Monday, May 02, 2011

A letter to Douglas Carswell MP

Monday, 02 May 2011

Douglas Carswell MP
The House of Commons

Dear Sir

Financial Services (Regulation of Deposits and Lending) Bill 2010-11

Congratulations on your speech introducing the above Bill, which I have just seen on YouTube. May I offer some counter-arguments so that you can rebut them when others raise them?

• Were your Bill to become law, the banks might simply offer no interest on “storage bank accounts” and a sufficient differential on “investment accounts” to draw money away from the former, even from cautious savers (but still not enough in the latter case to match inflation). In fact something like this is already happening with people investing in stocks who shouldn’t.

• British business might be at a disadvantage if we have this rule but other countries don’t. Look what the US has already bought from us with “candyfloss money” – the old Cadbury Quakers must be spinning in their graves.

• Savings need to be safe in terms not only of the return of capital, but the return of its real value. NS&I Index-Linked Savings Certificates fitted that bill, and were withdrawn in 2010 for the first time in 35 years. This is an indication of the Government’s priorities, surely. But even when available, money had to be locked up in those Certificates for years. And when first introduced, they were only available to pensioners.

• If you really want sound money for the protection of ordinary savers, then we should have index-linked (and linked to a properly fair index of consumer price inflation), instant-access (or short-notice access) cash ISAs, so that deferred consumption is at least not penalised, if not positively rewarded.

Very best wishes to you and for your Bill,

Rolf Norfolk

INVESTMENT DISCLOSURE: None. Still in cash, and missing all those day-trading opportunities.
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myopia said...

I take it your aware of the Positive Money campaign

I thought their submission to the banking commission particularly interesting.

Sackerson said...

Hi Myopia; hadn't seen the submission, thanks for the link.

The question is, even if it's a good idea, how do we get there from here? E.g. page 25:

"the demand for credit now is artificially inflated by the ability of bank lending to inflate
house prices and require members of the public to borrow more in order to buy a house."

Spot on. But introducing the new system would crash house prices and leave many existing owners in deep negative equity.

Are we up the creek in a barbed wire canoe, without a paddle?

myopia said...

"Are we up the creek in a barbed wire canoe, without a paddle?"

Yes but you knew that anyway. Sadly there's no pain free way out of the ending of a debt supercycle - I wish there were. Biggest mistake I made was to be prudent during the party - all efforts at present are aimed at rescuing the imprudent. C'est la vie.