Savers ignore Charlie Bean and use earnings to pay off debt

OK perhaps Mr Bean should swap places with the average person on an average wage with an average pension-and see if he still gives the same advice-or indeed would wish to follow it himself.....

Since when has it been wise to follow advice from government bodies anyway?

spending and borrowing more is not good advice . Mr Bean must be an economist. Knows nothing.

I thought one of the reasons for the present predicament in which we find ourselves was that spend spend spend was the modus operandi of the last government and many of the population. Funny world........

It is not a funny world, when you need credit and cannot get it.

In view of the above does it mean we should all be spending all our savings?

...and is that why we have such ridiculously low interest rates on savings?

My hunch is that Mervyn King and Charlie Bean are playing good cop and bad.

The Governor says "Of course we won't let you savers starve, it's just that the time isn't right to help you. All these folks who borrowed too much have to get TLC from the Bank first.'

King's enforcer, in a notnetoo well coded message, tells savers they can forget about getting a decent return any time soon and they might as well join the improvident-- although there are seven times as many savers as borrowers, democracy never trumps the imperatives of moneylenders.

Bean's indiscretion is like Maynard Keynes going on the BBC in the Depression, urging housewives to stock up with towels and blankets because after several years of deflation they were the bargain of a lifetime. (As it happens, JMK was right.)

Mr Bean is 'jawboning' consumer demand to avoid the horrors of deflation: you know, governments and feckless individuals having to pay back the true cost of their debts, the pound buying as much or more next year as this... that sort of usurer's nightmare.

Mr Bean is suggesting that people with actual cash spend some of it to create jobs. If they cut their spending jobs will be lost and all of us will be worse off. He is not suggesting that people with no money go into debt to buy consumer toys.

There is a great difference between spending your own savings - if you can afford it - and spending other people's savings (through credit cards etcetera). It was borrowing money people could not afford to pay back that got the country into this mess, not spending money saved for a specific purpose. It is the latter that Mr Bean suggests.

Perhaps he should have been more precise.......

As I commented in relation to the remarks of this to be last week, Mr Bean favours the miscreants who helped cause the crisis by rewarding their irresponsibility and injudicious borrowing over the law-abiding citizen who live within their means and save.

Given his position as a banker which is supposed to be a prudent approach to finances, is not that Mr Bean should not resign for promoting irresponsibility?

Regard should not be had to getting the printing presses running again to further devalue the currency, rather the prudent approach of tightening belts, cutting waste and making prudent use of man/woman power available. Surpluses need to be cut, today, not tomorrow, next week or next year.

If that means that those working in the unproductive civil service need to work that much harder to do the job (and there has been a lot of, and that they work at an exceedingly relaxed pace, and that they could probably be three and four times more productive) then they are going to have to learn that discipline and that section will need to be pruned back drastically, by a number greater than were hired over the last 13 years above the level Zanuliebore inherited, double for starters.

The section dealing with European regulations and laws need to be reduced by at least 90% and the enforcers of those regulations need to be similarly reduced, bringing us into line with what them across the water do, largely ignore them, the regilations.

Daniel Hannan should be asking for savage cuts to the bureaucrats employed (dreaming up crazy idiotic socialist dogma laws and regulations) by Brussels. A pipedream? Perhaps, but given the number of strikes now going on, some people are clearly very worried and I suggest that the writing is on the wall and it is inevitable.

re Jeremy Bosh

How many of us can afford it in the current climate?

Perhaps he should have been addressing the banking fraternity not the general public.

I'm sorry Lorna but I cannot except your reasoning. It would appear to me that you have misconstrued the meaning of Charlie Bean's remarks.

He never said anything like spend, spend, spend. Nor did he infer that people with debts should fund further spending from residual cash flow.

The people who he was referring to were members of the older generation who had paid their mortgages off and have substantial cash reserves. He was referring to what is known to accountants as "drawdown" In other words older people should review their finances with respect to current and prospective outgoings in relation to probable life expectancy.

He wasn't advocating that anyone should do anything rash or reckless. He was merely mindful of fact that some people's aim is to be the richest person in the Churchyard. To my mind Farmers are the worst offenders. They want to leave their land and the assets of the business to the next generation and still be able to live comfortably in retirement on the interest from capital deposits. At the same time agricultural workers who have helped create the wealth for them have never had a chance to save for retirement but are expected to vacate the house which has been their home when they are no longer able to work.

Every time you write articles about credit cards it touches a raw nerve with me. These innocent looking pieces of plastic are treacherous sirens which have caused many a good ship to flounder on the rocks. Well done to all those who have paid them off and cut them up. I put them in the same catergory as tobacco. Life is better without.

To all the moaners out there, I agree that bankers in general are greedy spivs. The previous Govt. were absolute nincompoops at managing money, and the mealy mouthed regulators know which side their bread is buttered. But we must face the fact that the Country is in a mess. We shall all pull through if we just stop carping and do the best we can to put our own house in order.

There! Now that I have got that off my chest, I will step down from the soap box.

Very well said Hodrod. I could not have explained that more eloquently.

re Hodrod

I we are in it together, why don't the bankers take a pay cut, and donate their bonuses to charity, sorry I meant the Government.

Re Anon 1

Saint Francis of Assisi is not the Patron Saint of Bankers. Although they have committed many sins, I would not accuse the banking fraternity of being miserly. On the contrary my understanding is that most of the high flyers are yuppies who live a frantic existence with no real concept of lifetime financial planning. Typical big spenders. Expensive pads in Notting Hill Gate. Twenty pound breakfasts in Lombard Street, with those huge bonuses sometimes being frittered away on fast cars, lap dancers, parties, and thousand pound bottles of champagne. You could argue that the baksheesh eventually finds its way into the pockets of the coolies.

If you doubt my word, read Rogue Trader by Nick Leeson, and/or "Cityboy" Beer and loathing in the square mile by Geraint Anderson.

re Hotrod

Thank you for your contribution, it is very interesting.

Just want to mention two further points.

1.I do not think the people you describe spend their money as quickly, and as fully in this country and on the goods of this country as the people on benefits.

There is thus a contradiction between spend, spend, spend, and reducing the benefits of some of the most impoverished members of our society.

2. The blame culture recently discussed under Citywire.

Many have blamed our state of affairs on- The last Government, lack of regulation etc.

But why is it some banks got into trouble, e.g. Lloyds, RBS, Barclays, whilst others did not e.g. HSBC, Coop.

Could it be Yuppie Greed is good for You?

Oops, I think I have just joined the Blame culture.

Some investment bankers squander their money on high living but others are extremely generous to charities. For example:

HSBC boss hands £4m bonus to children's charity... but top bankers ...

1 Mar 2010 ... Stuart Gulliver, the head of HSBC's investment banking division, ... Chief executive Geoghegan will donate his entire £4m bonus to charity ...

www.dailymail.co.uk/.../HSBC-boss-hands-4m-bonus-childrens-charity--bankers-share-35m.html

On the point that benefit claimants are more likely to spend their income within the UK, this is true but irrelevant. If the UK recovers any time soon it will be on the back of manufacturing exports to the likes of China and the USA. If we do not buy the exports of other countries, how will they be able to buy our exports? It does not matter if we import champagne and caviar for rich bankers so long as we export wine making machinery and fishing boats. Think about it. Even in the bronze age people travelled and we traded with our neighbours.

http://www.bbc.co.uk/news/science-environment-11421593

Anon 1, with respect the comparison between bankers and those on benefits is more than slightly disingenuous.

Bankers have had to work hard and long hours to get to where they have, whereas there are a considerable number on benefits who have no intention of working, or when they do, they do not declare, and the tax man gets no sniff of it.. In fact it is quite common for those on benefits to also be part of the black economy, who are in it, as some would say, for their own benefit, pun intended.

I do not begrudge bankers good salaries, however the rate that they are getting is nauseatingly obscene when there is little money of theirs at risk and they are in effect putting their sticky hands into the money stream as often as possible. When things have gone wrong, and in respect of which they were handsomely paid and over rewarded with unmerited bonuses, those bonuses are not clawed back.

The examples of excessive pay are invariably the wheeler dealers and the directors, rather than the man in the high Street bank, or should I say woman in high Street bank, (because there are an awful lot of them there, with a high turnover of new faces every few weeks) who are not there for their customers, but merely to bamboozle them, the customers, into accepting the bank's credo that your account, if in credit, is there to be milked, like a milschcow, twice a day on weekdays and three times a day on Saturdays and Sundays, so to say.

Not only do they not pay you interest, they do transaction charges and on top of that an "account charge", insult to injury.

Moving on, it wasn't so much the lack of regulation, it was a lack of enforcement of what was there, and the government ignoring the fire that was burning merrily back in 2004 and 2005 and growing by ignoring the bubble that was developing, and indeed overspending on their income, having sold off the gold and the family silver, and mortgaged what was left to the hilt, the Private enterprise initiatives in relation to buildings, hospitals and schools and forces accommodation.

Instead of spending a little on needed maintenance and improvements, they got barrow loads of money for the sale at an initial low rent, and the higher rents are now kicking in.

Now we have those responsible stating that the cutbacks should be over a much longer period of time and seeking to head off civil service reductions. In the meantime they draw their fat salary and expenses (and compensation for loss of office) but there is no come back to them for the disaster that they left.

Brown is travelling the world, undoubtedly charging high fees for talking (and drawing his PM pension and PM pay (and charging us for the extra cost of security whilst travelling, even at home because of his pandering to the criminals, making sure they cannot be locked up), silly band (E) having sat at the knee of the Cyclops in charge and rubbing shoulders with the other idiot responsible, balls (who was advising cyclops on matters economic), both are talking about pouring petrol on the continuing conflagration and expecting us to pay for the petrol and resultant damage.

Blame culture, no, I want compensation from those responsible and that they be held to account and debarred from being anywhere near the levers of power, for life, because of their total incompetence and failure to honour promises (and in particular the referendum) and policies designed to make businesses pay for the actions of individuals, and in effect to be the social security providers for anybody they happen to employ, for however briefly they work.

This brings into play the Equality Act, an iniquitous piece of legislation which has nothing to do with the much vaunted fairness we were regaled with last year and this year.

Better stop there.

re Jeremy Bosk

How many Stuart Gullivers and Geoghagans are there amongst the high bonus earners/

Compare their attitude to the attitude of Fred the Shred to his pay off, and pension.

On my first point. I stand by what I said. The propensity to spend by benefits people on goods manufactured in the UK is much higher than that of yuppies. The benefits people do not normally drive around in new BMW,s for example.

On your further points, there is the patriotic duty to consider our balance of payments situation, so I stand by what I said.

As we are not a manufacturing economy, but one heavily dependent on services your point about exporting wine making machinery and fishing boats, is not highly relevant.

In any case using the wine making machinery, and fishing boats brings in income streams much higher than the initial outlay.

As such they in the long term a will be better off.

As regards manufacturing it is unlikely to recover soon, as it has an unreasonable burden to bear in terms of services. Any recovery is only likely to fuel more service costs, bankers bonuses etc.

The real problem is not the pensioners, or benefits, but high cost and often irrelevant services in our economy

re Snookie

If a system encourages skivers then it should be changed.

If Black Economy is the problem, then it should be dealt with.

Why reduce the benefits of all.

As logical as increasing the taxation of everyone, because there are tax avoiders.

On banking, some banks needed enforcement, some did not. Getting the balance right is not easy.

Progressive taxation is the answer to excessive earnings, especially in the current climate, as well as taxing excessive pension arrangements.

On Equality I am a believer in equality. If the Equality Act helps achieve it, so be it.

Hope the above is a useful contribution to the debate.

PS I still think it is the Service Sector that is our problem, and I am not the only one.

To quote Vice "spivs and gamblers" and "the cosy world of Solicitors and Accountants" for example.

Re Anonymous1: Britain is still in fact the sixth largest manufacturing economy in the world. There are hundreds of manufacturers quoted on the LSE and AIM. Looking just at electronic and electrical equipment, 34 of them are up on the last 12 months, 12 of them by more than 100%. Only 17 are down. In Industrial engineering 30 are up on the year, five by over 100%. 27 are down. Some of these are based overseas or do some or all of their manufacturing overseas. Which does not invalidate my point because there are many big overseas manufacturers operating plants in the UK. Think of IBM, Siemens, Nissan, Toyota, Cemex and so on.

The service sector is a lot more than bankers and hairdressers. Legal services such as arbitration under the London rules, insurance, intellectual property law, translation, university led r&d... It is a very long list and most of it very profitable.

Even hairdressing (and I have cut my own hair for the last forty years) serves a function in improving morale and hairdressers wages get spent keeping other people in work. "Dost thou think, because thou art virtuous, there shall be no more cakes and ale?".

Twelfth-Night; or, What You Will

Act II. Scene III.

AEROSPACE and defence companies with major operations in the Midlands have defied the downturn to emerge with stable revenues and growth, a new study has concluded.

Eleven companies with a presence in the region are among those listed in the latest Top 100 table of global aerospace manufacturers, compiled by PwC in association with Flight International.

http://www.thebusinessdesk.com/westmidlands/news/71365-aerospace-firms-defy-downturn-to-stay-high-flyers.html

re Jeremy Bosk

Thank you for your contribution.

In reply please note the following.

Please advise where you got your figures from to show that we have the sixth largest manufacturing economy?

In any case I was under the impression that manufacturing has been in decline for a large number of years.

In response please provide our position 10, 20, 30 years ago, on a like for like basis.

A few examples of profitable sub sectors in services does not prove any point.

if you want an intelligent discussion then I suggest we do it on the following basis, based on figures.

10 years ago, 20 years ago and 30 years ago.

% of GDP of Services to %GDP of all other sectors.

% of GDP in Manufacturing to % GDP in Services.

% of GDP of Services giving an income from abroad to %GDP of Services not giving an income from abroad.

When you have provided these figures, stating your sources I will reply further. If you have any problems with the above ask Citywire for assistance.

Act 3. Scene l

I agree that manufacturing has shrunk as a proportion of GDP as is common in most major economies. I don't have the time or the energy to extract all the figures but they are almost all here if you want to do the sums.

http://unstats.un.org/unsd/snaama/dnllist.asp

The only data you requested that is not in the UN data is:

"% of GDP of Services giving an income from abroad to %GDP of Services not giving an income from abroad". However some of the figures are here:

http://www.econ.cam.ac.uk/faculty/coutts/Rowthorn_Coutts_2006.pdf

See Table 2 for the balance of payments by sector.

An FT article uses the UN data in saying:

Published: March 14 2010

"Manufacturing is widely portrayed in the media as a dying sector, but Britain remains the world’s sixth largest manufacturing economy. It is a world leader in biotechnology, pharmaceuticals and advanced manufacturing, with manufacturing providing 2.6m jobs and about half of export earnings compared with 12.5 per cent from financial services.

But manufacturing’s share of gross domestic product has fallen from 20 per cent in 1997 to 11.3 per cent in the third quarter of 2009. The report says industry is held back by policies on tax and regulation, failure to improve collaboration between business and researchers, and the ineffectiveness of programmes to improve access to finance for entrepreneurs".

http://www.ft.com/cms/s/0/51ffb2c6-2f98-11df-9153-00144feabdc0.html

Thank you Jeremy for your latest contribution.

I will in due course work through the figures.

I just want to bring to your attention the latest on manufacturing.

BBC Economy or Business News.

UK manufacturing growth "hits 10-month low"

So much for the recovery of manufacturing in the UK.

Anonymous1

Thank you. The BBC story is distressing and no one can pretend that all UK manufacturing is booming or that things are not going to get worse before they get better.

http://www.bbc.co.uk/news/business-11450103

However the problem is neither unique to the UK nor terminal. I believe that the UK has the brains and at least some of the educated workforce to overcome our present problems. It will not be easy.