The OBR is forecasting that in the short term, Bank of England base rates will fall to 3.25% (which looks less likely now for obvious reasons) and then return to 4%.
This matters. UK GDP (excluding the absurd measure for notional rents) is around £2,700 billion right now.
UK household financial wealth, excluding property wealth, might be very broadly similar right now (the data is out of date).
So, the economy is going to grow by 4%, and the minimum expected return on financial wealth is 4%.
The denominator in both cases is nearly the same.
Who captures all the gains from growth in that case? I think you can work that out.
Sigh. Without looking it up – so spare me corrections of details – household wealth is £7 trillion or so housing equity, that 2.5 tr or so financial wealth and also £6 trillion or so private pensions. By convention only those private pensions that are actually funded are included. Pass across and PAYE pensions – like doctors, state pension – are not.
The £6 trillion is invested that is. That’s actually what is measured, how much is invested in order to pay those private pensions. So, who is going to gain from that return to investments of 4%? Well, the vast majority of it will be pensions, won’t it?
Man’s a cretin.
I’d guess the owners of it get the returns. Not spiteful onlookers with dishonest intentions. I’d also guess that’s the part that he doesn’t like.
When is the UK economy supposed to grow by 4%? In Rachel Reeves’ dreams maybe.
The great Martin has it nailed down
He isn’t getting any of the benefit, which given (at least in his mind) he is the pre- eminent economic thinker of his generation is clearly unacceptable…
I have taken the precaution of opening a bank account that pays 4% with a collar of 3%.
I don’t know whether the collar will come into effect. But ages ago we had accounts collared at 2.5% and they proved worthwhile.
Meantime it’s a bit late, I suppose, to learn how to gamble on the oil price. A pity, it was on my job list for the month.
“the economy is going to grow by 4%”: maybe so. Not per annum, though.
Where are you getting that, if you don’t mind sharing?
Returns on financial wealth of 4% in nominal terms *before tax* so 2.2%-3.2% after tax, -0.8% to +0.2% after inflation.
Who captures all the gain from growth? – Rachel Reeves! Pity she cannot see that and go in for growth-enhancing policies instead of pandering to union bosses.