

      We have an almost total lack of competition due to the large barriers to entry.

      • Mike Wilson
        Posted August 18, 2013 at 11:26 am | Permalink

        You can bank on Dave in Burnley – and not Cameron!

    • alan jutson
      Posted August 18, 2013 at 9:31 am | Permalink

      Reply-reply

      John I understand exactly what more Banks in the marketplace should do, so forgive me for being sceptical, but more Banks may just like more of the same we have, and sinmply want a slice of the profit pie in the form of a similar percentage of margins.

      Perhaps we need more of a different sort of Bank.

      Did you see Bank of Dave programme on TV ?

      Yes I know it was all rather simple, but the clear message here was that the FSA (at the time) and everyone else for that matter, made it almost impossible for him to set up a new and simple Bank.

      Perhaps the answer is more Credit Unions or Mutual Finance houses, or even Building Society’s, because as I understand it, they cannot be called Banks.

      Reply I am advocating adding different types of banks from the large integrated ones that currently dominate, and in favour of splitting up RBS

      • Mike Wilson
        Posted August 18, 2013 at 11:27 am | Permalink

        Apologies – had not read you had already mentioned Dave.

  7. margaret brandreth-j
    Posted August 18, 2013 at 8:01 am | Permalink

    Are we actually going back round to the Carnaby St times Mr Redwood as your allusion suggests?

    Reply I did not say that

    • margaret brandreth-j
      Posted August 18, 2013 at 1:26 pm | Permalink

      I know..!

  8. Brian Tomkinson
    Posted August 18, 2013 at 8:15 am | Permalink

    Is it Carney Street? It seems more like Carey Street and Queer Street!

  9. Richard1
    Posted August 18, 2013 at 8:46 am | Permalink

    We also need much more business funding from non-bank sources. For this reason ‘hedge funds’ and ‘private equity’ so often derided in ignorance should rather be welcomed in the UK economy. A much bigger and more vibrant venture capital sector, especially at the smallest end, would also be welcome. Encouraging these doesn’t need tax breaks, govt gimmicks or any Bank of England special measures. It needs govt policies to address the fundamental discouragements to entrepreneurship and investment – too high taxes on income, gains and inheritance, stifling bureaucracy and absurd planning restrictions.

  10. Denis Cooper
    Posted August 18, 2013 at 8:47 am | Permalink

    “He will then have to initiate substantial new bond buying programmes to force the rates back down.”

    But he cannot do that unless and until Osborne sends him another letter of authorisation like this one from July 5th 2012:

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/185557/chx_letter_050712.pdf.pdf

    “I am therefore writing to authorise an increase in the ceiling on asset purchases financed by the issuance of central bank reserves from £325 billion to up to £375 billion.”

    And once again I suggest that MPs should wake up to their responsibilities and insist that before any Chancellor does that he must lay a draft of his letter before the House for their approval through a formal vote after a proper debate.

    Then, JR, during that debate you would have the opportunity to develop your case that Osborne should not be permitted to send the letter to authorise more QE, and instead Carney should follow your preferred course of action – “welcome the rising rates and help steer the whole market to more realistic rates for savers and borrowers”.

    And perhaps you could also take the opportunity to remind everyone that the law passed by Parliament in 1998 has not been changed and therefore the primary statutory duty of the Governor and the MPC is still to meet the Chancellor’s target for price inflation; and maybe also suggest that the same rather more democratic procedure should be followed before the Chancellor sends any letter changing his inflation target, as for the people you represent the effects of price inflation are akin to those of taxation and therefore should likewise be under the exclusive control of the House rather than the government.

    Reply Of course. Parliament has to approve QE. The problem in the past has been that because all 3 main parties back QE there was no point in forcing a vote.

  11. Martin
    Posted August 18, 2013 at 8:54 am | Permalink

    Mr Carney is playing the old Heath-ite game. Ignore inflation.

    This led then to the late 70s policy of Prices and Incomes regulation which then led to 1979 and 20 or so painful years to get inflation out of the system.

    I also thought that the remit of the B0fE was to control inflation. Is this a statutory obligation or just a Brownian hope?

    Reply The Bank’s remit is to keep inflation to 2% plus or minus 1%. This remit comes under the Bank legislation.

    • Lindsay McDougall
      Posted August 22, 2013 at 3:07 pm | Permalink

      45 consecutive months of inflation at well over 2% pa is hardly in keeping with the spirit of the BoE’s remit. I can’t say I’m too sorry that the rate of interest that the government has to pay on its borrowing has risen by 1%; I think that the markets have got that right.

      Hint to Mr Osborne:
      IF YOU’RE SPENDING TOO MUCH, SPEND LESS.

  12. Ralph Musgrave
    Posted August 18, 2013 at 10:33 am | Permalink

    JR,

    What makes you think the BoE or government has made rates “artificially low”? Given the VAST AMOUNTS borrowed by governments, I’d argue that the net effect of government over the last century has been to keep rates ARTIFICIALLY HIGH.

    In fact Milton Friedman argued that governments should not borrow at all. I agree.

    • Lifelogic
      Posted August 18, 2013 at 2:01 pm | Permalink

      Indeed as in Switzerland. Were governments not borrow and waste, the people and real businesses could, more cheaply and easily, borrow to invest in things with a real return. Unlike HS2 and the rest of the endless nonsense.

      • JimF
        Posted August 18, 2013 at 7:31 pm | Permalink

        Definitely the key.
        Swiss rates have always, without exception, been lower than UK rates. Private companies invested in machines and infrastructure because 1/they could write it down quickly 2/borrowing costs were low 3/they had trained staff available to work the machines. With profits generated they can actually afford decent healthcare, schools, etc.
        We have never got into this virtuous circle. We could have done so in the early parts of this century, but instead Brown blew this chance in a leftist statist fantasy, which was never going to work. Sadly we now have a government which refuses to reverse the damage. These are people who realise the problem but are too weak to undertake the radical restructuring of tax, regulations and borrowing to solve the problem. Our host sadly hangs on their coat-tails trying to strengthen their resolve rather than give up with them in favour of a new start. And a new start is what we need.

  13. A.Sedgwick
    Posted August 18, 2013 at 10:37 am | Permalink

    Just had three utility bills in, the unit cost increase 2012/2013

    Gas 19.25%

    Electricity 15.71%

    Water 7.85%

    Does anyone really believe RPI or CPI?

    Maybe the markets are at last coming to realise this country’s finances are unsustainable at current rates.

    • alan jutson
      Posted August 18, 2013 at 11:09 am | Permalink

      A.Sedgewick

      Yes, and all have Government appointed Regulators.

      Other than water, they all have green taxes added and included, again a government responsibility.

    • lifelogic
      Posted August 18, 2013 at 11:10 am | Permalink

      Well we have the absurd green religion in charge of energy, the non production of.

      • lifelogic
        Posted August 18, 2013 at 11:47 am | Permalink

        Meanwhile in the US energy prices have been falling significantly too.

      • Bazman
        Posted August 18, 2013 at 2:22 pm | Permalink

        Sustainable and clean energy is absurd?

        • lifelogic
          Posted August 18, 2013 at 6:46 pm | Permalink

          Yes, and there is nothing dirty about CO2 anyway it is harmless tree and plant food.

          • Bazman
            Posted August 20, 2013 at 5:39 pm | Permalink

            How about sulphur and nitrogen dioxide carbon monoxide and other tiny particle emission bad for human health which often are linked to the about of CO2 emitted? The dirt in London is a prime example in much worse in other cities which are crying out for clean energy.The potential market is vast and unlimited. Your fatalistic myopic and short term views on energy tax and finance are much more dangerous and stronger than your BBC rants. Fanatical, blind repetitive propaganda by a fantasist who’s fundamental views cannot be changed by argument or evidence. BBC think? Don’t make us laugh! You seem to believe that what is good for the rich is good for everyone. Stupid and foolish.

  14. behindthefrogs
    Posted August 18, 2013 at 10:37 am | Permalink

    The government should restore national savings paying interest rates of around1.5% tax free on say up to £10,000. This would enable cheaper government borrowing and give savers a better rate on short term savings.

    • Robert Taggart
      Posted August 18, 2013 at 11:42 am | Permalink

      Only 1.5% ?!

  15. Robert Taggart
    Posted August 18, 2013 at 11:42 am | Permalink

    Some of us scroungers would just love to be ‘givers’ !…
    Were it not for the penalty of lost benefits on account of the tapering capital penalty for claimants (starting at £6K rising to £16K) – some of us would be able to ‘do our bit’ for our country !
    As for MJC – will give him the ‘benefit’ for the time being !

    • Bazman
      Posted August 18, 2013 at 2:25 pm | Permalink

      If we cut your benefits you would be able to ‘give’? Is it not possible to give by having your benefits reduced whilst ‘doing your bit’ for the country. You can clean my car for free if you like?

      • Robert Taggart
        Posted August 18, 2013 at 7:14 pm | Permalink

        Alas, our bad back would put ‘paid’ to that !

  16. Acorn
    Posted August 18, 2013 at 12:46 pm | Permalink

    “Bank competition: Too big to lose. Market share of financial businesses vital to supporting global economic growth is concentrating rapidly into the hands of a small group of the world’s biggest banks. Dealogic finds that of the $36.3 billion customers paid out in investment banking fees in the first six months of 2013, 56% of that total, fully $20.3 billion, went to just 10 banks.”
    http://www.euromoney.com/Article/3229770/Category/17/ChannelPage/0/Bank-competition-Too-big-to-lose.html .

    • Acorn
      Posted August 18, 2013 at 1:17 pm | Permalink

      There is a good explanation of why the natural rate of interest is zero, in a sovereign fiat currency economy at http://www.cfeps.org/pubs/wp-pdf/WP37-MoslerForstater.pdf . It was written before the GFC of 2007, the outcome of which has proven its content in Japanese spades. The FED and the BoE started paying interest on central bank money reserves in 08 /09.

  17. chris S
    Posted August 18, 2013 at 4:42 pm | Permalink

    The rise in the rate at which the government borrows money is yet another nail in the coffin of HS2 which we are now told could cost £80bn.

    It is sheer lunacy for a government to borrow this amount of money which will then become a debt of more than £3,000 for every household in the country .

    All to finance a railway line that less than 2% of the population will every use.

    Yet the Dept of transport immediately responds and says it will go ahead come what may.

    Who is going to stop this scandalous waste of our money ?

  18. zorro
    Posted August 18, 2013 at 5:49 pm | Permalink

    As I said previously, the new Canute will command the waves to stay back, and will probably be just as successful…..They don ‘t need savers and will print their own debt whilst other nations do……What can you expect though from people who have been appointed by politicians who when left money in a will from a lady to spend for the good of the nation divide it up amongst themselves……

    zorro

    Reply The executors of the will made clear they thought the lady’s intention was to give it to the parties in government. The parties on hearing of the exact wording gave the money back despite the stated intentions of the lady through her executors.

    • JimF
      Posted August 18, 2013 at 7:37 pm | Permalink

      Reply to reply
      And still carry on printing their own debt. How can you condone this? Do your constituents, represented here, really want you to print money for working-age benefits, and screw down interest rates for pensioners?

    • zorro
      Posted August 18, 2013 at 8:49 pm | Permalink

      http://www.bbc.co.uk/news/uk-politics-23691209

      With a bit of encouragement yes, but they were a bit too quick to divide it between themselves at first…..

      zorro

  19. A different Simon
    Posted August 18, 2013 at 9:08 pm | Permalink

    It’s only ultra low interest rates for the banks .

    How much longer do we need to keep subsidising them so overtly ?

  20. madasahatter
    Posted August 18, 2013 at 10:30 pm | Permalink

    find somewhere else to keep your money as when the next bank collapse arrives shortly the eu has declared that the banks can take your money so as they the fat cats will not be affected , also we need a referendum on the proposed wage/expenses the muppets in power claim they need to survive poor b——s
    we the people pay their wages we the people should say what can and cannot be done in our name

  21. margaret brandreth-j
    Posted August 18, 2013 at 10:33 pm | Permalink

    A little bit of lateral thinking now ( the only link really is the blue brigade). I have been going around doing some work for the taxman in the car as I visited patients tonight, when I was lifted by the most sublime sound for a good hour by Dame Janet Baker. If David Mellor could present politics like he presented magnificent recordings of my favourite voice then he could be also be lifted to PM supreme.

  22. D Hope
    Posted August 19, 2013 at 5:23 am | Permalink

    Agreed, more banks and higher interest rates are required. Surely these are necessary conditions (along with cheap energy and others) for a rebalancing of the economy. How can we fund new manufacturing, tech startups etc when there are no incentives to save

  23. ferdinand
    Posted August 20, 2013 at 10:36 am | Permalink

    Mr.Carney said that if inflation rose too fast then he may have to reconsider his policy on interest rates. Since the CPI does not take house prices into account he is already operating under a false inflation rate. You can’t run a policy if you deny some of the facts.

  24. Rob
    Posted August 22, 2013 at 10:11 am | Permalink

    “Savers can still pick up 1% for 1 year savings, and 2.5% for 3-4 year savings, levels well above the official 0.5% short term interest rate…”

    But what about the more important inflation rate, currently at 2.8%, but for essential item costs most people would agree is much nearer to 5-6% ? And don’t forget that the savings interest is taxed as well.

    I’m surprised at you writing this Mr Redwood as though it’s a good thing. People who have “done the right thing” are having their hard earned wealth taken away from them to bail out the over-borrowed, to ultimately bail out the banks. My father is one such person. He worked (extremely hard) in the same company from when he was 17 years old until he retired from a very senior position in the company, and he never lived beyond his means. As a former life long Tory voter he has now said he’ll never again vote for a Tory party ever again.

    Reply I did not say it was a good thing. Sometimes I seek to describe what is happening, as so much debate is conducted in ignorance of crucial facts.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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