The plight of the saver

In an era of ultra low interest rates some savers complain that they do not get a sufficient return on their savings. Anyone who wishes to keep their savings secure and not at risk of capital losses from price fluctuations of financial assets is left with a low income return on a deposit or a low yield on a secure bond with a specified later repayment date.

It is not true to say that all savers have suffered from the era of ultra low rates. Those savers who decided to run the risk of losing money have often done very well. Those who bought government bonds have seen them rise strongly over the last decade as rates fell and stayed down. Those who bought world shares have also seen good gains. Those who had property in the right places are sitting on capital gains on their property. Indeed, most savers own property, and many directly or indirectly own financial assets through their pension funds. This  blog is not offering investment advice or commenting on what  might happen next in markets but describing the past.

Japan has lived now with these ultra low rates for several decades. The big crash in Japan  did far more damage to property values, share prices and banks there at the end of the 1980s than the western crash of 2007-9. It  ushered in a long era of money creation and extra borrowing by the Japanese state. We can see in Japan what these distortions do if sustained. The state can make many investments at little cost, and may make investments that are highly marginal in more normal times. Some savers decide they need more savings because the return on safe investments is so low. The Japanese state has bought up around half of all the outstanding quoted state debt, and is also buying up substantial quantities of exchange traded funds that hold Japanese shares.

Japan’s economy grows but slowly, though if you adjust the numbers for a falling population they look  better. The high gross state debt at 250% of GSDP is far higher than anything in the west, but it is no great burden given the interest rates around zero and the state ownership of so much of that debt following Central Bank purchases. A policy of money creation which should have induced inflation has not done so, given the pressures against credit and inflation in the rest of the system.

Some will argue that giving states so much access to cheap capital will distort markets too much and lead to too many ill advised investments by governments. The alternative way through the current situation is a more concerted attempt to strengthen the banks and to encourage more private lending so there is more of a market test on new investment. The mood globally is once again to lower interest rates, with the Fed this week likely to cut rates. Australia has recently cut her rate from 1.5%  down to 1%. Many EU government and Japanese government bonds  now offer a negative interest rate, yet still people and institutions buy them.

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149 Comments

  1. agricola
    Posted July 24, 2019 at 5:17 am | Permalink

    Buy assets where demand exceeds supply, unless of course you have as good an understanding of matters financial as our host.

    • Hope
      Posted July 24, 2019 at 9:01 am | Permalink

      JR, a thoroughly bias unbalanced account. You should be ashamed of yourself for such a distorted view of the world that your govt created.

      You forget how the govt bailed out the banks and continued to allow discredited bankers to earn millions at the expense of the taxpayer when they should have gone to the wall like other industries, you forget the govt gave banks about £80 billion each year to lend to customers and business so the banks did not have to create incentives for savers to deposit their money because the govt was giving it away! Banks still did not pass in the govts money at low rates to business or mortgages!

      You forget how savers switched to property and your govt has relentlessly hammered them starting with Osborne continuing with Hammond. By doing so first time buyers found property prices prices jump to beat Osbornes deadline to own two or more properties. Who would have thought an alleged Tory govt was promoting a socialist agenda.

      Why should savers expose their money to high risk after witnessing the govt dismal failure in the crash of 2008/9 and its espouse? EU took matters in their own hand and made depositors and investors pay for the losses in Cyprus. How about Equitable Life?

      Then we have the huge issue of pensioners getting hammered in their pensions by tax by Brown then Osborne.

      We could also see dishonest slight of hand by changing RPI to CPI for indexing pensions. Cutting some pensions effectively by 20 percent, not an insignificant amount. The only exemption, MPs!

      Wemthen turn to costs for pensioners. Council tax. A promise made by the Tory govt to freeze it. Councils allowed to separate some charges as separate i.e. Flood defence and adult social care as additional rises in addition to the five pe cent each year! Tory govt had already separated out water from that bill years ago! Is this what is happening with other elements of council tax? Let us not forget the useless Environment Agency costs taxpayers £1.7 billion each year so we are paying twice for flood defence! The same quangos Cameron was going to set on fire, suggest this is Johnson first task he could easily recoup billions from quangos that really do not provide value for money and only promote a left wing agenda as your govt appears determined to have left wing people in charge.

      • Lifelogic
        Posted July 24, 2019 at 6:25 pm | Permalink

        “by changing RPI to CPI for indexing pensions” not however for MP’s pensions I understand!

      • What Tiler
        Posted July 24, 2019 at 6:54 pm | Permalink

        “bias” is a noun, I assume you meant “biased” but were too illiterate to realise it.

        • Lifelogic
          Posted July 24, 2019 at 7:41 pm | Permalink

          Do not be so harsh! If you mis-type by one letter the auto spell checker often just corrects to something even worse. When I text my friend Furgus he often get Dear “Fungus” please can you …..

        • Edward2
          Posted July 24, 2019 at 8:07 pm | Permalink

          How rude
          Just a typo.
          Relax you remainers

  2. Mark B
    Posted July 24, 2019 at 5:30 am | Permalink

    Good morning

    The issue that I have is the large difference between the rates at which we save, and the rates at which borrow. Whilst I accept we live in a Market Economy and the last thing I want is State interference, we do need more competition and a permanent end to QE.

    I favour keeping rates as they are to support the pound and not lowering them. I do not believe that a race to the bottom is on everyone’s interest.

    Japan has decided that its population is too high and will not do what we in the UK have decided to do. That is, to artificially inflate the market (GDP) through the use of MASS IMMIGRATION. A policy that will come back to haunt us in more ways than one. 😉

    • Otto
      Posted July 24, 2019 at 2:50 pm | Permalink

      Mark B -‘Japan has decided that its population is too high ‘ This is good news. A little while ago I read they were frightened of falling numbers. I wonder who decided and how it was accepted. Not a news item for the BBC it seems.

      • Mark B
        Posted July 24, 2019 at 5:12 pm | Permalink

        Otto

        Context. They are afraid of a falling Japanese population, not population in general. Otherwise they would import.

      • Fred H
        Posted July 24, 2019 at 7:49 pm | Permalink

        They are more concerned about the ratio of ‘older people’ predicted to rise in coming years. A very alarming thought, made even worse by Andy’s views.

  3. Dominic
    Posted July 24, 2019 at 5:36 am | Permalink

    Low rates (relative) are a symptom of public policy failure. Savers are in effect being punished by the legislative stupidity, ignorance and incompetence of State actors

    An article about corruption and subterfuge at the heart of Labour’s Quango client state would be welcome

    • jerry
      Posted July 24, 2019 at 6:29 am | Permalink

      @Dominic; “by the legislative stupidity, ignorance and incompetence of State actors”

      Yours are the usual ramblings of want-to-be capitalists/investors who did the damage, and then blame others for your own (in)actions and demands.

      The only thing the ‘state actors’ got wrong was trying to bend over backwards to your demands that there be ever less regulation of the markets. I do not recall anyone from the Thatcherite wing of the Tory party and beyond, nor their supporters, calling for greater regulation of the markets/banks before 2007/8, although they always cheered when regulation was removed. The 2007/8 banking crash was made made on Wall Street & in Docklands, not 1600 Pennsylvania Avenue or 10 Downing Street…

      “An article about corruption and subterfuge at the heart of Labour’s Quango client state would be welcome”

      Does our host write fictional conspiracy stories? Whilst I do not always agree with his appraisals/ideas his articles always appear to be based on facts and reality!…

      • jerry
        Posted July 24, 2019 at 6:41 am | Permalink

        Off topic; The new Cabinet members, beyond the obvious big three (HMT, HO and FO), the key appointments for me will be DWP, DfFRA, DfCMS, that will tell me what road Boris will be taking, if he is Churchillian or just another Thatcherite.

    • Lifelogic
      Posted July 24, 2019 at 6:34 am | Permalink

      Matt Ridley had an excellent article touching on this the other day in the Telegraph (or Times perhaps). Boris need to organise a massive clear out and address the appalling left wing, climate alarmist, remainer, anti Boris, anti Trump bias of the dire BBC. Plus address all the postal voting fraud.

      • Daniel James
        Posted July 24, 2019 at 11:34 am | Permalink

        As much as I would like to see that, as well as reform of our ridiculous tax code (17000+ pages) I doubt he will be able to do that without calling a GE and winning a decent majority. I personally expect one in the autumn or certainly by the spring.

      • steve
        Posted July 24, 2019 at 6:09 pm | Permalink

        Lifelogic

        “Boris need to organise a massive clear out and address the appalling left wing, climate alarmist, remainer, anti Boris, anti Trump bias of the dire BBC.”

        Indeed.

        I see the BBC is already doing it’s best to try and pull down Boris. The BBC needs to be careful what they wish for. If they pull Boris down then Nigel Farage’s BP will see the opportunity and go for the throat, as it were.

        Nigel Farage has pledged to abolish the licence fee.

    • Mark B
      Posted July 24, 2019 at 8:17 am | Permalink

      Dominic

      If there were two sectors that need urgent reform, it would be the QUANGOS and the so called charities. Both are totally out of control.

      • Lifelogic
        Posted July 24, 2019 at 3:58 pm | Permalink

        They are indeed. Especially the fake green ones and animal ones they are more multinations businesses and propaganda outfits than charities. Many are just unfair competition to private businesses without the tax breaks. Alot of them are doing actual net harm. Scrap the tax benefits of charities other than in genuine and limited areas and cut general tax rates for all. Then people can afford to give (from their taxed income) if they want to.

    • cynic
      Posted July 24, 2019 at 10:01 am | Permalink

      Ridding ourselves of the undemocratic E U is the first step. We then need a cut to government spending on N G Os and Quangos.

      They not only provide employment (sheltered from the discipline of competition) for people who espouse soft socialist, illiberal, leftist causes; but campaign for more government spending and regulations which damage the productive side of the economy.

      Spending for political reasons is nearly always money down the drain. It is indeed odd that those who spend public money are considered by many to be more worthy than those who create the wealth.

      • Mitchel
        Posted July 24, 2019 at 3:04 pm | Permalink

        War is peace
        Freedom is slavery
        Ignorance is strength

        and the one Orwell forgot to add:

        Debt is wealth!

        • Fred H
          Posted July 24, 2019 at 7:50 pm | Permalink

          longevity can be misery.

  4. Roy Grainger
    Posted July 24, 2019 at 6:04 am | Permalink

    Savers complaining about low interest rates should rank near the bottom of problems to be addressed by the new Treasury team. With low inflation savers needed only to step a short way up the risk profile to match inflation.

  5. Newmania
    Posted July 24, 2019 at 6:04 am | Permalink

    We are talking about some of the wealthiest people in the country most of whom voted for Brexit which will force interest rates to stay down for longer ( if we can )
    No-one will shed any tears for them, and it is one of the few aspects of this whole disaster that gives me some grim satisfaction.

    I cannot recall any time in my life when the old have been so disliked by the young, sometimes it is unfair, but often it is not .

    • Cliff. Wokingham
      Posted July 24, 2019 at 10:53 am | Permalink

      Perhaps it is because “the elderly” are the only group left that don’t have any protection from so called hate crime laws.
      It is sad that the media regularly run stories to stir up the war of the generations.
      Young people seem to forget that we all worked for our so called wealth in conditions that would be totally alien to the snowflakes generation of today.
      We didn’t start of with our own homes all fully furnished with every mod con. We didn’t go off around the world or drank lots of overpriced coffees from expensive coffee shops.
      We cut our coat according to the cloth.
      Throughout history there have been winners and losers. For every wealthy pensioner, there are many poor ones. We tend to just get on with it which is a trait which could benefit many people today.

      Many youngsters are funded by the bank of mum an dad or nan and grandad. Again some have wealth, others don’t.

    • Anonymous
      Posted July 24, 2019 at 11:26 am | Permalink

      Of course, interest rates were low long before Brexit and savers using current accounts are not wealthy. Just prudent and only guilty of not being fly enough.

      The young have plenty of people to dislike before the old. Instead they are taught to venerate them – such as welfare cheats, gangsta rappers, Marxists, mafioso and drug pushers.

      The old WERE thinking of their children and grandchildren when they voted. It is lies about the old having spite for their offspring that has caused the dislike of them by the young.

      We agreed to vote as one nation in the referendum.

      You have done everything since you lost it to divide the nation geographically and demographically. Wicked and divisive.

      You cannot accept that The People still want Brexit after all these votes and the annihilation of CHUK and that is why your party has chosen Boris. Hopefully a general election will put an end to it.

    • Roy Grainger
      Posted July 24, 2019 at 11:29 am | Permalink

      Nonsense. You know nothing about “the young”. All we can say with certainty is the old are disliked by other old people like you and Andy, although his children may dislike him – not sure.

    • Lifelogic
      Posted July 24, 2019 at 11:35 am | Permalink

      Not to worry, perhaps these youngsters will get a little wiser as they age so many seem to think money grows on trees and Corbyn is Father Christmas. They have mainly fallen for the unscientific climate alarmist lunacy and think big government and high taxes are the answer they are not at all.

      Not sure what they are complaining about really. Now they can buy a phone for £50 and get all the music, films, books, social media, booking system, phone calls etc. they want to for nothing or almost nothing. I can remember having to work about two day at Woolworths (or slightly less at the local Bakery) just to buy one LP record and about 30 days to buy my decent quality JVC stereo radio/cassette player/recorder. Plus the phone & video calls are virtually free now too.

      When I went up to Cambridge for the interview the train ticket etc. cost me about 25 hours of part time work to but it. So when they did not actually interview me and just offered me the place (Maths/Physics) my first thought was:- why on earth did you not not just call me or send a letter and save the money? I did not actually say this but perhaps I should have done.

      • formula57
        Posted July 25, 2019 at 6:00 am | Permalink

        “… why on earth did you not not just call me or send a letter and save the money?”

        They wanted to get a look at you before making the offer they were minded to make perhaps?

    • a-tracy
      Posted July 24, 2019 at 11:54 am | Permalink

      What is it Newmania with you and Andy and age? I know lots of young people none that ‘dislike’ the old, either their own relatives or other people. In fact, the majority are very helpful, friendly and respectful. The only people I see with hate and bile in their mouths and faces are those remain protestors featured in videos recently shouting in elderly people’s faces and one dragging an elderly chap to the floor because they don’t agree with them.

      • Andy
        Posted July 24, 2019 at 4:09 pm | Permalink

        There is a difference between disliking an old person – and disliking policies espoused by and created specifically to favour old people.

        I want nothing more nor less than the elderly to be treated equally. And they are not. They are currently treated favourably.

        Most of my taxes go on services for the old. Pensions, your healthcare, your social care and your old age perks. I want a tax cut. I favour personal responsibility. If you want this stuff you save for it and you pay for it yourself. And, as I have said all along, most of you take more out of the system than you have ever paid in. That is not sustainable.

        Sell your homes to pay for your social care. That is perfectly acceptable. You should pay for your own care. I should not pay for your care for you.

        Why are you all so feckless?

        • Anonymous
          Posted July 24, 2019 at 5:27 pm | Permalink

          Fine. But it isn’t perfectly acceptable to pay twice the care home fee to subsidise the person – who didn’t save – lying in the bed next to you.

          What about a rebate for private pension raids and what about a rebate for national insurance then ?

        • Edward2
          Posted July 24, 2019 at 5:30 pm | Permalink

          Most of your taxes do not go on old people.
          Deduct pensions which are paid for by National Insurance payments we have paid in every week for over 39 years of work in order to get a full State pension
          In addition many of us contributed to an employee pension scheme or paid into an additional private pension.

          Many of us have paid for private health insurance cover.
          Others have made little impact on the NHS whilst your obese, unfit drug taking, binge drinking generation fill the A and E wards every weekend.
          One day, sooner than you think, you will be old and perhaps before you get old an illness might befall you.
          Not that I wish that happens at all.

          Andy, we live in a communal society where those of us that can, help the minority who for one reason or another need help.
          Being old is just one reason you may need help.

        • a-tracy
          Posted July 24, 2019 at 9:48 pm | Permalink

          Andy, you are just a wind-up merchant. You’re can rest easy tonight you’re not paying a 1p towards me 😜.

    • Fred H
      Posted July 24, 2019 at 12:46 pm | Permalink

      New mania….. ‘the old have been so disliked by the young’.

      Search your conscience….you sound like a paid-up member of the ME, ME, ME generation.
      Unlike other generations of youth – have you – – fought (and clearly not died) in wars, toiled dawn to dusk in the fields, shifted unsafe cargoes in the docks, stooped on knees hacking coal, huddled around a single dirty smoky fireside in your family home with vulnerable frozen pipes, foregone holidays and taken for granted recreation?
      I think not.
      And when you suffer sickness, unemployment and need life changing medicare – previous youth got nothing.

      You are selfish and should be ashamed.

      • Andy
        Posted July 24, 2019 at 3:50 pm | Permalink

        You have not done any of those things either.

        • Fred H
          Posted July 24, 2019 at 8:00 pm | Permalink

          Wrong!! with a young family of 3 children we didn’t have what young marrieds have today – beautiful kitchens, new cars (plural!) new tvs, foreign holidays, child care, nights out, weekends away, lovely affordable clothes. As a child my first 10 years were spent in a council house with a boiler for hot water, and one grated fire. Coal and coke was prohibitally priced, fogs were pea-soupers. Recreation was a ‘tired’ leather football in the street (who had cars?)
          So, Andy you continue making stupid, wild generalisations of which you have no evidence.

          • Edward2
            Posted July 24, 2019 at 9:00 pm | Permalink

            Well said fred.
            Some people have no idea what struggles we have made in our past.

          • a-tracy
            Posted July 24, 2019 at 9:55 pm | Permalink

            Fred don’t forget we didn’t get:
            Child Tax Credits
            Working Tax Credits
            Extended maternity leave and paternity leave
            Child savings bonds
            Education Maintenance allowances (stalled now but around for a decade)
            Oh and when we were paying our mortgages the rates were 8-14% and we went without annual holidays to afford the ups.

            The balance of benefits is not what Andy makes out, they can’t compare paid in defended contribution national insurance benefits with general taxation benefits.

          • Andy
            Posted July 24, 2019 at 10:06 pm | Permalink

            So you have not fought in wars or toiled in the fields. You grew up in a council house and played football in the street.

            Me too. Except I played cricket and on a second hand bike.

            The one making stupid generalisations is you.

          • margaret howard
            Posted July 24, 2019 at 10:30 pm | Permalink

            Fred H

            ” As a child my first 10 years were spent in a council house with a boiler for hot water, and one grated fire. ”

            That’s how millions of people lived then. In fact many of my friends would say you were lucky to have had hot water.

            But many of the old are disliked because they keep on and on about their harsh lives and now expect the younger generations to pay for it all. Many clog up doctor’s waiting rooms because they are too mean to pay for a packet of paracetamols.

          • Narrow Shoulders
            Posted July 25, 2019 at 7:17 am | Permalink

            A handful of hot gravel? You were lucky.

            It is right that each generation should have a better experience than the one before. Boomers did indeed have it hard but many of them have taken advantage of prevailing conditions to do well for themselves. Good for them, I should be so lucky.

            The current generation suffers from government equality policies encouraging two earner families and increasing the tax take from workers. Those and the unrestrained creation of money has made living costs rise disproportionatly placing a heavy burden on the young starting out.

            Having the latest phone, leaving home sooner, holidays, coffees and avacodos don’t help, nor does unfettered immigration but the root cause is dual income families and money creation.

          • Edward2
            Posted July 25, 2019 at 7:34 am | Permalink

            You do come out with some nonsense Margaret.
            You would recoil against anyone being discriminating or racist but to denigrate people just because they are old seems OK to you and Andy.
            We “don’t expect the younger generation to pay for it all”
            Pensions are not welfare
            They are paid from years of National Insurance contributions.

    • MB
      Posted July 24, 2019 at 12:49 pm | Permalink

      Heartily reciprocated.

    • Edward2
      Posted July 24, 2019 at 12:50 pm | Permalink

      Nonsense.
      The wealthy voted to remain not leave.
      The rich edtablishment love the EU.

      • hefner
        Posted July 24, 2019 at 2:07 pm | Permalink

        Oh yes? There is an interesting list of the 50 most generous political donors from the Sunday Times Rich List of 2018 in “Rule Britannia”, Dorling & Tomlinson, 2019 (their Fig.0.1, p.8).There are 47 donors to the CUP, 1 to the SNP (in 8th position), 1 to UKIP (in 28th position) and 1 in 43th position sharing their donations between Cons/Lab and LidDems. So the question I am sure Ed2 is going to retort is that these donations might not be to the leavers’ fraction of these parties. However funnily enough most of these donors supported Leave according to the authors. I did my own little research on the list’s first 20 donors and indeed all but the SNP donors are Leavers.
        So Ed2 what are your references for your claims that “the wealthy voted to remain not leave” and “the rich establishment love the EU”. Or are you just following what you are being fed day in day out by your favorite media/newspapers/websites. I would certainly agree with you: it requires much less work and attention to follow the mainstream of this blog.

        • Edward2
          Posted July 24, 2019 at 6:30 pm | Permalink

          Now you switch it to donors hef.
          Look at the establishment and look at the new pro EU elite
          They all love the EU.
          Media, PLC businesses, quango land, the charity sector, public sector top staff, civil servant top levels and so kn.
          Stop fooling yourself.

          • hefner
            Posted July 24, 2019 at 10:12 pm | Permalink

            Now you appear to consider establishment and pro-EU elite as the same group or at least consider them to have a huge intersection. The problem is that when calling”establishment” and “elite” you follow exactly what populist leaders have always been encouraging, over the years, from Huey Long in the 1892 USA to the present POTUS, from Ross Perot/Pat Buchanan in the 90s to the Tea Party and France’s Marine Le Pen.
            The English pride themselves not to have ever succumbed to this type of foreign disease.
            Look at yourself in the mirror in the morning and wonder: am I being conned? Stop fooling yourself.

          • Edward2
            Posted July 25, 2019 at 7:39 am | Permalink

            I do consider them to be the same group.
            I’ve given you a list of establishment groups who can be easily described as the elite and all of them are pro EU.
            The initial comment claimed the rich establishment are all leave supporters.
            Plainly that is not correct.

          • hefner
            Posted July 25, 2019 at 12:26 pm | Permalink

            “Nonsense.
            The wealthy voted to remain not leave.
            The rich establishment love the EU.”
            A => B
            C => D
            That what you originally said.
            Just as one can do with logics, I was pointing out that some A /=> B and some C are in fact .not.D.
            QED.
            Does such simple thingies go over your head?

          • Edward2
            Posted July 25, 2019 at 6:50 pm | Permalink

            You are wrong again but I notice you are getting all remainer style snobby and superior.
            Butwill not change the basic facts.
            From the House of Lords to the CBI to all Quango bosses to all Charity sector bosses to all top Civil Servants to all he media lovies, nearly all the rich elite establishment love the EU.

        • hefner
          Posted July 27, 2019 at 9:29 am | Permalink

          Very good, you keep your way and I’ll keep my ‘snobby and superior’ way. But still you do not have the first bit of a proof that your original two sentences (24/07 12:50pm) are true.

      • margaret howard
        Posted July 24, 2019 at 10:35 pm | Permalink

        Edward2

        “The rich edtablishment love the EU.”

        Really? So if it is not the establishment coterie who have just given us our new prime minister who are they?

        • Edward2
          Posted July 25, 2019 at 7:45 am | Permalink

          It was previously claimed that the “rich establishment” were “all leave supporters”
          Plainly that is not correct.
          The rich love the EU from the House of Lords down.
          PS
          The Conservative Party choose a new leader.
          Out of the final choice of two candidates put to the ordinary party members they chose Mr Johnson.
          Similar systems exist in the other political parties.

          • hefner
            Posted July 25, 2019 at 12:31 pm | Permalink

            I did not say that ‘economical.with.the.truth’, I never said the whole rich establishment are all leave supporters, but you said “the rich establishment love the EU”.

          • Edward2
            Posted July 25, 2019 at 6:55 pm | Permalink

            You have excitedly joined in this debate hefner and you have now missed the original starting point.
            And you gave now gone off on a tangent.

    • Everhopeful
      Posted July 24, 2019 at 12:52 pm | Permalink

      Newmania
      I dare say that the old dislike the young a great deal if the young are unpleasant to them.
      Ever heard of identity politics?
      Those who indulge in age baiting are either being manipulated or are manipulators!

    • L Jones
      Posted July 24, 2019 at 3:09 pm | Permalink

      In the real world, Newmania, I doubt if any of us have noticed that the young ‘hate’ the old. Perhaps you and Andy sadly suffer from dysfunctional family relationships, and you don’t get out enough to realise that not all the world is like your narrow idea of ‘reality’.

    • steve
      Posted July 24, 2019 at 6:23 pm | Permalink

      Newmania

      “I cannot recall any time in my life when the old have been so disliked by the young,”

      Well what do you expect ?

      The old get brand new virtually free cars at taxpayer’s expense, preferential parking spaces, unrealistically low insurance – when they’re more likely to cause an accident.

      They enjoy big fat juicy pensions most of us would never be able to have. They get priority when seeing a doctor – to the point where they clog up the system.

      And their property – bought in 1960 for five hundred quid and if they sell up they want much more than a young couple could even dream of, despite having a life expectancy of maybe two years.

      McMillan was right about that crowd; “they’ve never had it so good”

      Of course there’s resentment, understandably so in my opinion.

      • L Jones
        Posted July 24, 2019 at 8:23 pm | Permalink

        Good grief, Steve! That was better out than in, wasn’t it?

        • steve
          Posted July 25, 2019 at 6:29 pm | Permalink

          Yeah well, had to be said

  6. APL
    Posted July 24, 2019 at 6:15 am | Permalink

    JR: “A policy of money creation which should have induced inflation has not done so, given the pressures against credit and inflation in the rest of the system.”

    You’ve been banging that drum for ages, and it is just false.

    Anyone who has to live on earned income near the average income, knows there has been plenty of inflation.

    Or, are you saying the government figures are incorrect and it hasn’t met its 2 – 3 % inflation target ?

    • BillM
      Posted July 24, 2019 at 11:38 am | Permalink

      How CPI and RPI are calculated do need a complete overhaul. Excluding foodstuffs is of no use to the ordinary folk, who spend a higher proportion of their income on their homes and food than do the better off.
      Yes, food prices do fluctuate but what is wrong with using a Simple Moving Average to achieve a figure for a basket of edibles, say, on a weekly basis? This can be repeated across a diverse range of other products to display a factual number, not a conjured one. Or is this too easy and too honest for Whitehall to contemplate?

      • miami.mode
        Posted July 24, 2019 at 5:09 pm | Permalink

        Bill, you’re going to tell me next that they still have people going round shops and stores writing down prices when with a simple home computer the majority of prices of many items can be easily obtained. With the resources of the Treasury they should easily be able to keep a weekly check on most prices although services may be a bit more difficult.

        • Al
          Posted July 25, 2019 at 6:55 am | Permalink

          “a simple home computer the majority of prices of many items can be easily obtained.”

          Sounds like the Treasury needs an agreement with mySupermarket to scrape their data once a week.

        • BillM
          Posted July 25, 2019 at 1:33 pm | Permalink

          I know not how they obtain their figures but I’d bet on a system that was born in the last century probably post-war and has never been updated nor properly modified. Sir Humphrey and his ways and means are set in stone!

    • A.Sedgwick
      Posted July 24, 2019 at 2:00 pm | Permalink

      Inflation calculations have always been biased towards Treasury requirements. RPI, which includes housing costs, has been rapidly sidelined over the years – too close to reality. True inflation concentrating what the “ordinary” people need to buy is always substantially over even RPI.

    • acorn
      Posted July 24, 2019 at 5:05 pm | Permalink

      When a central bank operates QE it is not “creating money”, it is simply swapping government debt (actually private sector savings instruments) back into the cash that bought those savings instruments originally. The process does not increase the “net fiscal assets” in the economy; and hence, is not likely to increase inflation for the following reason.

      The fact that savings instruments – Gilts – were surrendered to get cash back, does not mean that the Gilt surrenderers, were going to spend it on wine, women and song and boost inflation. They are more than likely to continue saving in some other form.

      QE was designed to force them to continue to save the cash back by buying shares in quoted corporations; thus jacking up share prices. Those jacked up share prices would enable said corporations to offer larger collateral against private sector bank loans for expanding their business. It has and still is, failing to do any such thing.

      Japan is a classic case of how not to do MMT. Every time the Japanese economy shows signs of expanding, “Abenomics” fiscal austerity, increases sales taxes, to reduce the budget deficit, which knocks the Japanese economy, back into stagnation.

      Japan, EU and UK have large domestic demand side deficiencies. Because they all operate the neoliberal austerity (balanced budget) economic model. Japan’s version has created a situation where households are saving 40% of their income in government bonds and are frightened to spend Yen, fearing their old age care costs. Hence, Japan’s Treasury (not its central bank), has a lot of its “units-of-account” (Yen)” that it is not getting back via taxation in a normal spending cycle.

      PS. There is no current Westminster MP that has the first idea how a sovereign fiat currency macro-economy actually works.

      • APL
        Posted July 24, 2019 at 9:41 pm | Permalink

        acorn: “The process does not increase the “net fiscal assets” in the economy; and hence, is not likely to increase inflation for the following reason.”

        Of course the government doesn’t want to ‘increase inflation’ it’s calculated that at 2% to 3% per annum it can ruin you over 50 years and you won’t notice.

        According to the Bank of England’s own inflation calculator – to get the same purchasing power of £10 in 1968 you’d have to spend £170.37 today.

        You think that asset you purchased has appreciated in value because some greater mug will buy it off you for twice what you paid for it? You’ve actually lost on the deal.

        Inflation that you don’t notice? That’s why you can barely buy a chocolate bar for a pound.

        acorn: “QE was designed to force them”

        QE over the last decade was designed to keep dead banks walking. At least £120bn thrown at RBS alone. It would have been better to pay off each employee with £1000,000. We might have even got some new businesses out of it.

        acorn: “Japan”, Don’t care about Japan.

  7. Bryan Harris
    Posted July 24, 2019 at 6:17 am | Permalink

    It’s not true that politicians get everything wrong, but the more they mess around with natural cycles the more chances there are that something awful will happen.

    We can see quite clearly how stagnation comes into effect when interest rates are kept low instead of given free reign. Everyone suffers, with low wages or lower production. I’m not encouraging high interest rates but they do have a place in the natural cycle of the economy.

    Stagnation inhibits growth and innovation and is far worse than inflation, which the EU proves only too well.

  8. Stephen Reay
    Posted July 24, 2019 at 6:24 am | Permalink

    Low interest rates isn’t the problem. It’s about having fair rates, rates below inflation is simple theft from savers and this government and the B.O.E is facilitating it. Remember it was poor regulation from governments and bad behaviour from banks have got us into this mess in the first place. The time is right to have rates set above the level of inflation even if it’s done gradually.

    • Mark B
      Posted July 25, 2019 at 4:56 am | Permalink

      I agree.

  9. Lifelogic
    Posted July 24, 2019 at 6:28 am | Permalink

    One of the biggest problems in the UK is over the top bank regulation, high margins, high fees restrictive terms and a lack of much real competition from the banks. Particularly on development and commercial property lending.

    One major bank has advert saying “it is good to talk about money”. Indeed it is, let’s talk about why some Major banks can get away with paying say 0.2% on deposits yet can charge daily overdraft fees that are about 350 times more than this at circa 68%. Plus they do so in a way that they can avoid telling customers what the real rate is. One rate for all customer good or bad it seems.

    Why bank margins, that used to be perhaps base +1.5% or so, can now be +3.5% to 60%+ often with huge fees on top too and five year renewal fees. Where is some real competition?

    What is needed is for the private sector to be able to borrow to invest and at sensible rates. The government can borrow cheaply, but they generally waste it anyway.

    • Lifelogic
      Posted July 24, 2019 at 7:41 am | Permalink

      The Chancellor, the bank of England, the FSA, the competition authorities and May’s appalling socialist government have all totally failed to ensure any real & fair competition in the banking sector. The banks, since the crash of 2007/8, have managed to away with totally ripping off customers (both the borrowers and the depositors). Cut out the middle man seem to be the best option (where you safely can do). This has done huge harm to the real economy.

      They are also very slow and bureaucratic, taking months and needing endless information to agree loans that used to be all agreed and settled within a few days before the crash. I am often put off sensible investments and developments because I cannot really be bothered with all the hassle of dealing with them now. Especially for commercial property or development property or business acquisitions.

      • Lifelogic
        Posted July 24, 2019 at 12:11 pm | Permalink

        The dire May just now:- “I voted three times for a good deal”. She still thinks her £39 billion sell out/vassal state W/A is a good deal. Is she a liar or just rather thick? Or perhaps she just did not understand it?

        Mother of the house Harriet Harman said of May:- “Even her harshest critics must recognise her integrity, her commitment to public service and her dedication to this country”.

        No one that I know agrees. She was the compete reverse of all these things. Zero integrity, a completely broken compass, a tax to death government know best fool, and a total dedication to make the UK a vassal state of the EU while paying £39 billion + for this. Just go you vile woman.

        • Lifelogic
          Posted July 24, 2019 at 1:15 pm | Permalink

          Not much difference really between Theresa May and Harriot Harman really. Both left wing, tax and regulate to death, identity politics pushing, politics of envy, intellectually challenged, pro EU, anti-democratic, green crap spewing women with their “it’s cos I’m a woman” chips on their shoulders.

          • Sir Joe Soap
            Posted July 24, 2019 at 3:20 pm | Permalink

            Indeed.
            The best service she could have done was to have nothing to do with politics about 30 years ago.
            Go and be a school governess or some child’s nanny. NOT OURS!

          • Lifelogic
            Posted July 24, 2019 at 5:21 pm | Permalink

            Exactly.

  10. Mike Stallard
    Posted July 24, 2019 at 6:30 am | Permalink

    The government is heavily in debt.
    So the interest rate has to be kept low.
    People like me – an OAP with minimal savings which I live off and a (free inherited house in an estate in an unfashionable part of the country) pay the price.
    People starting up new businesses benefit.
    Swings and roundabouts.

  11. Everhopeful
    Posted July 24, 2019 at 6:30 am | Permalink

    The message is loud and clear…
    Work all your life.
    Do as you are told.
    Pay your taxes.
    Do the “right” thing ( as decreed by the govt of the day).
    Save for your old age.
    Do this for about 40 miserable years and as a reward you’ll be well and truly shafted.
    ( Why put money into shares? Just go out to the bookies with a fistful of cash …it’s no different!)

    • Everhopeful
      Posted July 24, 2019 at 6:40 am | Permalink

      GDP only helps those at the top.
      “Trickle down” has never worked.
      Benefits have never eradicated poverty.
      Signs of wealth in most are down to borrowing.
      We, the ordinary…the grave diggers…we paid and are paying for the “salami slicing” of the banks ( Mrs T de-regulated?) and the nice old banks just refinanced their own coffers with QE and withdrew most services to the public.
      Actually ..after a recent experience I would say …ALL services withdrawn.

    • steve
      Posted July 24, 2019 at 6:31 pm | Permalink

      Everhopeful

      “Do this for about 40 miserable years and as a reward you’ll be well and truly shafted.’

      But not if you’re a middle management toady whipping boy, or a civil servant, then you get handsomely rewarded for all those years of selling fellow workers down the river, or doing the dirty work of unpopular government.

      The rest of us just get shafted, as you point out.

  12. eeyore
    Posted July 24, 2019 at 6:31 am | Permalink

    No return on savings while the printing presses roll. They call it “quantitative easing” now but it’s still robbing the prudent to reward the feckless. The only difference is that it goes straight into assets and ordinary people get nothing but the bill.

    • Mitchel
      Posted July 24, 2019 at 1:58 pm | Permalink

      For those that believe in Trumponomics(is that you,Boris?),Andrew Neil has a reflective comment on twitter today:

      “The US national debt was $19trillion when Trump took power and passed $22trillion this month.Even with interest rates remaining abnormally low,the Federal govt will pay out more than $350bn this year to service that debt.

      Two swift conclusions:Trump has shredded the Republican reputation for fiscal conservatism and budget prudence.The Trump tax cuts did not “pay for themselves.”They have widened the deficit substantially.”

      And this at a time when there are serious initiatives underway to undermine the $ system.

      • Peter Parsons
        Posted July 24, 2019 at 2:57 pm | Permalink

        When campaigning to become President, Trump claimed he would eliminate the entire US national debt in 8 years.

      • Dennis Zoff
        Posted July 24, 2019 at 5:00 pm | Permalink

        Mitchel

        You are right, Trump took the deficit to $22T from $17T (endless parade of economical editorial opinions)…..but who took it to $17T?

        Reply The Democrats helped him with substantial spending demands to agree a budget

  13. Lifelogic
    Posted July 24, 2019 at 6:46 am | Permalink

    “Some will argue that giving states so much access to cheap capital will distort markets too much and lead to too many ill advised investments by governments.”

    As we have seen almost endlessly. Surely all sensible people will agree with this? And often this “investment” by government is not just bad it is positively harmful or unfair competition to the private sector as we see in education, energy, renewable lunacy, health care, long term care, social housing, transport subsidies and elsewhere it creates dire state monopolies and kills more efficient completion and innovation.

    What is good, for example, in saddling young people with £50k of debt ( that they are unlikely to ever repay) for a worthless degree in gender and media studies from say the University Bognor or similar? Or subsidising the technology of electric cars before it is cost effective or the technology competitive? It does not even save CO2 overall.

    • Lifelogic
      Posted July 24, 2019 at 6:48 am | Permalink

      Or sending men to the moon or into space costing billions all for no real return at all in most cases.

      • Al
        Posted July 25, 2019 at 7:07 am | Permalink

        One of the smartest things the US Government did with regard to the moon landing was set up a patent office connected to NASA to patent all of their developments and the results of research for use in industry.

        Given the techniques that made their way into common products, from injection molding techniques and memory foam to cochlear implants and phone cameras, it has certainly boosted technical development.

  14. Lifelogic
    Posted July 24, 2019 at 6:57 am | Permalink

    According to the Telegraph:-

    Boris will also make it the most ethnically diverse Cabinet in history, with Alok Sharma, the employment minister, among those to be given their own department, and the number of female secretaries of state also increasing.

    Fine if they are appointed on merit and have working compasses. Not if the are appointed for reason of superficial “diversity”. Working compasses that point to far less government, a real clean Brexit, far lower and simpler taxes, far less red tape and a sensible energy policy have been totally absent from government since Margret Thatcher was evicted from office and even she did not do enough of it and by some margin. I do not think Javid, for example, will be a good choice for no 11 at all.

    • Lifelogic
      Posted July 24, 2019 at 6:59 am | Permalink

      “Margaret”

    • Sir Joe Soap
      Posted July 24, 2019 at 12:52 pm | Permalink

      We will soon know
      Thumbs up – he gets the ok
      Thumbs down – Nigel gets the ok

      Win win

      • steve
        Posted July 24, 2019 at 6:37 pm | Permalink

        Sir Joe Soap

        Very true, ultimately we can only win, and then get on with restoring the country to what it once was.

        But I do hope Boris can do what he’s promised.

        • margaret howard
          Posted July 24, 2019 at 10:48 pm | Permalink

          Steve

          “then get on with restoring the country to what it once was.”

          You mean before EU membership?

          I can tell you as I was there. We were known as the ‘Sick man of Europe’

          The reason Britain joined the EU (at the third attempt) was, in large part, a desperate attempt to find a way of forcing the country to become more competitive.

          By the mid-1990s, the trick seemed to have worked. In particular, London, which lost a quarter of its population between 1939 and the early 1990s, became a global, self-confident city, attracting expats from all over the world.

          All will now be lost again. What folly!

          • Edward2
            Posted July 25, 2019 at 12:37 pm | Permalink

            It was three terms of good reforming Conservative Government that made the UK better off.
            The EU just got in the way.

          • steve
            Posted July 25, 2019 at 6:27 pm | Permalink

            Margaret Howard

            “You mean before EU membership?”

            Before left wingers pulled it down with their political correctness, and when the surface fleet consisted of approximately 350 warships, when we actually designed and built aircraft, the best aircraft in the world.

            A time when you could freely speak your mind in your own country.

            A time when no one messed with us.

            So yes, as it happens, before EEC membership.

            You may note that this country didn’t join the EU, we were betrayed into it. The EEC is what we joined.

    • L Jones
      Posted July 24, 2019 at 3:19 pm | Permalink

      As soon as I see the word ”diversity” my hackles go up. Why not meritocracy?

      We don’t care about ”diverse” – we want ”dedicated”.

      • Lifelogic
        Posted July 24, 2019 at 5:24 pm | Permalink

        We want the best people to do the jobs. If you aim for diversity you are limiting yourself and clearly will not be able to select the best.

  15. oldtimer
    Posted July 24, 2019 at 7:06 am | Permalink

    Changes in the tax rules that apply to savings and risk investments such as shares are just as damaging as persistent low interest rates. Brown’s decision to impose a tax on dividends earned by pension funds (c1997/8) destroyed final salary pension schemes over the next twenty years. Hammond’s decision progressively to reduce the capital (to £1 million?) that can be set aside for a personal pension is causing a crisis in the health service as GPs and hospital consultants conclude it is no longer worth working at penal tax rates. I read that the latest, ill-advised, advice to the government is to remove the IHT relief presently available on qualifying AIM investments held for a minimum of two years. Let us hope that the new Johnson government consigns this advice to the bin, doubles to £2 million the amount that can be saved in a personal pension pot and introduces personal tax rates that will actually incentivise people to work and to invest in the productive economy.

  16. Anonymous
    Posted July 24, 2019 at 7:08 am | Permalink

    On a personal level one has to adapt. I bought a much nicer home against my own instincts using cheap money. I didn’t quite have enough loose change or knowledge to play the stock market.

    I also put borrowed money into my kids’ education which has elevated them into a totally different social strata.

    Trying to save money in low interest accounts and hunker down would have been totally the wrong thing to do.

    The irony is that it was a Lefty friend of mine who encouraged me to do it. All the conservative minded people warned me against.

    • Lifelogic
      Posted July 24, 2019 at 11:45 am | Permalink

      Indeed if you can borrow and watch your debts devalue with inflation and your assets increase in value it is often a jolly good thing to do. But if it is not if it is not you main house the state will tax you on the income/rents if any and the “gain” at high rates without indexation so it is not a real gain at all. If Corbyn gets in they will probably just steal the assets off you in some way or other anyway.

      Then again that is exactly what Hammond’s landlord and thus tenant tax does. Thank goodness we are rid of him and May today. The Proseco (my wife is Italian) is in the fridge already!

      Even if it is your main house they will probably steal 40% of it off you on death (over just 325k each) due to the IHT ratting by Hammond!

      • Dennis Zoff
        Posted July 24, 2019 at 5:08 pm | Permalink

        Lifelogic

        My German wife has a fine bottle of German white wine in the fridge also…ready to celebrate May and Hammond’s departure. Happy days!

      • steve
        Posted July 24, 2019 at 6:40 pm | Permalink

        Lifelogic

        “Even if it is your main house they will probably steal 40% of it off you on death”

        Sell it real cheap to a family relative a few years before you die.

        • Lifelogic
          Posted July 28, 2019 at 4:10 pm | Permalink

          Well HMRC do have rules about connected transactions and general anti-avoidance.

  17. Ian Wragg
    Posted July 24, 2019 at 7:24 am | Permalink

    First let me congratulate Boris on bringing a breath of fresh air to the country.
    Let’s hope the thunder storms last night finally washed away the grey miserable Mays, Hammo d’s and Grieves.
    It’s over 10 years since the taxpayer bailled out the Banks and we are still subsidising them through low returns on our savings. It’s time we were properly rewarded.

    • Lifelogic
      Posted July 24, 2019 at 11:51 am | Permalink

      Grieve say he will not be joining the LibDems (who are clearly very anti-liberal and anti-democratic) as he would have trouble adjusting to the policies of another party. Why? The idiotic policies are surely exactly the same is his! And his beliefs, like T May’s and P Hammond’s are not anything like sound Conservative ones.

  18. Kevin
    Posted July 24, 2019 at 7:31 am | Permalink

    The ability of savers to get a fair price for their wages should be subject to
    ordinary market forces. This is a simple question of fairness.

  19. alexP
    Posted July 24, 2019 at 7:51 am | Permalink

    It would seem Sir John has all the experience and qualifications for promotion to no.11, a perfect opportunity for him to show off his talents and steer us clear. If Boris doesn’t appoint him then I for one will be wondering why? could it be Boris or is it Sir John that is out of step?

    • outsider
      Posted July 24, 2019 at 4:52 pm | Permalink

      You are right Alex. Am I alone in half wishing that this is Sir John’s last Post for a good while, although the other half of me would regret the loss to economic debate? As I understand it, Sir John has never served in the Treasury, where his combination of understanding the big picture and mastery of detail have been badly needed. Even if our host only had responsibility for tax matters or for public spending, he could make a big difference. With luck, this comment might not even make it to moderation.

  20. John Probert
    Posted July 24, 2019 at 7:58 am | Permalink

    Markets have been riding high for some time now and I think a cyclical correction
    is on the cards for 2020. Many of course will blame Brexit but this will simply
    not be true

  21. Shirley
    Posted July 24, 2019 at 8:37 am | Permalink

    I put a big chunk of my savings into Premium Bonds. I am very risk averse and the interest rate on low risk accounts just isn’t worth having. If you want a less pathetic rate of interest (but still appallingly low) you have to tie your capital up for years and pay a penalty if you withdraw early.

    Still, I suppose it’s better than the negative interest rates being offered in some EU countries.

    • steve
      Posted July 24, 2019 at 6:46 pm | Permalink

      Shirley

      “I put a big chunk of my savings into Premium Bonds.”

      I did that, never got a single win. Waste of money total rip off.

      Same for the lottery, funny how people with criminal records seem to get the big one. also I don’t trust a draw where the organisers have possession of your numbers prior to the draw.

      Fact is you can’t get rich by these scams, if you could everyone would be doing it.

  22. Fred H
    Posted July 24, 2019 at 8:38 am | Permalink

    For far too many years saving has been beyond lower income families. Pathetic savings rates has meant that money has gone on cars (made in Germany), bathroom/kitchen makeovers( materials from EU, labour often from EU), foreign holidays etc.
    Osborne, Hammond have depressed our economy, businesses have not expanded due to the uncertainty, and now the 3 year nonsense of Brexit has revealed a fault line in the UK political landscape. Cameron took us to a poor coalition, and now May has dragged us through a gutter of despair.
    The people voted for Brexit, they had better get it, Boris is the only possible PM to seize the direction and self-confidence needed to restore what being British has always been about.
    I say Britain, but it is increasingly likely to be just England (and Wales?) in a few years to come.

    • steve
      Posted July 24, 2019 at 6:57 pm | Permalink

      Fred H

      “For far too many years saving has been beyond lower income families.”

      ……now beyond most average income families too, what with being held to ransom by fuel retailers and supermarkets.

      And then there’s the credit interest rates, total usury.

      If any leader of this country was serious about transforming the economy, that person would abolish interest on existing and future personal debt, and force fuel retailers to sell at £1 per Litre, and above all make it highly illegal to pass tax rises onto the consumer.

      …..Give us all a break !

  23. a-tracy
    Posted July 24, 2019 at 9:10 am | Permalink

    People on safe public sector pensions can take more gambles with savings “Those savers who decided to run the risk of losing money have often done very well.” People in the private sector who are relying on a defined contribution only pensions can’t gamble in the same way and have to save more and they are then punished by our public servants.

  24. formula57
    Posted July 24, 2019 at 9:44 am | Permalink

    The result of the policy of quantitative (really qualitative) easing with low interest rates is, of course, huge asset bubbles and mispriced risk. It avoided a horrible end to the Great Financial Crash but may lead to an endless horror and the chances of success in Japan in particular are I think slim.

    If we now get a proper Chancellor (the first since Nigel Lawson), perhaps the U.K. will fare better than most.

  25. formula57
    Posted July 24, 2019 at 10:02 am | Permalink

    O/T I see we are told to expect: – 14:15 M the Q goes to Buckingham Palace to tender her resignation to the Queen.

    So by say 14.30 hrs. today the cry can go up “Yes! We have no Quislings, we have no Quislings today!”

    Good job, even if done far too late.

    • Lifelogic
      Posted July 24, 2019 at 11:57 am | Permalink

      Indeed, but will they all really be gone from Government and what about all these quisling bureaucrats or the endless bias of the BBC? And will they anyway do even more damage from the back benches as Grieve and Hammond clearly intend.

      They all need to be deselected before the next election. Otherwise the Brexit Party will surely kill the Conservatives dead.

  26. Pominoz
    Posted July 24, 2019 at 10:18 am | Permalink

    Sir John,

    I very much respect your choice of subject for your diary today, but today, surely, is the day to focus on Boris. As such, we should surely congratulate him on his epic victory.

    He must now succeed in delivering the will of the people by Halloween. The fact that the EU have already declared they will not renegotiate the putrid WA is of great help. A clean WTO exit, unencumbered by any remnants of the WA, is the goal.

    A sovereign UK, free of the shackles and hindrances of the inward-looking and protectionist EU will, with the right leadership, once again, reassert itself on the world stage. Subversive agents, the sore losers from both sides of Parliament, must be prevented from sabotaging the clearly stated will of the British people. Boris needs a strong, optimistic, co-operative, resourceful and loyal team around him – all determined to achieve the type of Brexit which results in true independence for the UK with control of laws, borders, defence, trade and taxes. Nothing less will do.

    I wish Boris and his chosen team well and hope that you, Sir John, are one of them.

  27. Gareth Warren
    Posted July 24, 2019 at 10:21 am | Permalink

    I am one person who loses out due to low interest rates, I could go all in one shares but would be at a substantial risk of a crash.

    I also am slightly concerned about the value of sterling or any other fiat, if t drops too much then people abroad will ask for more, or perhaps even precious metals for trade.

    For that reason,while the bulk of my money is in sterling all new savings are either put into precious metals or shares. The shares I target are exporting type companies who would do well in a slump.

    While I do accept interest rates need to be low I also believe low rates are a problem as they encourage marginal investment, especially by governments. Worse still is QE, that legitimised Corbyn’ economic policy of printing money to nationalize since he now points at QE in the past not causing a crash. In the end QE will do just that, hopefully we can watch someone else use it too often.

  28. Denis Cooper
    Posted July 24, 2019 at 10:25 am | Permalink

    Off-topic, the SNP moot that a new Bill they have in mind could stop a no deal Brexit.

    Or even better from their point of view, what they openly want, stop Brexit altogether.

    https://www.bbc.co.uk/news/uk-scotland-scotland-politics-49062945

    “SNP considers bill to change no-deal Brexit default”

    They tried something similar in early 2017 with an amendment to the Bill to give Theresa May the power to serve the Article 50 notice, which they would have stopped on any one of five grounds, the last being that serving the notice could lead on to the UK leaving the EU without a deal.

    http://johnredwoodsdiary.com/2019/07/22/chiming-our-independence/#comment-1039139

    Then the snake Philip Hammond voted against the SNP amendment and for giving the unamended Bill its Second Reading, but now he has started to come clean about his true belief I expect he will support the SNP’s new Bill, if it emerges.

    And the same with Dominic Grieve, and David Gauke, and others.

  29. Denis Cooper
    Posted July 24, 2019 at 10:45 am | Permalink

    https://www.ft.com/content/6cd70552-ad2b-11e9-8030-530adfa879c2

    “No-deal Brexit poses threat to world economy, IMF warns”

    We’ve had this before, but not necessarily just for a “no deal” Brexit but any Brexit.

    And what I wrote on April 16th 2016 still applies now:

    http://johnredwoodsdiary.com/2016/04/16/questions-for-mr-corbyn/#comment-810402

    “If there is anybody in the world who would knowingly risk precipitating the global economic meltdown predicted by the IMF it could only be those fanatical politicians in our EU trading partners who see the EU primarily as a geopolitical project, and who stubbornly refuse to contemplate continuing the present “established trading relationships” with us unless we are still prepared to allow the entire population of the EU to come and live and work in our country.”

    Perhaps Boris Johnson should publicly point out to Michel Barnier that the Withdrawal Agreement he made with Theresa May will not be ratified and if he stubbornly refuses to re-open it then he will be responsible for any global economic collapse.

    Not the UK, if it proposes modifications which might make the agreement acceptable to MPs, but the EU with its refusal to consider making any modifications.

    • Know-Dice
      Posted July 24, 2019 at 5:22 pm | Permalink

      And from the EU:

      Mr Verhofstadt – “Politicised language from the Conservative leadership raising the spectre of a no-deal Brexit is unhelpful, irresponsible and only increases the risks of a catastrophic severance, which could destabilise the global economy,”

      Hmm..

      If you offer a rubbish deal how would you expect any reasonable person to react?

      To Mr Verhofstadt – may be if the EU had given at least something to David Cameron then it all could have been different.
      Don’t you learn from your mistakes?

      • margaret howard
        Posted July 24, 2019 at 10:56 pm | Permalink

        Know-Dice

        “may be if the EU had given at least something to David Cameron then it all could have been different.”

        Not that old chestnut AGAIN!

        The reason most other EU members are so pleased the UK is leaving and are unwilling to give any concessions now is that they had become sick and tired of constant UK demands for special treatment and opt outs.

        • dixie
          Posted July 25, 2019 at 6:33 am | Permalink

          @MH – you seem unaware of all the opt outs enjoyed by other EU countries – France, Germany, Austria, Denmark, Sweden, Netherlands all get rebates for example.

          Why should the people of the UK subsidise French and Spanish farmers so we can buy their produce at above world prices? How is that rationale and what have we ever got in return. And by “we” I mean the general public, not the euphilic civil servants and politicians who bask in privilege, expense claims and group hugs.

  30. Mitchel
    Posted July 24, 2019 at 11:00 am | Permalink

    An interesting area for our host to comment on would be the likely future shape of the financial system in the light of:-

    A)Russia and the EU announcing they are discussing settling trades in Euros and Rubles ie outside the $ and SWIFT.

    b)The EU bringing Russia into INSTEX and allowing Iranian oil to be part of the deal.

    c) following on from b) others,encouraged by Russia, who already do trades outside of the $ system-China,Turkey,India,Venezuela,Cuba,etc-joining in and creating an alternative to SWIFT and countering the US’s “illegal attempts to restrict their activities.”

    • Mitchel
      Posted July 24, 2019 at 2:06 pm | Permalink

      re b) above,a Russian MFA spokesman:

      “”Russia is interested in close co-ordination with the EU on INSTEX.The more countries and continents involved,the more effective will the mechanism be as a whole….the full potential of INSTEX will only be able to able deployed if it will be open to the participation of countries which are not members of the EU.”

  31. BillM
    Posted July 24, 2019 at 11:26 am | Permalink

    Higher Bond prices with ultra-low yields mean just one thing. Investors are prepared to take a loss against the current inflation in order to keep their money safe.
    This infers they are no longer buying in the market but preserving their cash. This inevitably leads to deflation. Great for the consumers but anathema to Governments and to manufacturers.

  32. ADAMS
    Posted July 24, 2019 at 11:26 am | Permalink

    The robbery on savers and pensioners in particular continues . The miracle that all would be wonderful if interest rates hit rock bottom has not happened and is not going to happen .
    On all the finance progs interest rates are not even mentioned . In days gone by if the Pound plummeted it would be suggested that interest rates would have to rise . NOT ANY MORE under Carney and crew . Reality no longer exists ,not even on the back burner .

  33. TheyWontCrushBrexit
    Posted July 24, 2019 at 11:50 am | Permalink

    Yes it is sickening to see savings eroded by inflation.

    I am a cautious investor who invests monthly into an ISA fund.
    As it builds up, I watch and wait.

    At the moment, I have only one ISA fund (only £2000 invested) that is showing an 18% increase.
    I shall shortly “bank” that money again, thank you very much.
    Then I start again, when I am ready.
    I don’t sell when I am losing money, I just hold and wait.

    I used to have larger amounts invested but no more – I am far too cautious.

    Any other money I have, goes into multiple bank accounts that give some interest and also Premium Bonds.

    NB. This is not investment advice. Just a personal view on what I do in the current financial climate!

  34. Just so
    Posted July 24, 2019 at 12:25 pm | Permalink

    Now, Mrs May is going to The Palace to jack in her job. God Speed!

  35. MB
    Posted July 24, 2019 at 12:48 pm | Permalink

    Savers only have themselves to blame if they suffer as a result of interest rate manupulation – QE. They should move a little higher up the risk scale and invest SOME of their money in assets, be they individual shares, investment trusts or open ended funds.

    I do not need another reply that shares can go down as well as up. I am very aware of this, and don’t need to stay invested if this happens.

  36. Caterpillar
    Posted July 24, 2019 at 1:24 pm | Permalink

    When we consider the situations in which UK residents are living (surviving) and struggling to save / provide for later years then there arises an ‘isn’t / can’t’ question to be asked; which question is it – why isn’t the UK enabling each resident to be in a position of (economic) well-being OR why can’t the UK enable each to be in a position of well-being?

    Unfortunately the resultant discussions of market vs government , Conservative vs Labour, autarky vs. free trade, free market interest rate vs. central bank interest etc. are all held within the current macroeconomic/financial system world view. The world view isn’t questioned e.g. even simple things such as the monopoly on credit.

  37. Prigger
    Posted July 24, 2019 at 1:36 pm | Permalink

    Mrs May on her doorstep has just finished.
    She said she was glad to have ‘”Served the national interessssssssssssT”

    • Lifelogic
      Posted July 24, 2019 at 3:45 pm | Permalink

      I assume she things the EU is a nation already then. She certainly did huge damage to the UK’s national interests in so many ways.

  38. formula57
    Posted July 24, 2019 at 3:01 pm | Permalink

    “In the event of no deal we will have the extra lubrication of the £39 billion…”

    So any deal means we pay up then? Oh dear!

  39. Duyfken
    Posted July 24, 2019 at 3:09 pm | Permalink

    16.07
    She’s gorn – I’ll drink to that.

  40. Sir Joe Soap
    Posted July 24, 2019 at 3:22 pm | Permalink

    Every day, in every way, Boris has to be aware that Nigel is right behind him.
    Either to help or to stab.
    It’s up to Boris.

  41. Denis Cooper
    Posted July 24, 2019 at 3:59 pm | Permalink

    Off topic, now we have Caroline Lucas of the Greens joining with Jo Swinson of the Liberal Democrats admitting that if they got a second referendum on EU membership, but lost it like they lost the first, then they would just ignore that result as well.

    https://order-order.com/2019/07/24/caroline-lucas-wont-accept-result-second-referendum/

    ““If there were to be a referendum and Leave were to win it again, either more decisively or not, in the Commons would you then back a Brexit deal to leave?”

    “Um, no I probably wouldn’t.””

  42. JohnK
    Posted July 24, 2019 at 4:42 pm | Permalink

    I have just got a nice letter from the Nationwide telling me the interest rate on my ISA is falling to 0.4%. Given that inflation is in the order of 2% (officially), what we are seeing is the confiscation of wealth from savers to benefit borrowers (such as HMG).

    This never ends well for any society. If people do not save, no society will last long.

    • Caterpillar
      Posted July 24, 2019 at 6:08 pm | Permalink

      JohnK,

      Correct, ZIRP has contributed to a savings ratio decreasing to about 4% and dividends going up whilst profit doesn’t. Chancellor Javid will have to step outside his university economics and banking experience as it is the tax and finance structures that are fundamentally wrong. It is a big ask (and it hasn’t been his job to be thinking about it).

  43. Dominic
    Posted July 24, 2019 at 5:57 pm | Permalink

    Patel is Home Sec!!!!!!!!!!!!!!!!!!!

    Made my day. I love this woman. A true Thatcherite.

    A truly magnificent appointment

  44. Narrow Shoulders
    Posted July 24, 2019 at 5:59 pm | Permalink

    Sajid Javid to the treasury. The man who at business would not allow the EU to put tariffs on Chinese steel.

    Guarding against unintended consequences apparently. The next set of Treasury forecasts will be interesting. Mr Javid voted to stay as I recall

    Remember Mr Johnson – tax cuts for higher rate payers. Preferably without the accompanying rise in NI contributions that has clawed half of the last two small rise back.

  45. Benjy
    Posted July 24, 2019 at 8:06 pm | Permalink

    am delighted it’s only 99 days to go because I’m fed up with all this BS. Politicians prancing about- in the door, out the door. Wall to wall TV, Sky and BBC, interviews with them should all stop now and give us a break.

    After listening to Boris and his inaugural speech today- from what he has said I don’t believe the EU will have very much to discuss with him- in fact he’ll have the one meeting with them and that will be it.

    Then after the Summer recess there will be one last EU Council meeting on 15th October and what is not talked about here is that the EU parliament will have time to say goodbye to Farage, Widdecombe, et al by the 31st Oct- because for it to be any other way I’m sure would be wholly intolerable for them- that’s why I say roll on 99 days- bring it on!

    • Fedupsoutherner
      Posted July 24, 2019 at 9:53 pm | Permalink

      Agree Bengy. I’m fed up with the whole thing too. Only just been able to comment as I’ve had no internet all day. Shops were unable to take credit cards. Cash only. So much for modern tech. Well done and good luck to Boris. I hope he proves all the gloomsters wrong.

  46. Lynn Atkinson
    Posted July 24, 2019 at 8:56 pm | Permalink

    Very disappointed in Boris’ cabinet and ministerial appointments. I shall be ‘saving’ elsewhere.

  47. Gareth Warren
    Posted July 24, 2019 at 10:17 pm | Permalink

    Hearing the appointments come in, not sure about Sajid Javid for chancellor as he didn’t previously seem to believe in the UK being better under brexit.

    Overall I would have prefered our host, Mr Mogg or Mr Raab in that order, I wait and see but fear this will not be a good pick.

    The other important position is given to Elizabeth Truss is the trade ministry, likely to be vital for the success of brexit. I am less convinced this team will make a smooth success of brexit mainly because I don’t know the politicians in the key roles.

    If they acheve brexit it will be enough, it will be interesting to see how this works out.

  48. John Probert
    Posted July 24, 2019 at 11:29 pm | Permalink

    Boris hits the ground running

    A new cabinet with new opportunities

    Very good day

  49. Lindsay McDougall
    Posted July 24, 2019 at 11:42 pm | Permalink

    I may inherit some money this year. I’m thinking of buying a couple of VCTs. Sod lending to governments or big, sleepy corporations who simply waste money.

  50. Lindsay McDougall
    Posted July 24, 2019 at 11:45 pm | Permalink

    If you’re so worried about savers, why not raise base rate. Don’t tell me that it is the Governor of the BoE who has that power. Although the BoE is supposed to be ‘independent’, you and I know better.

  • 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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