Flush Those Quid Down the Loo, For England

In the U.K., the unit of currency actually says in its name that it used to be worth a pound of a precious metal. But our former (and future?) colonial masters were experts in the destruction of money long before we got into the game. According to one central bank apparatchik, the biggest threat to the Sceptre'd Isle's financial health is not the government's unspportable spending. It's the damn savers.

From the Daily Telegraph:

[Bank of England deputy governor Charles Bean said] "Savers shouldn't necessarily expect to be able to live just off their income in times when interest rates are low. It may make sense for them to eat into their capital a bit." [...]

Mr Bean said that encouraging Britons to spend was one reason why the Bank had cut interest rates.

Live off your savings, not your income. Think about where that personal finance plan will end up.

Courtesy of Calculated Risk, which notes that U.K. subjects are earning £18 billion a year less in interest. In the United States, savers are earning $143 billion less on interest than they were during the peak.

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  • Old Mexican||

    Nice picture there, fellas... The west coast is returning from lunch, just in time to see it . . .

  • ||

    The west coast is returning from lunch, just in time to see it . . .

    California still needs to be nuked into a parking lot.

  • ||

    Hey!

  • ||

    Legalize pot...until then you are on my shit list.

  • ||

    It's got my vote, so can I get off your list?

  • Old Mexican||

    Bank of England deputy governor Charles Bean said: "Savers shouldn't necessarily expect to be able to live just off their income in times when interest rates are low. It may make sense for them to eat into their capital a bit."

    That Keynes was sure one lucky bastard - he has so many lovers!

  • Old Mexican||

    In the United States, savers are earning $143 billion less on interest than they were during the peak.

    Buy gold.

  • Ska||

    What does gold typically yield?

  • Old Mexican||

    Re: Ska,

    What does gold typically yield?

    It currently outperforms the Dow Jones. It is only outperformed by the Dow during bubbles.

    http://home.earthlink.net/~intelligentbear/com-dow-au.htm

  • ||

    My current checking account interest rate: .01%.

  • ||

    In the U.K., the unit of currency actually says in its name that it used to be worth a pound of a precious metal.

    Imagine, if this were still true, each British pound would be worth around $320.00 today, rather than merely $1.50 or so.

    Of course, if we hadn't taken the dollar off the gold standard, it would be worth around 40 times what it is now.

  • Captain Buzzy||

    A standard weights and measure pound was based on 7000 grains of barley at about 65 milligrams each. A pound sterling was a 'Tower Pound' or 7000 grains of wheat at about 50 milligrams each. Also, silver is priced in troy ounces (31.1 grams), so about $245.

  • ¢||

    That's the first time I've ever seen what "lower rates to encourage spending" really means, publicly expressed, in terms a random dipshit might understand.

    Good times.

    Buy gold.

    It's late to start doing that. Buy cheaper stuff—but actual stuff.

    If you can't afford to traffic in slaves, scrap is the crap, yo.

  • ||

    What does gold typically yield?

    Protection from currency debasement, mainly. Which, when your currency is being debased, is no small thing.

    If you want to compare it to securities that don't pay dividends or interest, I think you'll find that over the last decade, it has outperformed. By multiples.

  • Ska||

    This was mainly my point - investing to maintain capital values and investing to earn income are going to generally lead you down different paths. This is an article about interest income, not asset values.

    I'm not saying one is better than the other, or that gold is a poor investment choice; it's just generally used for something different.

  • Night Elf Mohawk||

    If only we could make such choices with the benefit of a decade of hindsight.

    I wonder how it will do in the decade ahead.

  • ||

    I'm not going to be truly satisfied until Stephen Fry and Rowan Atkinson--at the very least--appear on House. It can be a dream sequence, and I don't give a shit that 95% of the audience won't understand the significance of the glorious reunion(s).

    Caught a "cunning plan" reference on a 3rd season episode a couple of days ago.

  • oncogenesis||

    Every red-blooded American knows that the proper way to destroy money is to burn it in a pit.

  • ||

    That was a great bit. And still relevant!

  • threadjack||

    shameless threadjack . . . Canada virtually legalizes prostitution.
    http://www.thestar.com/news/ca.....rules?bn=1

  • ||

    I think Brits call em "pants" not "skivvies".

  • Lexicon||

    Or "Y-fronts".

  • cynical||

    While manipulating people into doing that is pretty sleazy, isn't cutting into savings during tough times sort of the point of savings (as distinct from investment)? You save not to earn interest, but to build up a store of easily tradable wealth to carry you through short periods of diminished income and cushion the fall for longer periods.

  • Mike Laursen||

    There's this thing people do called retirement.

  • ||

    I'm not saying one is better than the other, or that gold is a poor investment choice; it's just generally used for something different.

    I agree 100%. Gold should not be bought as an investment, it should be bought as savings and insurance.

    Nothing makes you feel like a bigger fool than looking at charts. Gold is up 400% in the last 10 years. The S&P (including dividends) is down a little.

  • MJ||

    Remember the good old days, when these newspapers used to go into hand wringing angst about individuals not saving enough?

  • ||

    Remember the good old days, when these newspapers used to go into hand wringing angst about individuals not saving enough?

    by newspapers do you mean Krugnutz?

    If so then yes.

  • canada goose ||

    That Keynes was sure one lucky bastard - he has so many lovers.haha

  • ||

    "U.K. subjects are earning £18 billion a year less in interest. In the United States, savers are earning $143 billion less on interest than they were during the peak."

    Would this peak be during the inverted yield curve that signaled the oncoming Great Recession? That is certainly a disingenuous time to compare against, since it represents a period of unsustainable short-term interest rates.

    "Buy gold"..., etc.

    Gold is currently in the middle of a far worse bubble than the stock markets or real estate markets ever saw. Anyone who buys now, and anyone who doesn't sell now, will be regretting it in 5 years.

  • ||

    Gold is currently in the middle of a far worse bubble than the stock markets or real estate markets ever saw.

    Gold is in a bubble only if we don't see currency devaluation. Right now, we are seeing what sure looks like the beginning of a massive round of competitive devaluations.

    The Bank of Japan, past master of currency manipulation with decades of successful interventions keeping the yen underpriced to promote exports, just gots its ass handed to it on its last intervention.

    The US has officially adopted a devaluation policy to try to support its export industries. Which is probably irrelevant, the official QE policies, massive debts, brobdingnagian deferred entitlement liabilities all make dollar devaluation, IMO, mathematically inevitable.

    China has agreed to a limited float, but will (still) be intervening to keep the yuan nice and low.

    The Germans are beginning to grumble about the Euro's strength relative to the dollar.

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