Cutting Interest Rates Encourages Savers To Spend?

[12DrinkMore]

"Punish savers and make them spend money

Near-zero interest rates and even a tax on bank deposits are necessary to force those with cash to use it productively"

http://www.timesonline.co.uk/tol/comment/c...icle5469589.ece

This article has wound me up a bit.

Would you spend more because of earning less interest?

I certainly won't. I will be looking to spend less. And the more I am "penalised' for having cash the less I will spend, especially if it comes to the situation where I am running down capital for my beer and other essential living expenses.

[samuibeachcomber]

the truth is they dont know what else they can do,cos when paulsen did it early 2000 it worked,well it just put off the recession we now have.globalisation has helped to make this a very bad one.

I personally think the respose to this crisis particularly that of the UK govt.has been pathetic.they should have had a buckket load of money saved to deal with this crisis,but instead they spent it all.running a country is no different to say running a family,only on a bigger scale.

rule no 1,you should not spend more than you earn.

always put away at least 10% of your net income for a rainy day.If they had adhered to this simple principle things would not be so bad.you take australia,during howard years they spent big,threw a lot of money at the people at election time,but they had big surpluses to do this,and when they were finally defeated there was still a 20 billion govt. surplus,so australia,as yet,is still not fairing too badly.

back to the UK,now they are talking about printing money to put into circulation(no one else will lend to them anymore) this can be a very dangerous option.they've got no money for social welfare,including pensions.the country has to get back to saving,has to get back to training the young into apprenticeships,something of value,the country has to start making things again.

[Naam]

"Punish savers and make them spend money

Near-zero interest rates and even a tax on bank deposits are necessary to force those with cash to use it productively"

http://www.timesonline.co.uk/tol/comment/c...icle5469589.ece

This article has wound me up a bit.

Would you spend more because of earning less interest?

I certainly won't. I will be looking to spend less. And the more I am "penalised' for having cash the less I will spend, especially if it comes to the situation where I am running down capital for my beer and other essential living expenses.

of course not, only clowns would!

[samuibeachcomber]

i read the first few lines of the article you posted but my eyes glazed over,same old same old,the public will not spend pure and simple.a new mindset has developed over this crisis...............one of trust,or lack of it.no one trusts the politicians anylonger or western financial institutions.

the public service sector is too large and needs to be cut back big time,the money they save can go towards unemployment benefits,people need to be re schooled and educated with a worthwhile trade while receiving these benefits,the issuing of food stamps to the unemployed as a part of the benefit should be put in place too.

[PattayaParent]

But you are in a minority of people that actually has money saved to live off.

The majority of people are in the opposite position, living hand to mouth, day to day, so low interest rates encourage them to BORROW or spend on credit cards to spend their way out of recession.

But isn't that what started the mess in the first place? Too many dodgy loans to people that couldn't repay them?

[khundon]

"Punish savers and make them spend money

Near-zero interest rates and even a tax on bank deposits are necessary to force those with cash to use it productively"

http://www.timesonline.co.uk/tol/comment/c...icle5469589.ece

This article has wound me up a bit.

Would you spend more because of earning less interest?

I certainly won't. I will be looking to spend less. And the more I am "penalised' for having cash the less I will spend, especially if it comes to the situation where I am running down capital for my beer and other essential living expenses.

UK Bank of England has today dropped the base rate to 1.5% the lowest in it's 315 year history.

[pkrv]

"Punish savers and make them spend money

Near-zero interest rates and even a tax on bank deposits are necessary to force those with cash to use it productively"

http://www.timesonline.co.uk/tol/comment/c...icle5469589.ece

This article has wound me up a bit.

Would you spend more because of earning less interest?

I certainly won't. I will be looking to spend less. And the more I am "penalised' for having cash the less I will spend, especially if it comes to the situation where I am running down capital for my beer and other essential living expenses.

UK Bank of England has today dropped the base rate to 1.5% the lowest in it's 315 year history.

Story Here:

http://news.bbc.co.uk/1/hi/business/7817453.stm

The expression is Monkey See Monkey Do (MSMD) - some people are just extraordinarily good at this, and indeed get exotic qualifications, high level qualifications in learning by rote, but just simply miss the wood for the trees.

Edited January 8, 2009 by pkrv

[khundon]

But you are in a minority of people that actually has money saved to live off.

The majority of people are in the opposite position, living hand to mouth, day to day, so low interest rates encourage them to BORROW or spend on credit cards to spend their way out of recession.

But isn't that what started the mess in the first place? Too many dodgy loans to people that couldn't repay them?[/quote]

I agree, I was always taught if you can't pay cash never borrow to pay for anything, if you cannot afford it, go without.

Anyone who takes out a loan for a "must have item" be it a holiday, car or a luxury item is asking for trouble, if they use credit to purchase it.

So many people now believe in "have it now, worry about how to pay for it tomorrow" and then wonder why their house or car is repossed when they miss payments.

The banks still seem to push loans and credt cards despite knowing that many will default.

Edited January 8, 2009 by khundon

[12DrinkMore]

UK Bank of England has today dropped the base rate to 1.5% the lowest in it's 315 year history.

So at that rate, to fund a reasonable life at 500,000 Baht/year you now need the equivalent of over 33,000,000 baht or, at the GBP exchange rate some 660,000 Quid in a bank to avoid eating up the capital, and if you add the the inflation factor, things are a lot worse.

And the much vaunted promise of DEFLATION doesn't seem to have manifested itself on my basic food bills (I couldn't care less about lcd tv's or computers, which are an insignificant once every few years purchase) in spite of the falling oil price, which would have possibly alleviated the pain. More lies from the government of massaged statistical bullshit.

The more I consider the rantings from number 10, "come on, yer bastards, spend yer money", the more I wonder, "on what?".

It looks like everybody has a mountain of debts, paying for a car, a house, a TV and a mobile phone, what then, Brown, do you expect people to spend on for God's sake?

[JimsKnight]

Yep, but this is to be expected from a bunch of left-wing lunatics out to buy votes via a return to easy-credit cards and meddling with the golden goose etc.

Labour are playing this for winning an election in 2009-2010 and they are gambling on the spend-spend-spend tactic pulling off the impossible and then trying to get the public to rally behind them come election time.

The Tories harp on about save and be responsible, good on them, but the trouble is the damage has been done.

Most lads my age and younger either haven't the nouse or funds to save cash so this nutcase mindset of NuLabour may wreck the UK economy further.

[PattayaParent]

"Punish savers and make them spend money

Near-zero interest rates and even a tax on bank deposits are necessary to force those with cash to use it productively"

http://www.timesonline.co.uk/tol/comment/c...icle5469589.ece

This article has wound me up a bit.

Would you spend more because of earning less interest?

I certainly won't. I will be looking to spend less. And the more I am "penalised' for having cash the less I will spend, especially if it comes to the situation where I am running down capital for my beer and other essential living expenses.

UK Bank of England has today dropped the base rate to 1.5% the lowest in it's 315 year history.

Probably in order to encourage the savers to put their money into the Stock Market.

[12DrinkMore]

Few points in this which drew my interest

http://www.bloomberg.com/apps/news?pid=206...&refer=home

"The bonus pool for bankers will slump by more than 50 percent this year from 3.6 billion pounds in 2008, according to the CEBR. They received a record 8.5 billion pounds for 2007"

How on Earth do these bankers have the audacity to take a single pound as a bonus? Based on what performance, destroying the economy maybe?

"The shop, which opened in 1868, is struggling to sell brown leather briefcases priced at 800 pounds and umbrellas for 275 pounds"

You have to be kidding me, a brown leather briefcase at 40,000 Baht? An umbrella at 13,000 baht? Apart from the immense profit margin, it seems pretty obvious to me that anybody who is prepared fritter away so much of their money ON THEMSELVES should not be given a job looking after OTHER PEOPLE'S MONEY.

The world is changing and hopefully for the better, although the transition is going to hurt.

[neverdie]

the truth is they dont know what else they can do,cos when paulsen did it early 2000 it worked,well it just put off the recession we now have.globalisation has helped to make this a very bad one.

I personally think the respose to this crisis particularly that of the UK govt.has been pathetic.they should have had a buckket load of money saved to deal with this crisis,but instead they spent it all.running a country is no different to say running a family,only on a bigger scale.

rule no 1,you should not spend more than you earn.

always put away at least 10% of your net income for a rainy day.If they had adhered to this simple principle things would not be so bad.you take australia,during howard years they spent big,threw a lot of money at the people at election time,but they had big surpluses to do this,and when they were finally defeated there was still a 20 billion govt. surplus,so australia,as yet,is still not fairing too badly.

back to the UK,now they are talking about printing money to put into circulation(no one else will lend to them anymore) this can be a very dangerous option.they've got no money for social welfare,including pensions.the country has to get back to saving,has to get back to training the young into apprenticeships,something of value,the country has to start making things again.

The cost of Socialism my friend. When your country is running elections, everyone wants to hear about what the government is going to spend money on, do this, do that, take care of him, take care of her.....& these populist pea heads running the show are too busy trying to look good & not on the important business of running a country. Most of these people are business rejects, flat out running a hot bath & the voters line up one after the other to tick and flick boxes at election time.

Well mate, nows the time to pay for it & pay you guys will, your governements have been writing cheques they cannot cash for a long time....now as usual the people in the community with the most to lose will lose....the dregs who can't have a go will still run up the big bills for society & overall nothing will change....govt's keep making the same mistakes over and over again. Now how stupid is that?

As for Australia, you can thank Peter Costello & his cronies for attempting to run the country like a business....kevin 747 will slowly chew thru all that money & in no time Australia will be thrown to the wolfs.....interesting to see that the HOWARD government was very very unpopular, but I can gaurantee you one thing, had we had governements like Paul Keatings or Kevin Rudds in Australia for the last 12 years, then Australia would be leading the race to complete distruction already....theres still a good chance of that happening with fools like kevin 747 & that silly treasurer of his running the books.

Now how does this relate to thailand?

Edited January 9, 2009 by neverdie

[12DrinkMore]

Now how does this relate to thailand?

Because this has developed into a global mess, IMO originating from the inability of the West to constrain their spending to what they can earn or afford. It is now having a major impact on us here in Thailand. I have no intention of ever spending a single penny in the UK again. But the UK government are attacking my savings by reducing interest rates and there are even reporters saying that savers should be forced to spend their money to "rescue the economy".

The knock-on effect is currently hitting Thailand and I was wondering how other Farang are dealing with the call to "help out the debtors".

[pkrv]

Now how does this relate to thailand?

Because this has developed into a global mess, IMO originating from the inability of the West to constrain their spending to what they can earn or afford. It is now having a major impact on us here in Thailand. I have no intention of ever spending a single penny in the UK again. But the UK government are attacking my savings by reducing interest rates and there are even reporters saying that savers should be forced to spend their money to "rescue the economy".

The knock-on effect is currently hitting Thailand and I was wondering how other Farang are dealing with the call to "help out the debtors".

I am slightly more polite but I believe the expression is they can FO - is appropriate?

[Khun Jean]

If you compare how people lived it is not strange that many people choose debt instead of savings.

Take someone who goes on holiday twice a year, new car every 2 year, nice house, etc.

With the credit problems now they have it tough but can look back on 20-30 years of living in luxury.

Others worked hard, saved their money, drove old cars, lived in small affordable houses and have as a result money in the bank (if they picked one that did not went bankrupt).

Once taxes and inflation hits both groups the ones in debt have lower debts (old dollar value) and probably higher interest rates the ones that saved see there savings diminish, never again having a change to live life in luxury.

When SHTF they both are in trouble.

So who is the most 'smart'?

[12DrinkMore]

Once taxes and inflation hits both groups the ones in debt have lower debts (old dollar value) and probably higher interest rates the ones that saved see there savings diminish, never again having a change to live life in luxury.

When SHTF they both are in trouble.

So who is the most 'smart'?

I think this question is now in the process of being resolved in the favour of those who saved.

But maybe I am one of the few who have always lived well within my means, saved, saved and saved some more. My life has been OK, although never with the latest car, TV and always rented accommodation, as I like to move around frequently.

But now the SHTF in a massive way.

I am looking at reducing my lifestyle a bit, age sort of reduces the play a little as well, but can still carry on for the rest of my life in this way here in Thailand. I have no debts, I don't have to face working to pay off debts until I die. I don't have to worry about the insolvency of the pension schemes where I thought my money would be safe, or the inability of the state Ponzi pension schemes to actually pay any money out, or the negative equity in my property which I thought would increase at 10%/year forever.

Nope, the good times for the spenders are in the past, and now they are looking at very dire times indeed. I hope they enjoy the memories.

In the end the bill has to be paid and justice will be served, unfortunately I have to pay part of the bill, but IMO the profligate bunch will have a much much bigger bill to pay.

The VERY VERY SAD PART is that today's kids and their kids will STILL be paying the price down the line.

[Khun Jean]

In the end the bill has to be paid and justice will be served, unfortunately I have to pay part of the bill, but IMO the profligate bunch will have a much much bigger bill to pay.

In the end people who still have money pay the bill, meaning people who saved and who are maybe forced to sell their assets. The people who will have nothing, pay.... nothing, and will be kept alive by social structures (so they hope).

Inflation is a savers nightmare, and don't be surprised when you see numbers higher then around 8-10% of recent years.

You don't get enough interest on your saving to keep up with inflation. In ten years time 100.000 dollar can have the same buying power as 36.000 - 50.000 dollars now.

Spending money buying things that will be worth more in ten years would be smart. I think that is gold, but it can be lots of different things for different people.

[PattayaParent]

If you compare how people lived it is not strange that many people choose debt instead of savings.

Take someone who goes on holiday twice a year, new car every 2 year, nice house, etc.

With the credit problems now they have it tough but can look back on 20-30 years of living in luxury.

Others worked hard, saved their money, drove old cars, lived in small affordable houses and have as a result money in the bank (if they picked one that did not went bankrupt).

Once taxes and inflation hits both groups the ones in debt have lower debts (old dollar value) and probably higher interest rates the ones that saved see there savings diminish, never again having a change to live life in luxury.

When SHTF they both are in trouble.

So who is the most 'smart'?

So why must it be one or the other?

Why can't there be people who go on holiday twice a year, new car every 2 year, nice house, etc.

who can look back on 20-30 years of living in luxury but have saved in the bank?

One is not mutually exclusive of the other.

[PattayaParent]

But the UK government are attacking my savings by reducing interest rates and there are even reporters saying that savers should be forced to spend their money to "rescue the economy".

But then if everyone is spending their savings where will the banks get the money from to loan to anyone?

[pkrv]

But the UK government are attacking my savings by reducing interest rates and there are even reporters saying that savers should be forced to spend their money to "rescue the economy".

But then if everyone is spending their savings where will the banks get the money from to loan to anyone?

Ohh you silly boy what you do is as a goverment is BORROW the money 'that you personally <edit if you were in your right mind would never borrow end edit> borrow' - this is straight forward stuff

Edited January 9, 2009 by pkrv

[Khun Jean]

If you compare how people lived it is not strange that many people choose debt instead of savings.

Take someone who goes on holiday twice a year, new car every 2 year, nice house, etc.

With the credit problems now they have it tough but can look back on 20-30 years of living in luxury.

Others worked hard, saved their money, drove old cars, lived in small affordable houses and have as a result money in the bank (if they picked one that did not went bankrupt).

Once taxes and inflation hits both groups the ones in debt have lower debts (old dollar value) and probably higher interest rates the ones that saved see there savings diminish, never again having a change to live life in luxury.

When SHTF they both are in trouble.

So who is the most 'smart'?

So why must it be one or the other?

Why can't there be people who go on holiday twice a year, new car every 2 year, nice house, etc.

who can look back on 20-30 years of living in luxury but have saved in the bank?

One is not mutually exclusive of the other.

Is that a way of saying you are rich? In that case good luck to you.

[neverdie]

Now how does this relate to thailand?

Because this has developed into a global mess, IMO originating from the inability of the West to constrain their spending to what they can earn or afford. It is now having a major impact on us here in Thailand. I have no intention of ever spending a single penny in the UK again. But the UK government are attacking my savings by reducing interest rates and there are even reporters saying that savers should be forced to spend their money to "rescue the economy".

The knock-on effect is currently hitting Thailand and I was wondering how other Farang are dealing with the call to "help out the debtors".

Firstly, you must understand I am also one of the savers, I don't have debts, in fact I live off the interest to my savings, thats how I survive. Movement of interest rates has always been a part of Monetry Policy & it gets adjusted and moved around at the drop of a hat, its always one of the first things to move, which I agree is annoying when its on the way down but much more appealing when its on its way up. Millions of debtors think the opposite way to that.

Anyway, the UK interest rate is way down, it won't stay there forever & when it does start to come up I would imagine it will do so rather swiftly when governements try to deal with spiraling inflation. Inflation will kick in, its only a matter of time. In the mean time, savers only need to really worry about deflation getting out of control, followed by a burst 'hyperinflation' that could possibly destroy the values of many curriencies, very quickly.

I don't know how the UK plans to make people spend their savings, they are physically going to take it from your accounts and go shopping, are they? Sounds like pathetic reporting & people blowing hot wind as usual. Sure they want people to spend through this current problem & I have no doubt that some will, fearing their cash will be less in the future, its up to you.

[Naam]

Is that a way of saying you are rich? In that case good luck to you.

an interesting question and although not directed at me i'd like to add my 2 Satangs. 15-20 years ago i used to chide a very good friend of mine because of his (what i thought) excessive spendings on luxury items. his response was always "rich is not the one who has money, rich is the one who spends money!"

he (three years younger than me) and his wife (one year older than my old lady) are both dead since a few years after prolonged sufferings and i had to realise that he was dàmn right!

[Heng]

Saver here as well, and certainly not spending more consumption wise despite lower interest income. Definitely not loaning out more funds nor lowering interest rates on existing loans.

[PattayaParent]

If you compare how people lived it is not strange that many people choose debt instead of savings.

Take someone who goes on holiday twice a year, new car every 2 year, nice house, etc.

With the credit problems now they have it tough but can look back on 20-30 years of living in luxury.

Others worked hard, saved their money, drove old cars, lived in small affordable houses and have as a result money in the bank (if they picked one that did not went bankrupt).

Once taxes and inflation hits both groups the ones in debt have lower debts (old dollar value) and probably higher interest rates the ones that saved see there savings diminish, never again having a change to live life in luxury.

When SHTF they both are in trouble.

So who is the most 'smart'?

So why must it be one or the other?

Why can't there be people who go on holiday twice a year, new car every 2 year, nice house, etc.

who can look back on 20-30 years of living in luxury but have saved in the bank?

One is not mutually exclusive of the other.

Is that a way of saying you are rich? In that case good luck to you.

Just managed money well I guess.

[JimsKnight]

Never a borrower or a lender be.

As long as you can save and budget then the savers will have a heck of a softer ride than the credit whores out there in the coming months/years

[samuibeachcomber]

khun jean is right,if you've got nothing you've got nothing to lose,at least in the west the state will give you a hand out.

but the reverse is true also,the more you have the more you have to lose and as we have seen,in extreme cases leads to suicide.

[PattayaParent]

Never a borrower or a lender be.

As long as you can save and budget then the savers will have a heck of a softer ride than the credit whores out there in the coming months/years

Although with interest rates dropping now might be a good time to borrow some of that cheap money and you always have your savings as a fall back position when rates rise and you can pay off the debt.