Since the 2007/08 financial
crisis it has not been the best of times for savers as interest rates have been
at record lows for the last four years and inflation has been creeping up but
the main barrier to savers seeing some return on their hard earned cash is the government
and its clear preference for borrowers primarily because it’s the biggest
borrower of the lot.
Because of this simple fact, savers
are forced to try their hand at risky ventures such as the stock market in light
of the news that they could lose a whopping “£33bn over the next three years
due to new policies on interest rates and inflation”[1].
This current state of affairs
is no accident as interest rates have taken a remarkable nosedive over a
sustained period as successive governments have looked to pump cheap money into
the economy whenever times got tough and even when times were good. What this has meant for savers is that their
hard earned savings had lost some of its value thanks to inflation caused as a
direct result of this policy coupled with the government refusal to raise
interest rates in order to keep debt cheap for “households and businesses that
would be crushed by higher interest rates”[2].
The rationale for this policy
offered by government and the Bank of England is that such measures are needed
to stimulate the economy but often the policy of flooding economy with cheap
money only raises the rate of inflation whittling away at savings, increasing
the cost of living in an age where wages have been stagnant. This cannot work
for any sustained amount of time as the Government are not really interested in
a solution but a stop gap as cost of a real solution will a lot of lost votes
come 2015.
This story is important as it reveals
the interests of the conservative led coalition government who are not aiming
for sustainability or even growth but greater consumption fueled by cheap money
refusing to learn the perils of this strategy practiced by the last government.
[1]
D.Hyde,2013, Savers ‘condemned to £33bn loss’ by Bank of England, http://www.telegraph.co.uk/finance/personalfinance/savings/10254044/Savers-condemned-to-33bn-loss-by-Bank-of-England.html
[2]
Herald Scotland, 2013, Such a Sorry State of affairs for savers from carney’s
Strategy, http://www.heraldscotland.com/business/opinion/such-a-sorry-state-of-affairs-for-savers-from-carneys-strategy.21829161
