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Another blow to Spudnomics

The Guardian complains that savings rates aren’t rising:

So some people have benefited from savings rate increases?
Overall, according to figures issued on Monday by Moneyfacts, the average easy access rate has risen to 0.7% and stands at its highest point in nine years. In August last year the average was 0.18%.

The artificially low interest rates of the past decade compressed banking interest rate margins. As rates rise we expect to see decompression here. We can even see it in the quarterly results of the banks – their gross interest margins are expanding. We have, that is, a reversion to the status quo ante. As the Lloyds results show.

Not that that’s going to please the people The Guardian is talking to. However, that savings rates are moving up at all is a killer blow to one of the keystones of Spudnomics. According to the P³ banks do not lend out deposits. They simply create the money they lend. The obvious implication of which – stated baldly by Spud – is that banks just don’t need deposits at all.

If this is so then why are they – however slowly – paying more for deposits? Why would you pay anything for what you don’t need?

Spud’s vision of banking is simply wrong.

4 thoughts on “Another blow to Spudnomics”

  1. Candidly, you’re an evil capitalist lackey Tim. When reality doesn’t agree with Spud’s theory, it’s reality that’s wrong…

  2. The answer often given by Murphy to any criticism of him or his views, is:

    “Right-thinking people agree with me”.

  3. how on earth does Moneyfacts calculate ‘the average easy access rate’

    Average rate across those offered?
    Weighted by numbers of customers or money saved in them?

    Allowing for the derisory rates from the high street banks which are a significant outlier?

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