Why I disagree with Mr Haldane of the Bank of England

Mr Haldane the Chief Economist of the Bank of England  thinks we might need negative interest rates on money held in banks. I disagree   He thinks we might need lower interest rates, not higher, in the future. He wants to stop people who have saved from keeping their savings. He wants to persuade them to spend their money. Why not, he muses out loud, charge them for the privilege of owning cash?  To do so, he suggests getting rid of banknotes, and forcing people to hold cash in accounts which could be charged a negative interest rate (or taxed) accordingly, to force people to spend.

This is a bad idea. He does accept that banknotes are not about to disappear, and all the time there are bank notes people do not have to pay a negative interest rate to hold money. He suggests substituting digital money for banknotes, so all with money would have pay the negative interest rate.  Even were he able to create his dreamworld, a nightmare for savers, there would be nothing to stop them simply transferring their cash to another currency and another banking system where there was no penalty for daring to save. Nor could he prevent various other cash like assets popping up to protect savers from his negative interest rates. He needs to understand many people have good reasons to save. A society with too little savings would leave the elderly with insufficient means and the unfortunate with no reserves to fall back on.

Nor do I accept his premise that saving is evil, a crime against economic growth. If the Bank of England had kept the commercial banks in better shape between 2005 and 2010 by regulating them sensibly, they could carry on using the money that people had saved. A healthy banking system is designed to put savers into contact with borrowers, with the banks as the intermediaries standing behind the risks. It is designed to let the prudent, the elderly and those relying on savings to get a return on their savings by lending their money to the adventurous and the hard up to invest and spend beyond their immediate means. It is only because the Bank overdid the easy credit  up to 20078 and then visited a tough bust on the banks thereafter that savers have been robbed of return and potential borrowers starved of loans.

The UK economy is the fastest growing major economy in the world today. Wages and real wages are now rising. There is more investment underway. That does not argue for interest rates below the current 0.5%. In  order to sustain recovery and have a more normal economic performance post crash, we need to complete the repair of the commercial banks. They can then get the savers’ cash to work. Trying to abolish or diminish  savings is a very bad idea. It would undermine people’s sense of independence and security. If digital money is linked in people’s minds to negative interest rates, it will slow enthusiasm for this technology. Let’s have properly working banks and a return on savers’ money.




  1. Martyn G
    September 22, 2015

    When I first read about it I thought it must be April 1st, having not read anything so daft and damaging from a chief economist before. What he proposes is simple State theft of our money, at the first hint of which all of my disparate savings would be out of the country in a flash via internet banking. And if everyone did the same the impact on banks and building societies would be catastrophic, to say the least – it really beggars belief that anyone in his position can be so economically illiterate.

    1. oldtimer
      September 22, 2015

      Exactly. He should be fired.

      1. Gary C
        September 22, 2015

        And made to leave without his ‘no doubt’ over inflated pension pot.

  2. Mark B
    September 22, 2015

    Good morning.

    The first political party to promise, should such a thing as negative interest rates occur, to abolish it, will form the next government. The one thing you do not mess with, is people’s money and their ability to do as they please with it.

    I do not know this economist, but I bet he has never run a business. Or has lived the life that many here lead. So he is in no fit state to ‘dictate’ what is good for us. A typical nanny-state mentality that likes interfere thinking it is doing it for the common good.

    What this man does not understand, is that under the Four Freedoms of the EEA, I can move my money to other EEA (31) members. This does not include any UK dependencies or territories such as the Isle of Man or Gibraltar.

    It would not make more people spend, it will simply seize up the economy.

    As for the Bank of England and the banking crisis, I think it was the FSA that was caught wanting. An idea of the EU and implemented by the Labour Government.

    1. Mitchel
      September 22, 2015

      It is not “nanny state” at all – to call it that is to humour it-it is old fashioned state appropriation of private assets,bolshevik style.Furthermore,the BoE has form in this matter;does anyone remember David “Danny” Blanchflower a few years ago,after leaving the Bank, brushing aside the impact of QE on deposit and (private)pension savers,at a time when inflation was consistently 4-5%,by effectively saying it served them right for not putting their money into the riskier asset classes that benefitted from QE and that cash was not meant to be a long term asset?

    2. Leslie Singleton
      September 22, 2015

      Dear John–I could only face glancing at what you have had to say today but does it mean that according to this nutcase economist, First, we would all be forced to carry some kind of electronic or digital piece of equipment around with us (Count me out) and, Secondly, is his idea that people should have no self dependency at all because surely with no cash or savings the slightest problem would mean going begging straight to the State? He has single-handedly lowered my opinion of the Old Lady.

  3. Lifelogic
    September 22, 2015

    Exactly where on earth do all these bonkers economist come from. Why bother to work at all if you have to pay 45% tax on income plus NI, then save it, at negative interest rates, only to have Osborne take 40% more off you on death? Meanwhile you can have the pleasure of watching him waste it on endless idiocies. Mind you we have negative real interest rates after inflation already, and you are even taxed on the non return. Also capital gain tax on no real gains.

    1. Lifelogic
      September 22, 2015

      More signs of the “in three letters” Cameron’s priority, the N H S falling to pieces as even Addenbrooke’s and Rosie Hospitals are placed in special measures. From all I hear the NHS must be causing thousands and thousands of unnecessary deaths and much suffering and inconvenience with its incompetence, deliberate rationing and delaying. Start charging, break it up and get some real competition going, instead of this dreadful, incompetent, wasteful, death causing, monopoly.

      1. Lifelogic
        September 22, 2015

        It will never improve, with its current set up and structure. Worse still, being free at the point of use (delays & non delivery), it kills nearly all the competition. Start charging, restore tax relief for private medical insurance and get rid of the insurance premium tax to reduce demand. This would be a good first step.

        Why should those going privately pay twice plus have IPT on top?

        1. Iain Gill
          September 22, 2015


          Still replying constantly to your own posts to make them look interesting? Still going for quantity over quality? Still living in dreamland.

          On the NHS you are correct, its a national disgrace, absolutely the worst health system of any developed country. Its rotten from top to bottom. The whole way it is monitored and managed is a disgrace. The could place every hospital in the country in special measures and they still couldn’t fix it.

          I wish some mainstream politicians would start stating the obvious truths about the NHS instead of going along with the state religion.

          As William Shatner told the teckies “get a life”

          Love, life and peace

          1. BobE
            September 22, 2015

            The way to privatise anything is first to make it fail or perform badly. Then the public will accept privatisation. Its an old trick being executed on the NHS now.

    2. Lifelogic
      September 22, 2015

      Savers are hugely helpful to the economy. They lend too banks who should lend it on to businesses and grant mortgages. True the lack of much competition in banking in the UK does not help as they are able to get away with paying say .01% and yet charging 3.5-40%+ to borrowers. Often borrowers that are less of a risk that the bank itself. They even want security for this very often too. Best to cut out the expensive and inefficient bank middle men I find.

      There clearly needs to be a real incentive to save, there should be a real return after tax, over above inflation.

    3. Lifelogic
      September 22, 2015

      These views of the chief economist at the Bank of England makes me wonder what other sort of “group think” lunacy is going at the Bank and within government circles. How can anyone in such a responsible position come out with such complete nonsense? One assumes they are just trying to think of anyway that the government can continue their over tax, over borrow, over regulate and piss down the drain form of government for a bit longer.

      This while the government is delivering so called “public services” as dreadful as the appalling/virtual monopoly N H S.

      We already have a chancellor who wants to dictate wage levels, tax non profits and control energy prices after all. We hardly need Corbyn in power, the lunatics are already in charge of the asylum.

  4. DaveM
    September 22, 2015

    As well as the fact that computers are not infallible and a cyber attack would create absolute chaos.

  5. Richard1
    September 22, 2015

    I am sure Mr Haldane is a knowledgeable and well intentioned man, but if it is his view that he authorities should take measures to deliberately create 4% inflation then he should be fired. Confidence takes time to build and can be undermined very quickly. We cannot have someone in such a position at the BoE who’s view it is that the the state should seek to undermine sound money, property rights and the liberty of individuals to conduct transactions independently of state supervision. As you point out the idea is also unworkable as anyone with the money and know how will simply transfer their cash to currencies and banks where such confiscation does not apply. (It would be wise to do so as well – sterling will be in free fall in the event this sort of thing went ahead).

    People in positions like Mr Haldane’s have responsibilities to the rest of us to bolster confidence. He’s not just another blogger. The Governor should be asked to repudiate this foolish idea inmediately and entirely and Mr Haldane invited to seek an alternative platform for his musings.

    Reply Mr Haldane is leading research at the Bank into this and related options, which is why I thought it was important to read the complete speech and write about it. The Speech is published by the Bank and part of the Bank’s agreed work programme.

  6. Antisthenes
    September 22, 2015

    One day bank notes and coins will not be used at all that is inevitable. The convenience of doing so and governments wanting it to be so so that it can have better control over the grey and black economy and tax evasion will ensure it.

    Convenience of course is a considerable benefit but government’s motives and the fact that only ten people decide on money supply and interest rates is a considerable disadvantage. As it stands it will be another notch up in the state’s strangle hold on us all. Of course as you point out if the ten wise men and government use a paperless money system to police the nation and bend it to its will many will find ways around it in times when it disadvantages them.

    If we are going to have a paperless money supply and even before we should let interest rates and money supply be decided by free open markets. 65 million people know better and far more what the levels should be than 10 economists who decide on their personal beliefs. If we don’t go to free markets then the police state will take another step forward and bad economic decisions will continue to be made.

    The old loon Corbyn of course wants to put control back with politicians despite them known to be totally useless at it when they have been in the past. The independence of the BOE was a step in the right direction but now circumstances dictates that it is now passed to people.

    1. DaveM
      September 22, 2015

      “One day bank notes and coins will not be used at all that is inevitable.”

      Really? They’ve been around in one form or another pretty much since humans began trading . Nothing’s worth a thing without a tangible ‘thing’ to validate its value. Otherwise gold and diamonds would be worthless, or people would be satisfied with owning a picture of a diamond on a screen.

      I rarely use cash, but I want to know I can get it out of the bank if I need to.

  7. margaret
    September 22, 2015

    What a crass stance. Had the banks saved it’s capital and not lent willy nilly they themselves would have been a little stronger. Perhaps he likes spend spend spend , but when the water jugs empty it won’t turn into wine , intoxicate and numb the pain of bankruptcy. This man needs firing. Had the country not sold off all its assets then we would not be at the mercy of poorly performing stocks and shares , our pensions would have existed, then we would not have to save. Idiot.!

    1. margaret
      September 22, 2015

      Does he not realise that the Mc Cawber theory only works for the occasional one. Imagine a whole country thinking that they can spend, spend, spend and something will turn up.I would seriously have this man investigated; it is a sure way to try and control a country , take their money , take their strength and then dole out little bits to keep them down when they have spent spent spent. The anger I feel when he says it is against humanity to try and protect themselves and the country for begging for mercy at the hands of financial dictators.

      1. margaret
        September 22, 2015

        protect the country’ from’

      2. zorro
        September 22, 2015

        That is their endgame – ultimate control.


  8. Douglas Carter
    September 22, 2015

    Just to play a limited Devil’s advocate on that, the comments of Mr. Haldane represent some logic, even if solely by perceiving them as from an individual who has lost the big picture.

    It seems to be the view from someone who believes the human race exists to service the needs of economic exigency.

  9. Denis Cooper
    September 22, 2015

    Well, I can’t disagree with any of that, but I would just add that paper banknotes are still the legal foundation of our monetary system, as explained here by Martin Howe QC:


    “Of course the qualification is that in the modern economy only a minority of transactions are conducted in actual notes and coins, but such transactions are at the base of the whole system and current bank accounts are in law simple running debts payable in notes on demand and because there is or at least there was until the recent events, generally confidence that the banks will always be able to pay in actual notes and coins if called upon to do so, money in accounts of solvent banks is universally treated as being as good as cash and in many ways more convenient. But it is the ultimate ability of financial institutions to pay out in actual legal tender which underpins this.”

    Reply This is underpinned by the requirement that the Central Bank supplies notes on demand to regulated banks in its system – a requirement which the ECB does not always follow with disastrous results in Cyprus and Greece.

  10. Denis Cooper
    September 22, 2015

    Off-topic, I read here:


    “In the same month, Mr Cameron also played down expectations of full EU treaty change before the referendum. But eurosceptics in the Conservative Party are demanding such legal changes.

    Denmark’s “post-dated” treaty change in 1992 offers one precedent for the sort of change that Mr Cameron might seek. British diplomats are studying that deal carefully.”

  11. Gary
    September 22, 2015

    the economy may be growing, whatever that really means, but his statements suggest panic.

    What he is saying is what everyone should know. This debt based money system is mathematically certain to die, and that is what it’s doing. In their efforts to keep the yield curve slope positive they are forever trying to get short rates down so that they can keep inflation positive and borrow short(print in this case) and lend long. Deflation is like kryptonite to these usurers. But the more they try to avoid it , the more deflation we get. It’s killing them. They’ve severed the rate feedback between the propensity to save against the propensity to invest. We are in a rudderless mal-investment hell. We have no means to liquidate debt, only to swap for duration. He talks about using a cryptocurrency , but he certainly doesn’t mean distributed trust bitcoins, he means a centrally controlled digit that they can value at whatever whim they want.

    We are in the end game of the greatest theft in the history of the world. I look forward to seeing justice eventually. It will happen.

  12. Bill
    September 22, 2015

    Yes, you are right on all counts.

  13. agricola
    September 22, 2015

    God preserve us from economists. Banks have discarded the concept that those who lend them money are customers as are those who then borrow the money.

    Because of government support for the incompetence and greed of bankers, they have been allowed to operate with a great disparity between what they borrow at, and what they lend at. They have become a real Shylock industry. It is their modus operandi, supported by government, that has given birth to the pay day loan industry with all it’s social downside. It is government complicity that allows it to continue.

    Intimating that deposit accounts will fly out of bank doors via the internet may be true for the likes of yourself who know what they are doing, but the majority are milch cows, to be used at the will of the scam run by banks and government. Remember it is government that has debauched currency since the demise of the gold standard, and all to finance their interference in our lives. Politicians and banks have much to answer for.

  14. Bob
    September 22, 2015

    I can’t fault your analysis John.
    Is Mr Haldane a Common Purpose graduate?

  15. Brian Tomkinson
    September 22, 2015

    Haldane was also reported as wanting an inflation target of 4% rather than the current 2%.
    Reading his comments, it was frightening to realise that this was from a senior member of the Bank of England and not from a think tank advising comrade Corbyn.

  16. Bert Young
    September 22, 2015

    Mr.Haldane is influenced by economic affairs in China . The slow down in Chinese growth does have an effect on the total amount of money in circulation , however , in this country -where spend spend spend and the credit card boom means there is a consumer over-supply , does not imply that more of this should be encouraged .

    I have always believed that being prudent in the way you balance your financial life has many advantages – particularly as one ages . The credit card system has given many spenders opportunities often well beyond their means and created a debt mountain of astronomic proportion ; this cannot go on and should certainly not be boosted by a negative interest rate .

  17. a-tracy
    September 22, 2015

    Before the Bank’s Head Honchos do this can they agree to give up their final salary guaranteed pension and just have the same crummy schemes the rest of us are allowed to invest in with all the risks we take on personally instead of expecting our employer to cover all risks and losses and future taxpayers to guarantee an income so they don’t have to save.

  18. David
    September 22, 2015

    I agree 100%, what Gordon Brown did to the banks no ever thought could happen in the UK.

  19. David Price
    September 22, 2015

    So what is the “official” poition of the Bank of England and other worthies who would decide such matters. The proposal is public now and to say nothing would simply suggest that it is receiving serious attention in which case those who can might consider bailing out of stirling savings pronto.

  20. They Work for Us?
    September 22, 2015

    It seems that citizens need to reassert some fundamentals of governance and the state.
    We allow ourselves to be governed, there is no divine right for a particular set of politicians to be allowed to govern us. (Proper easy right of recall and dismissal of our employees, the politicians, would bring this home effectively and I note that it was reported that many Libdem ex MPs are unemployed). Mr Junker and other EU officials might be reminded of this when they condemn Populism.

    Money for labour provided is a fundamental or else why bother. Reasonable taxes are a necessary evil but not an ever expanding right of our employees the politicians. Inflation is often the result of govt. financial incompetence. All savings interest should have inflation deducted before it is counted as income. Finally it should be normal business for the citizen to consider placing assets in an inflation proof holding, e.g gold, if they want to and no record or account should be furnished to the authorities, it is not or employees business.

    September 22, 2015

    A couple of days ago I read a most respectful critique of Mr Haldane’s views. He knew the man. He said “he is brilliant” but again with respectful remarks on every other line he stated in detail how he completely and absolutely disagreed with his view.
    This is the state of academia in the UK: a never-ending stream of nonsense published… from brilliant people.

    A whole political party called UKIP arose with its main mantra being “it is commonsense “. Well all that UKIP said may not be commonsense. But it struck a chord with the public. We are weary of brilliant ideas from brilliant people using every complicated and convoluted linguistic device and jargonistic flowery esoteric phrase to talk pigswill.

    If one wishes to know what the Bank of England as a whole is going to do in two weeks time, what it is going to say in in two weeks time, then merely follow US Business commentators from whom they most obviously and simply take their “brief”.

  22. petermartin2001
    September 22, 2015

    Yes I largely agree! (Surprised?)

    The Bank of England’s chief economist Andy Haldane’s speech has caused some raised eyebrows. It sounds like he knows we’re in for some tough economic times ahead. Things are so desperate that it might require the abolition of cash in the economy! People will be forced to hold money in banks and see its value dwindle.

    As Andy Haldane has put it “A more radical proposal still would be to remove the ZLB (zero lower bound) constraint entirely by abolishing paper currency.”

    We could perhaps begrudgingly say Andy Haldane has shown political and economic courage in saying this. If we are being charitable we could credit Mr Haldane for highlighting some of the problems of modern economic thinking. If we wished to be less charitable we’d have to say the idea of abolishing cash is about as stupid as it gets!

    I hope it is the former and that cash won’t be abolished. But this isn’t the first time we’ve heard this silly argument argument from some economists and in particular from Kenneth Rogoff. That they feel the need to make it shows they still haven’t really grasped that interest rates can’t have the controlling effect they think they have on the wider economy.

    The main argument for banning cash, other than to hinder criminals and tax-dodgers, which is no stronger an argument now than it has ever been, is to facilitate sharply negative interest rates. But if we want to stimulate the economy, as we do right now, there’s an obvious and much easier alternative: ie loosen fiscal policy. Increase government spending and reduce levels of taxation.

    So what’s the theory? When times are good interest rates are increased to slow the economy down. When times are bad they are lowered to stimulate lending and get it moving again. There’s no need for government to be involved at all. They can concentrate on balancing the books like any good business should.

    Except that every stimulus leads to the build up of private debt in the economy. This build up slows down economic activity, and so we later have to have another reduction in interest rates. Then another and yet another after that . If we get it all wrong then there can even be a giant crash in the economy when those who’ve taken on too much private debt go bust and cause their creditors to go bust too.

    So, eventually we arrive at the situation, as we have now, where interest rates in much of the western world are close to zero and they need to go negative according to the theory to stimulate the economy again. Economists with more intelligence are saying “Whoa! There must be something wrong with the theory”. Others with less insight are saying “But this is just the special case of the zero lower bound” and those with no insight at all, or are stupefied by their own political ideology, are ploughing on regardless and calling for the abolition of cash!

    Leaving aside the argument that many of us quite like the convenience of using cash, it’s much quicker than messing about with credit cards at the petrol station for example, it is a genuinely bad idea to go down the road of negative interest rates which will lead to an ever increasing build up of private debt in the economy.

  23. JJE
    September 22, 2015

    This craziness has also been proposed by the FT. It appears to have come from a discussion at the Bilderberg Group. I don’t suppose they invited you – they should.
    Your response is admirably restrained whereas mine was rather angrier. I see this proposal as the end of individual liberty and the dawn of total state control.

  24. Colin
    September 22, 2015

    I must say it’s slightly worrying to find that the Chief Economist of the Bank of England is either an idiot or a lunatic, although perhaps not entirely surprising.

    One day the whole fiat money/central banking system is going to come undone. We just have to pray that a way can be found for this to happen in an orderly fashion – or it will make 2008 and 1929 look like minor blips.

  25. miami.mode
    September 22, 2015

    The ultra low “emergency” interest rate of 0.5% is gradually changing the demographics of the whole country. To coin a phrase the rich are getting richer and the poor are getting poorer. It’s only happening very gradually but as an example, where you used to see Estate Agents you now see Letting Agencies. This does not bode well for the next few years where the less well-off are having to compete with high levels of immigration. The nation individually and as a whole seems to be getting poorer.

    A huge amount of our economy is based on property and unfortunately to get back on to an even keel with more normal interest rates it would necessitate a number of people and businesses going bankrupt which is obviously why governments endeavour to maintain an equilibrium by means of QE plus other measures to try and keep the status quo.

  26. Peter Stroud
    September 22, 2015

    Perhaps the time has come for Mr Haldane to consider his position.

  27. MikeP
    September 22, 2015

    It turns out Haldane joined the Bank of England in 1989, aged 22, having graduated (laudably) with a BA and an MA in Economics. He’s been at the BoE ever since, such solid credentials for someone cited by Times Magazine as one of the 100 most influential people in the world. I don’t know which is the more risible, Time Magazine or Handy-Andy Haldane ?!?

    1. petermartin2001
      September 22, 2015

      I wouldn’t be quite so hard on Andy Haldane. He’s a bright enough guy. What he’s saying is entirely in accordance with modern economic thinking. That is to stimulate the economy we need to reduce interest rates. So as they are only 0.5% now – they should go negative when, sorry, if the next crash occurs. Maybe we could get away with -0.5% , but much lower than that and cash would need to be abolished.

      I’d be surprised if he doesn’t agree with me in private but I doubt he’d last very long in his job if he was quite as direct in his approach. He has to be more circumspect in his criticisms.

  28. Iain Gill
    September 22, 2015

    We have already been operating the economy to rob from savers to prop up the over borrowed. Inflated asset (house) prices. Destroyed savings with low interest rates. Allowed the bankers to borrow at nominal interest rates to feather their own nests. While charging the poor massive interest rates as the pay day lenders demonstrate. Given all the signals that the government will support house prices no matter what. Destroyed any incentive to invest in productive business. Left those relying on their savings, such as pensioners, in severe trouble. Turning the notch a little from very slightly positive to negative is not as big a manipulation as you would imagine. People are already moving their money abroad and all the rest. The values this nations supports are not those I support.

  29. Mark
    September 22, 2015

    I had considerable respect for Mr Haldane in the earlier phases of the financial crisis: he seemed to have a rather better understanding than most of those around him of the nature of transmission of monetary crisis through the banking system, and the failures of the regulatory system put in place by Gordon Brown.

    Now it appears he is taking the side of debtors because he understands that the crisis hasn’t really gone away. Government debt continues to grow apace, and household debt has also resumed its upward path. Internationally, the problems of the PIIGS haven’t been solved, and now we have China’s slowdown and bankruptcies particularly in the renewable energy solar/wind businesses, where they had built too much capacity.

    Debtors have had an exceptionally easy life under ZIRP – an environment that should have been used to promote early repayment among the over-indebted, using the interest savings they make to pay off principal. Had they done so, while some may have been exposed as unable to make the necessary payments, the exposure of collateral to falling asset prices would have been substantially reduced, and debtors would have learned that borrowing too much comes with a reduced spending capacity, or the ability to move house. There have been no consequences for bad borrowing and lending decisions for either banks or borrowers.

    Government is still struggling to control its deficit. Attempts to inflate away the problem risk the stagflation of the 1970s, and all the associated unrest as one group or another is left to suffer the consequences. Mr Haldane is too young to have experienced those times in a meaningful way (he was born in 1967). Perhaps he should spend some time studying them, as he has the Great Depression.

  30. Tim Bennett
    September 22, 2015

    Thank you, Mr Redwood, for addressing the speech made by Mr Haldane and exposing his argument for the wrong-headed fantasy that it so clearly represents. I felt despair when observing how many news outlets simply regurgitated his comments as evidence of how “interest rates could fall still further rather than rise” rather than take issue with precisely what Mr Haldane was suggesting.

    I am no economist, but it seems pretty obvious to me that as soon as there is any likelihood of people being charged to deposit their savings anywhere it would prompt a run on the banks as people withdrew their money. I thought that central bankers were supposed to ensure bank stability, not prompt bank runs.

    The last time Mr Haldane piped up his belief that interest rates were as likely to go up as go down, there followed what appeared to be a concerted effort to slap him down by Mr Carney and other MPC members publicly stating the opposite during the following week or so.

    If this man is so detached from the real world as to suggest in seriousness that the state should look to abolish cash simply so it can try to make savings subject to negative interest rates, it does indeed raise questions as to whether he is a fit and suitable person for the offices which he holds.

  31. pedant
    September 22, 2015

    “The UK economy is the fastest growing major economy in the world today”.

    While Haldane’s thesis is bizarre, this assertion is also rather peculiar. Even inserting ‘western’ would require cherry picking time intervals to make it accurate.

  32. Dennis
    September 22, 2015

    JR wrote, ” there would be nothing to stop them simply transferring their cash to another currency and another banking system where there was no penalty for daring to save”

    Yes there would be – it would be made illegal to do so.

    Reply There is no sign of movements to capital controls and exchange controls.

    1. zorro
      September 22, 2015

      Reply to reply – not yet but there will be if the ‘dreamworld’ vision is implemented!


      1. Lifelogic
        September 22, 2015

        Indeed it would have to be.

  33. zorro
    September 22, 2015

    This is an interesting and important matter. We often talk about security and dangers to individuals and the state. I find this more of an existential threat than ISIS to our general well being. Someone like Mr Haldane proposing this mood music is of even more concern…

    What he proposes is effective theft of your savings/assets. This is most definitely a bad idea….. but not unexpected bearing in mind the mind games being played over interest rates and when the ‘recovering economy’ will be able to function with a ‘normal’ banking system. The cashless system is more of a ‘nightmare’ than ‘dreamworld’, but that us what they are preparing for in the near future. This gives them total control as you will only be able to function through your card/internet…. and if they go down there are problems. John mentions about swapping to other jurisdictions. That is possible, but for how long? Will the same happen there? This is the danger of having a superpower which wants a unipolar world and wants to force that vision, come what may, on everyone else….

    I suspect that there will be more QE as they are addicted to it, and they can’t see a way out. They do not want to pay increased debt through higher interest rates. I also expect that there will be more wars and more terror to concentrate the minds of the people, and deflect them from what really matters. I will leave you to consider whose interests are served in such an ongoing scenario.


    1. Denis Cooper
      September 24, 2015

      If demand for new gilts continues to fall, and so long term interest rates rise, then I expect Osborne will be tempted to arrange for the Bank of England to create more new money and use it to buy up some of the surplus gilts from the market and store them safely away in its vaults, figuratively speaking. It’s just like the old system whereby the EEC would intervene in the market to support the price of butter by buying up the surplus and putting it in cold storage, except that the Commission relied on existing money provided by the governments of the member states, rather than being able to create new money for that purpose, and of course it involved real physical butter requiring real physical cold storage rather than the government’s IOU’s which now exist only in virtual form, as I understand.

  34. paul
    September 22, 2015

    Hi john, started in 1981 by your own party, the big bang and will finish with your own party. The best part is you can not stop it because business will make your party do it. It already been trail it in Manchester and in jan 2016 Sweden is doing away with all cash tills and already negative interest rates in the eu and will spend all over the western world because business dictates it and politician follow.

    Myself, I do not mined going to the Tesco food banks in the future. Some people believe that hard assets are the things to own but I can tell you that they are wrong in their belief. I read some Mr carney in the paper today and he got it right but dose not know what to do and would not wish to do anything because all his so called friends and same for most people in his place like yourself. I have a some land so I can get by. I have told you before what to do I will not tell you again and you also believe everything is great as business and people borrow money like water to keep the show on the road with no means of paying it back just like the government under the influence of business and the BOE.

    All done by your own hands and believes and what comes out of the business boardroom is king, this will lead to the end of your party in government for good when people put down their toys and put 2 and 2 together. They the people will not want right and will not want left and not want centre they will want your heads. Wet & mad in own little bubble with the rest.

  35. paul
    September 22, 2015

    And by the way you have already had QE for the people it called tax credit and housing credit which wet&mad is doing away with and giving it to business instead as they dictate to the government.

  36. Jon
    September 22, 2015

    Good to get an informative analysis of the proposal.

    It reminds me of the often discussed subject on this blog of how do you maximise tax receipts without over taxing and ending up with fewer receipts.

    We have a good operation in the UK, it’s not predominately black market, people pay their taxes on the whole and most of the savings of the UK are in onshore funds and other vehicles. Going after the cash could have the opposite result as suggested.

    I like to hold a little cash as sometimes your card doesn’t work, sometimes technology temporarily fails like RBS this year. Sometimes some one can steal your card details and have a party with it meaning it’s cancelled.

  37. ferdinand
    September 22, 2015

    Savings are essential. Without them, either in the form of saved profits or saved private income.there can be no investment.

  38. Maureen Turner
    September 22, 2015

    If we are going to be charged for leaving funds in a savings account why would anyone consider keeping money in a bank. At the present time the interest paid is derisory. Surely it would be better to withdraw the cash and keep it under the mattress and if everyone did that how would this benefit anyone.

    Many pensioners rely on their savings to prop up the state pension which is amongst the lowest in Europe . As an OAP I’m sick to death of being told that we have been cushioned from the crash of 2008. I accept the younger ones are having a hard time to get on the housing ladder but is this not the result of too few houses being built in recent times hence the sky high prices?

    We keep reading people are not saving enough for their retirement but it’s difficult to see any inducement to save which is hardly a good advertisement for the younger generation. I wish I understood even basic economics which I don’t but it seems to me this country is far from being on the road to recovery, merely treading water.

  39. JJE
    September 22, 2015

    John Kay in the FT is pushing Haldane’s argument again:

    Perhaps they might to print your rebuttal as you are an occasional contributor?

    Reply They don’t have space for me this week.

  40. Lindsay McDougall
    September 23, 2015

    What a crackpot idea by Mr Haldane. What has he got for a brain?

    There is one problem with the British economy that gets very little mention. It is the staggering difference in wealth between the richest pensioners and the poorest, and its consequences.

    Many working women, wives and widows at my bridge club do not lack for a bob or two and many of them go for expensive three week cruises every summer or have summer homes in Majorca. This results in a lot of expenditure that does not accrue to Britain and adversely affects our balance of payments.

    In contrast, poor pensioners spend most of their money in UK but have little of it.

    It is not a good idea for the State to spend lots of money on the retired elderly. Put simply, investing in yesterday is stupid. A lot of problems in the UK could be at least partially solved if the retired elderly were forced, for financial reasons, to downsize their houses earlier. It would put more accommodation space on the market.

    So, by all means let interest rates rise but make the retired elderly share in the ‘austerity’ misery.

  41. stred
    September 23, 2015

    Mr Haldane has been at the B of E for an awful long time and it would cost a lot to the taxpayer to sack him. Time for a windfall tax on stupidity and golden goodbyes.

  42. sm
    September 24, 2015

    Would equivalent taxes be placed on other non-cash assets. Would we apply equivalent reductions in promised benefits like final salary pensions? or does it just apply to certain assets that most poor people don’t have a lot of and are forced to use.

    It might work if it was restricted only to large balances & possibly corporate offshore ones.

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