Savings; Modest Proposal

[fivemack]

Great. Savings rates are now at 2%; the perfect moment for the Government to launch a token encouraging-saving program whereby, if you are sufficiently poor and put away six pounds a week, after two years a magic wand will be waved and it will be as if you had put away nine pounds a week.

At the very least it would seem to make sense to raise benefits and pensions by those six pounds a week, with a claim that it's to encourage saving. If you add only a couple of hoops to jump through to keep the £6 from going automatically to a savings account of the right sort, it might well actually end up saved, and if not then a marginal six pounds on benefits is infinitely more likely to get spent in an economy-stimulating way than any process which, for example, gives money to me.

(Anyone who has sixty spare pounds a week, set up a monthly saver with Barclays ASAP before they decide that paying more than three and a half times the current base rate, fixed for a year, is silly. You need to turn up in person with your passport and a utility bill, the process takes about twenty minutes, and you have to set up a standing order into the account manually rather than have Barclays arrange it through direct-debitry)

Comments

[tau-iota-mu-c.livejournal.com]

But I thought we were trying to boost short term profligate spending, not increase savings. How will increasing savings boost the economy, man!?

Also: isn't CPI now about 5%?

[del-c.livejournal.com]

The savings of little people don't cause recessions. Recessions are caused when rich people, who have most of all the money there is, keep hold of their money instead of investing it, not poor people. And the spending of little people likewise doesn't get you out of a recession. What's going on is that recessions, and the need for forced investment, is always a good opportunity for consumerism to claim that now is the time for consumerism. If they say it loud and often enough, they can make a buck before anyone realises that *this* thing is not the same as *that* thing.

Received propaganda makes up the bulk of all the folk economics there is: consider the famous but almost-completely-mythical Laffer Curve, that millions believe in because they're told to.

[fivemack.livejournal.com]

I think the consensus is that CPI will go down in the short to medium term because much of its recent rise was a consequence of the price of oil speculatively tripling over the last two years.

My guess, and this is a bad guess made out of poor-quality string, thrice-used sealing-wax and a strong belief in the honour of politicians, is that encouraging small savings for people who have no money is an attempt to strengthen a certain kind of safety net, and weaken demand for loan sharks at the absolutely most desolate baby-needs-new-shoes level. It's not going to have macro-economic effects but it's possible that it might be good for people.