Mr Bean

Mr Bean lectures the prudent, the savers, that they must go out and spend more. He tells us the whole point of providing practically no return on our desposits and savings is to persuade us to spend more.

Doesn’t Mr Bean – or the Bank – realise that the UK has a treble deficit problem. It’s not just the public sector that has borrowed too much. In the boom years individuals borrowed too much as well. We are all collectively embarked on cutting the mortgage and putting some more money into savings and pensions. We also have a balance of payments deficit. We need to export more and import less.

Consumers might spend more if they got a better return on their savings and had more savings income. With the current cripplingly low level of savings income people are saving more to try to compensate. As house prices fall, people become more alarmed by the level of the mortgage. Mr Bean doesn’t understand human nature, let alone economics.


  1. Timdog
    September 28, 2010

    This is an absolutely ridiculous stance for Mr. Bean to be taking, it smacks of "let them eat cake" as well as setting out to punish people that have behaved with a modicum of responsibility. As you say, it won't work, and the final irony is that the housing bubble that these older savers have supposedly benefitted from was created in no small part by the Bank of England. Incredible.

    I blogged about this earlier

  2. nick
    September 28, 2010

    I also dispair at many MPs and the BBC. The BBC regularly states things like.

    The government is paying down the deficit.

    Government debt is 175 billion.

    I've had complaints upheld against both statements. You can't pay down a deficit, it's just the rate at which debt increases. The deficit isn't debt.

    The official debt figure isn't debt either. It misses off the big debts, which are pensions. 5,000 billion versus 22 billion for the bail out.

    So John, you promised before the election clear publication of the true debt figures. There's been a bit of an estimate from the NAO. When is the government going to publish the real figures or is it a case of don't scare the punters?

    Now, as for the economics, you aren't cutting spending. As a government you are planning on increasing it. That's completely the wrong approach and the public have realised it. Until you start getting serious and really cut, both spending and taxes, as well as tell the whole truth, people will behave accordingly.

    As for telling the truth, who do you think will get the blame?

    Reply: I did publish my estimate of the true debt, and the NAO have now published more realistic figures.

  3. oldrightie
    September 28, 2010

    Absolutely. Individuals, just as Government, need to cut their own deficits. Debt is never, ever a good life to lead. Spending money earnt and not borrowed is a superior experience. Unlike Government and particularly Labour, spending other peoples' money unwisely is in their DNA.

  4. @wassabeee
    September 28, 2010

    What do you expect with the name Mr Bean has?

    His is clearly a case of cognomen syndrome.

  5. Brian Tomkinson
    September 28, 2010

    With people like this at the top of the BoE I am even more concerned that the government is giving them more powers. How well named is Mr Bean, who seems a real Charlie to me. It would be funny if it weren't so worrying. You have seen clearly that such seriously expressed comments show that he is not fit to hold his senior position at the bank. Will politicians do something about this or leave us at the mercy of such irresponsible thinkin?.

    1. John Maynard
      September 28, 2010

      Isn't Bean tipped to be the next governor ?
      Anyone know how the independent members of the MPC are "appointed" ?
      Is it just the Bank hierarchy that decides who to invite ?
      Who was responsible for nominating Brown's little chum Blanchflower ?
      That was equivalent to appointing (say) fantasist Ambrose-Prichard.

      1. FaustiesBlog
        September 29, 2010

        We'll have to make a lot of noise about that, if true. For all we know, though, King shares those views.

        Nevertheless, cooking up a storm about Bean becoming the next governor will shine a much need light on economic policy, which screws the little guy.

  6. simon
    September 28, 2010

    Could Mr Bean have fallen out with Mystic Merv ?

    Merv would never have even admitted this policy .

    As someone else pointed out the way Charlie Bean repeated to Faisal Islam that hosing savers was a deliberate policy and not a side effect suggests it could have been said tongue in cheek in a deliberate attempt to garner a reaction from savers .

  7. Mark
    September 28, 2010

    Carlo got the top first in his year in Economics. It seems that isn't quite enough, because now he has told us not to trust the pound but to convert it to something else. He is saying "eat, drink and be merry, for tomorrow the pound dies" (and we along with it). He may get his wish – but if we withdraw all our savings from our banks and convert them to foreign currency or other assets he will have sparked a bank run, and probably several other asset bubbles to add to the existing property bubble.

    We should be fearful if he considers the situation so dire that he exhorts spending – because that can only be motivated by an intention to indulge in further QE. He does after all have a sight of the true BoE balance sheet denied to the rest of us, and doubtless some insight as to the chances of banks being able to repay their SLS and CGS financing on time. The more that is added to the level of QE, the less credible it becomes as a device. It ceases to be a "payday loan", printing money temporarily until more favourable conditions obtain or taxes can be raised, but instead becomes a notice of default. That threatens not the deflation he fears, but hyperinflation instead. He needs to review the history of how fast the Reichsmark collapsed in the Weimar inflation.

    Perhaps he is looking across the Irish Sea, knowing that UK banks may be faced with heavy write downs on their largest overseas exposure – some €224bn. He should talk to the ECB about that. We need to sort out our domestic banking problems by getting banks to use their surplus capital to write down mortgages to more realistic valuations, and using higher interest rates to squeeze inflation out of the economy. That is the reverse of trying to hyperinflate the bubble – gamma minus, Carlo.

    1. Mark
      October 1, 2010

      Much to my surprise, Joe Stiglitz (Economics Nobel Laureate) sees things much the same way on the approach to sorting out the banks:

  8. Alan Jutson
    September 28, 2010

    I think Mr Bean is having a "Senior Moment", about time he was put out to pasture.

    He suggests (Press reports Telegraph) that we all have benefitted from a rise in house prices, and should spend this so called windfall to get the economy moving.

    Pray tell me how you spend money that is in the value of your Home without taking out a remortgage or equity release, and pray tell me how you pay that mortgage if you are on a low pension, and your income relies upon investment income from your hard earned savings.

    The man is a fool if these are his real thoughts, and is clearly unfit for the position he holds. No wonder this Country is in a mess if this is what the so called financial experts think.

    What is even more worrying is that he has said that it has been the BOE policy to hold savings rates low for this very purpose, indicating that many of those in charge feel the same way.

    1. Mark
      October 1, 2010

      The only way we could all benefit would be by selling up and emigrating. I'm sure some politician has had the idea somewhere. Are there enough Russian oligarchs etc. to pay our silly prices?

  9. Robert Taggart
    September 28, 2010

    One preferred Mr Bean when he was but a mime artist !

  10. a-tracy
    September 28, 2010

    Take Mr Beans safe and secure final salary pension off him and put him into a contribution based fund, like the majority of Britains savers have then let's see him make the same silly statement.

    When you are one of the 'final salary pension' takers you can make silly, stupid statements like this man. Well level the playing field. Freeze everyone on 1st January 2011 and start them all up on defined contribution based on the success of the businesses we all invest in. If certain public servants think that 10% plus their own 10% contributionof their gross wage will buy them a guaranteed pension from 55 or 60 years then they won't mind.

    1. Paul B
      September 28, 2010

      I think you'll find his pension is also Index Linked. Funny that.

  11. A.Sedgwick
    September 28, 2010

    Savers would be helped if the pledge by Hague/Portillo in 2001 and Cameron/Osborne a year or two back to remove standard rate income tax from savings was scheduled in a tax reform plan – it makes a lot of sense all round but then tax doesn't do common sense.

  12. waramess
    September 28, 2010

    Of course, Mr Bean thinks you don't understand human nature or economics. The difference between you is that he is paid for his opinions and he is listened to by the government who are eager to act on his advice.

    Who then has the upper hand on the argument? However sensible your opinions might sound and however silly the opinions of Bean and King might sound it is their opinions that will be acted upon.

    When will sanity prevail or, just like Japan, will sanity never prevail? Is it just too much for the ruling class and their Keynesian advisers to ever admit they are wrong for fear that if they do they will cease to be the ruling class.

    So I guess it is time for another bout of money printing and perhaps a savings tax dressed up in fancy clothes and maybe a land tax just to put a bit of pressure on all those folk who now have more bedrooms than people living in the house.

    Let us prepare for some really really silly policies in order that we might not be too suprised

  13. APL
    September 28, 2010

    JR: "In the boom years individuals borrowed too much as well."

    We have been through a god almighty credit boom, coupled with the fact that government in order to encourage a false impression of gdp growth encouraged credit purchases and discouraged saving.

    By the way, those folk worried about inflation, what do you call the doubling or quadrupuling in the price of a collection of timber, bricks and motor over fifteen years? Yes, that would be inflation, not sure I heard too many people complaining about that!

    So anyway, there is no reserve of savings in the economy and now we cannot draw on credit, because we have exhausted even the supply of that, there is unlikely to be any investment funds avaliable for quite some considerable time.

  14. forthurst
    September 28, 2010

    Is Mr Bean being disingenuous? What we have with rock bottom bank rate and rock bottom retail interest rates for savers is a strategy for tranfering the lifetime savings of the prudent to the ever imprudent and ever gready and ever disonest bankers who now make enormous margins on loans . Thus pensioners must cancel their holidays so that spivs can contiue to enjoy the high life.

  15. lola
    September 28, 2010

    Mr. Bean by name. Mr Bean by nature. Prat.

  16. Mark M
    September 28, 2010

    Mr Bean is a complete idiot. Who are these people who tell us that when our income falls, we should spend more? I would hate to see the state of his personal finances if he applied his thinking to his personal life. Perhaps he might like to show us his bank statements – so we can see that he practices what he preaches.

    The amazing thing is Mr Bean doesn’t understand that there is a section of society that wants to spend money. These are the borrowers – they want to buy their first house, they want to get their business running. If they have money, they will spend it. The savers save, that money gets lent to borrowers, who then spend it. If he wants more spending, he needs to get money from those who don’t want to spend into the hands of those that do.

  17. Martin
    September 28, 2010

    I wonder if Mr Bean has a nice state guaranteed final salary pension as opposed to a poor money purchase scheme?

    1. Derek Buxton
      September 28, 2010

      Of course he has, but the taxpayer will have to fund it. An absolutely disgraceful statement from one in his position.

    2. Paul B
      September 28, 2010

      I mentioned this above. I believe the BoE pension is now Index Linked.

      So the guys in charge of targeting inflation have also decided that an an Index Linked pension is the way forward.

      Will the people buying Government debt soon demand higher interest rates?

    3. Mark
      September 28, 2010

      Some details of the remuneration of the Governor and his Deputies:

      and details of the BoE pension fund (some £2.357 bn – but at least it actually exists):

  18. sm1
    September 28, 2010

    Probably insulated from any risk, final salary scheme, etc i bet.
    Pray tell where is the BOE pension funds invested in, if they have any?
    Can we strip them of state guarantees so they are subject to their own decisions.

  19. Mark
    September 28, 2010

    Censorship again? Must be close to the truth. If it weren't it could be ridiculed.

  20. John Maynard
    September 28, 2010

    Nobody has commented on the strange anomaly that the MPC's remit is to adjust interest rates to meet the inflationary target.
    Whilst inflation is well above target, a Bank dep. governor reveals that interest rate policy is actually all about micro-economic manipulation.

  21. James Clover
    September 28, 2010

    Well, since we all live in houses that have made us rich, let's sell them and then we can have a jolly good time and go and buy another, er, house, that er, hasn't also increased in price…. Oh, dear, Mr Bean.
    At least he's been honest. It's clear the B.O.E. is happy to sell savers down the river. It's immoral, but that is hardly relevant to them.

  22. Andrew Johnson
    September 28, 2010

    Please reassure us John. This isn't official coalition economic policy is it?
    The comments about B of E employees having gold plated index linked pensions are germane are they not?

  23. Conrad Jones (Cheam)
    September 29, 2010

    Now the Sheep like appearance of the men from the Bank Of England peels off revealing a large Wolf. We have all been naive about what the purpose of the Bank of England truely is. They state on their website that their objectives are:
    1. "Monetary Stability" and 2. "Setting Interest Rates to keep Inflation Low".
    So how is spending all my savings going to help improve monetary stability and keep inflation low? Urm.

  24. Conrad Jones (Cheam)
    September 29, 2010

    More talk of Quantitative Easing. More money to give to Banks to help them lend more money to us. But where will the money come from for this Quantitative Easing. If it's just lying around why don't we use it to help pay down the National Debt? Because it doesn't exist until the BoE buys more Government Debt. This increases the money supply which increases inflation which makes the Deficit disappear in about twenty years when a loaf of bread will cost about the same as a Brand new BMW M5 does today. And the poor savers will be left with the Bill. So that's how it works. A financial magic trick. Which is why young Ed Milliband isn't bothered about the Deficit. Except for one thing, the BoE lends the money to the Government (i.e us), we then give it to the Banks – interest free, they then charge us interest on it. I should have worked for a Bank instead of Engineering. Why work for a living when you can lend people money you haven't earnt.

  25. Yorkie Boy
    September 29, 2010


    Please stop saying we had a boom.

    We didn't.

    We had a credit bubble involving an orgy of consumer spending on imports and property specualtion.

    All this masked a decade long industrial and investment depression.

  26. Gary
    September 29, 2010

    Mr Bean understands debt based fiat currency economics very well indeed. He knows that the last chance to delay, not prevent, the currency collapse is to use the savings buffer, of which there is very little to be had.

    In a debt based fiat system , you can never prevent currency collapse, you can only delay it using 3 methods :

    1) keep cutting rates
    2) spend savings
    3) keep borrowing

    Since the principal + interest payable on the debt money created must be payable out of the same money created, you have to keep printing money , and that is done by perpetual lending. Stop lending and creating new money and the interest consumes the principal. Eating into savings and serially cutting rates delays the collapse but cannot ever eradicate collapse.

    Since they have already cut rates to next to zero, Mr Bean is now studiously recommending throwing savings onto the pyre.

    There are no savings, we are now in the endgame. It is about to get interesting.

  27. Gary
    September 29, 2010

    I do agree that a reduction of govt deficit(debt) spending, will precipitate a crash. However, there is no other way out. Continuing deficit spending just buys some time before an even bigger crash. There are no good options left when your total national debt is 470% of GDP. The interest payable on a debt based fiat system eventually consumes the system once the borrowing inevitably stops.

    At these historic debt to GDP levels, we have lost control.

  28. simon_555
    September 30, 2010

    The BoE seem to forget that many people have seen their incomes slashed with low rates. They aren't going to go out and spend more with less money.

  29. Conrad Jones (Cheam)
    October 8, 2010

    Am I right in thinking that a Bank could actually charge less interest on a Loan than it pays out on a Savings Account?

    Example: Deposit £100 in a Bank. The Banking System can then loan out £900 as the total Demand Deposits are £1000 with 10% in reserve and 90% (Excess Reserves) out to Borrowers.

    Say the Bank charges 4% for the Loan, and pay out 6% on the Savings Account. They actually only pay 6% of £100 , and receive 4% of £900.

    That is: they pay £6 to a saver and receive £36 from the borrowers. The increase in Tax Revenue would then help pay off the Debt and Boost the economy would it not?

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