EDITOR'S LETTERMerryn Somerset Webb
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?
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.
• Read the full editor’s letter here: Crazy idea to boost lending.