Better Deal for Savers.

It is clear a lot of the current problem being felt by the UK is high levels of debt. The problem is how to encourage saving, when interest rates are so low. In a new financial world order I think we should have the situation that the MPC is not allowed to set interest rates to less than inflation + 4%. The position we would like to reach is inflation around 1-2%, this would mean Interest rates around 5-6%. Clearly we cannot go from 0-1.5% the current bank rate to 4.1 ( current inflation) + 4% overnight, but the Government should make a commitment that we will steadily progress towards this situation over the next 10 years. The 10 years starting when the recession reaches its maximum pain. This would give people time to adjust i.e. reduce they indebtedness and increase their savings. Businesses could make their decisions on interest rates being reasonable rather than very low. If we get rising inflation as a result of all the money pumped into the economy and we get to the situation where Interest rates have to be set to at least Inflation + 4% before 10 years have passed then so be it. After that we should stick to
limit no matter what, especially as I think this recession will prove that cutting interest rates does NOT stimulate the UK economy as any increase in borrowers having to spend it offset by.

• Impact of weakening pound on inflation
• Paying off their Mortgage quicker
• Banks not passing on the full savings yet hitting savers
• Need to pay money back with future increased Taxation.
  

After all its only the fact that Banks leverage the amount they lend compared to what they borrow, that makes any gain for borrowers cancel out the loss for savers.
We should also have a better measure of inflation, or at least another measure, we should base this new measure on the cost of Food, Oil, Energy and Council Tax. These are the essentials that people have no real means of avoiding. Also Food, Oil & Energy are all things are limited resources in the World and hence likely to increase. Council Tax is a black hole that needs to be accounted for.

Economists are totally hopeless.

Economists are totally hopeless, they cannot make up their minds in the recession we are now in is going to be long or short and if we will have high inflation or deflation.

Well I predict the recession will be a long one. Financial Services is 31% of our GDP and the city of London will shrink over the next 5 years. We do not have any Natural resources like North Sea Oil that is going to help us. Our Manufacturing currently 13% of GDP is not going to grow dramatically, as we cannot compete with China and Asia's low employment costs. Some where along the line the Government and we as individuals will have to pay the large amounts of interest on our loans as well as try and pay them back. This will throttle back any recovery.
I can see us not recovering from recession for 5 to 10 years

As to deflation. I can see Oil, Energy and Food prices dropping from their highs, but we are not going to see any deflationary spiral on these essential items. In fact as the rest of the world comes out of recession faster than us these essential items will inflate.

As to none essential items, Cars, TV's etc. I can see these deflating with the world in recession, but again we are going to be in recession for longer and these things will then cost more as the pound will still be suffering.

The City Uncovered.

Just watched "The City Uncovered with Evan Davis" on BBC2. Whilst still a newbie in terms of understanding how the city operates. it left me in total fear of what the UK Government has done by offering to insure the Banks bad debts. Add to the mix that Alistair Darling admits the scheme is unfunded i.e. In reality they have no idea how big a risk they are taking on. I can't help but worry about the unbelievable size UK debt will reach. It seems to me it could dwarf the UK GDP. I can only see one thing happening and that is we as a country will default. No wonder the Pound is taking a pasting as I don't think I am alone in my thoughts. Given Gordon Brown's track record for making bad decisions I can only see disaster.

Fall in Inflation.

BBC website gives details of a fall in inflation. It headlines it Big Fall in Inflation to 3.1%

Well that's still way over the target of 2%

They go on to say "But high food, gas and electricity prices prevented the rate from falling as fast as economists had predicted".

Well as Food and Energy are the major costs in most households that does not help very much. I don't think Interest rates should be so low with inflation still at 3.1% and the real rate for most homes being higher due to Food & Energy.

Tempting Offers

Tempting Offers : Seems everywhere I go or every email I am getting I am bombarded with tempting offers, trouble is we just don't have the money so the answer has to be no. But it sure takes will power to say no and avoid spiralling debts.

Cutting VAT to 15%

Cutting VAT to 15%

Quote from the BBC website

"They also argue the VAT cut is the fairest way to get money into the economy because low-income households spend a larger share of their income on VAT than richer households."

What a load of tosh. Why oh why are we lead by such idiots. The poor spend their money on Food, Council Tax, Petrol and Energy none of which are effected by the 15% VAT deal. Really poor people just have food and energy. I think this government is living on a different planet. You have to be quite well of for any of your monthly outgoing to go on VAT related goods.