Cover of MoneyWeek issue no 506

Offshore riches

1 October 2010 / Issue 506

Offshore riches

PLUS:

  • The stock with a licence to print money
  • What's going on at the Vatican Bank?
  • Three ways to find gold in annual reports

Excerpt

Mr Bean’s unfunny farce

There was something rather extraordinary about listening to Charlie Bean, deputy governor at the Bank of England, talk to Channel 4 earlier this week. Not because he said anything we didn’t know, but because he said it so explicitly.

“What we’re trying to do by our [ultra-low-interest-rate] policy is to encourage more spending,” he said, before going on to note that he wants savers who find that they can no longer live on their incomes from interest to just get on and “eat into their capital”. They shouldn’t mind this, he says: interest income is very much a matter of “swings and roundabouts” and there will be times in the future when they do very well out of interest rates being “at a relatively high level” (although those times might not be with us for “several years”).

Look at the bulletin boards and comment pages on the internet and you’ll see savers aren’t really going for this. They point out that once they have finished eating into their capital they won’t have anything left to earn relatively high interest.

They also aren’t much taken by the idea that, as Bean puts it, they “shouldn’t see themselves as being uniquely hit by this. A lot of people are suffering during this downturn.” Indeed they are. But, as savers are well within their rights to point out, most of them aren’t being deliberately made to suffer by an administration that both explicitly disapproves of their prudence and that plans to keep bailing out mortgage holders and bankers at their expense.

It all adds up to a pretty disgraceful-sounding policy. So much so that if I was Mr Bean I’d have certainly kept my mouth shut.

• Read the full editor’s letter here:
Mr Bean’s unfunny farce