In other words, there are no good reasons for bank deposits to be rewarded as they are, except that it very much suits some in society that they should be, and the Bank of England is intent on rewarding them.
The only reason banks take deposits is because regulation demands banks take deposits.
This then gives to the obvious question as to why we now need to move to a situation not known for most of the last 15 or so years in the UK, where we might have positive real interest rates in this country i.e. the rates payable to depositors of funds might exceed the inflation rate that otherwise reduces the value of the funds that they save.
If we didn’t have that regulation then banks would not bid up interest rates on deposits. Then we could have negative real interest rates. For always!
Growth’s been so good this past 15 years of negative real interest rates, hasn’t it?
And there is no time value of money – nope, really, not – which leads to thinking that real interest rates should be positive. Nope, all just made up by regulation.
In other words, as I have always said, inflation was always going to go away. It is now doing so. There never was a reason to raise interest rates. Nor was wage restraint required. But, the government and the Bank took the opportunity to create positive interest rates to increase inequality in the UK, which harms growth whilst also seeking to suppress the wages of most people.
Yep, the claim is that the only reason to have positive real interest rates is so as to increase inequality.
Howling at the ceiling.
Hold on, didn’t he say just last week that “real interest rates” was “the retail rate offered” not something so pedantic as comparing with what real goods you could spend it on.
I’m confused. Is it Thursday again?
He’s the equivalent of Howard Beale in the film ‘Network’
Such a situation always represents an economic environment where the income of those who borrow and have to pay interest is reallocated by the banking system to those who can save because they have no current use for their funds.
So the entire country should run hand to mouth because one retired ‘accountant’ with a penchant for watching avian life, model train sets and an inferiority complex decrees it? F&$k that.
Habit. It is presumed that banks need deposits to make loans, even though even the Bank of England has admitted that is not true.
Based on one ten year old paper that was heavily disputed at the time I seem to recall and which events like the collapses of Silicon Valley Bank and First Republic in the US have shown is an erroneous conclusion – in fairness to the BoE I think it’s This fool drawing an inaccurate conclusion rather than the Bank’s word.
There is a residual belief, implicit in this practice, that banks are financial intermediaries when that is not true.
So banks do not act as intermediaries in the financial system – I’ll remember that the next time I can’t log on to the website of mine.
In other words, as I have always said, inflation was always going to go away. It is now doing so. There never was a reason to raise interest rates. Nor was wage restraint required. But, the government and the Bank took the opportunity to create positive interest rates to increase inequality in the UK, which harms growth whilst also seeking to suppress the wages of most people.
It’d be an interesting counterfactual to see what would have happened had there been no rises in real interest rates. Would inflation still be peaking at double digits even now? I do know had ZIRP been continued then the consequences were not something this polymath could have predicted.
As Tim says, to call this tinfoil hattery is frankly an insult to either Alex Jones or David Icke who are both far more coherent than Murphy.
Only a member of the evil neoliberal conspiracy to increase inequality and sell the working classes for dog food would point out that today is Friday.
The greatest inequalities being perpetrated now are by scandalous public sector pension provision and the appalling decline in productivity by the salaried public sector who now even want restrictions on their working day hours and numbers.
No-one who makes their own provision for the future through saving, investing and pensions, subject to the vagaries of the markets, is safe from the avaricious grasping and envy of this low-life cvnt.
BF
Absolutely – and any government which tackles that will have my vote – sadly it seems
As likely as turkeys voting for Xmas. Equally depressingly this most profoundly evil of men seems to be representative of the zeitgeist in the U.K. now.