Negative interest rates - a crazy idea to boost lending

The Today programme called me early on Wednesday. They wanted to know what I thought about Paul Tucker's suggestion that the Bank of England (of which he is deputy governor) should introduce negative interest rates.

The idea is that instead of the Bank paying out interest on money it holds for the commercial banks, they'd instead have to pay the Bank to look after their money for them. This, so the theory goes, would encourage them to lend money out instead of hoarding it as they supposedly do at the moment.

My instinct, as I told them, is very much against it. How can it be right for money to be worth so little that you have to pay someone to take it off your hands? What about savers, most of whom already see the real value of their savings falling every day, due to the toxic combination of tax and ongoing inflation?

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We live in an environment in which the young don't have mortgages (so the cost of them is by the by), but do have debt the interest rate on which is entirely unrelated to the Bank rate (payday loans, credit cards and overdrafts).

At the same time, mortgages are so cheap that those in work are already pretty happy they're spending less on repayments as a percentage of income than they have for 15 years.

So the consumers likely to be hit by constantly cutting interest rates in this way are the old, via savings rates and annuity rates. According to work from the Centre for Policy Studies, savers are already losing in the region of £65bn a year as a result of our current extreme monetary policy.

This doesn't make sense given that our biggest savers (the over-55s) are also the fastest-growing demographic in Britain and hence the ones we need to spend us back to growth.

Then there is inflation. Due to the fact that we already have negative real interest rates (rates are below the rate of inflation), most of ours is imported via our feeble currency (the lower the pound goes, the higher the prices of the things we buy from abroad go). Make interest rates negative and the pound will fall and we'll import even more.

The old are already terrified of inflation. Why go this extra mile to validate their fears? The policy might improve lending a little. But the price is just too high. This wasn't the answer the BBC wanted. It turns out the consensus is very much against negative rates and they wanted someone to back the idea. I couldn't do it. It pains me to say it but we are with the consensus.

Finally, a word on gold. Its price has been volatile recently it fell below $1,600 an ounce this week and the gold death cross' sent the bears into a swoon of self-righteousness. But we no longer hold gold in the expectation of making the huge gains we have banked over the last decade. We hold it as insurance. And we will continue to do so.