[mattduke]

I kid you not. Prudent savers, it's your fault.

The next logical step, although it may be politically controversial, would be to do the opposite of what the Tories suggest. Instead of reducing taxes on interest payments, the Government could tax all bank deposits and other risk-free savings. This would create a negative risk-free interest rate, encouraging savers either to invest in property, shares and other productive assets - or simply to save less and consume more. In either case, the result would be more consumption and physical investment, less unemployment and faster recovery from the slump.

timesonline

[Denny]

Yes, the savers will be punished, if they keep their savings in money. Anybody remember the sixties, how it took about $2.50 by 1975 to buy what $1 bought in 1965? And from what I recall by hearsay, even worse in Britain.

We are all set to repeat that experience, with the massive government intervention and turning the spending valves wide open throttle. Nor am I saying this is so bad, it may be the lesser of two evils, but savers should be agile to put their money into the right things. Or else be prepared to be sacrificial lambs for the benefit of the rest of society.

[mattduke]

He should be careful what he wishes for. Once the currency hot potato game kicks in, it's over.

[Snowrunner]

Actually there is an economic theory that stipulates just that, but damn if I can remember the name of the guy.

His thesis (roughly) was that money hoarded does not benefit the economy and that it leads to certain people hoarding more money than they should and gaining thus more influence.

His suggestion was to make money lose value when it is not in circulation. In his idea you needed to buy a "stamp" for the money if you kept it in your bank account instead of bringing it back into circulation for a certain percentage of the value of the bill.

I guess this is somewhat a similar suggestion here though I doubt it'll fly, the problem is not that nobody is spending money it's that too many peopel have no (real) money, just debt.

[Revi]

We had a negative savings rate for a couple of years there. You aren't going to find much money tucked away in bank accounts in America. We gave it to Bernie Madoff instead of putting it in a boring bank. It was way more fun, until last month.

I think inflation will be a good stimulus to spend money. It could happen anytime soon. They just aren't issuing enough of those chips at the casino, though. Smoke those printing presses and hand out the chips. We're ready to do some gambling!

[jasonraymondson]

I doubt anyone on this forum had the kind of money it took to be swindled by madeoff.

It will just lead to people converting their funds to gold and silver and then hoarding that out of bank.

[miles392]

That's really an insane proposal... Punish prudent savers and reward those in dept. Just as said it would only increase interest in silver and gold. Nobody wants to be long in property and stocks these days but of course goberment will try and force it. Why make things better when you can make it worse?

And I really don't understand this:

"I believe, in line with the vast majority of non-socialist economists, that Mr Cameron's campaign for savings is completely wrong; that “borrowing our way out of debt”, paradoxical as it sounds, is exactly the right prescription for our present problems. This paradox is easily explained: if governments or wealthy individuals increase their borrowings they replace weak debtors - bankrupt hedge funds, struggling businesses or repossessed homeowners - with strong ones and this helps to stabilise the financial system and sustain economic activity and employment. The country can borrow its way out of debt. "

Does this make sense to anyone? To me it sounds like madness. He wants Britain of all countries to borrow itself out of this mess? That's what the US is trying to do and so far it's not working very good at all. And he's talking about socialist economics? Isn't the struggle of thought between Keynesian and Austrian economics (with the Austrian side winning)?




Ok another edit: after reading the entire article I can safely conclude that he's just another talking head, although this is actually the worst one I've seen for myself. He's even admitting that so far he's been wrong on pretty much everything that's happened but that doesn't stop him from giving proposals on how things should be handled from here on. If Britain goes ahead with these proposals I see nothing stopping them from being the first big country to fall. Who will keep them up? Ironic as hell that they them self helped doom Iceland and now they are the ones doomed. I'm however not looking forward having a financial Titanic a stone throw away.

[lawnchair]

Meh. The long-stated goal of the "a healthy 2% inflation is our target" economic policy has been just this. To force the thrifty to keep bought in to the "grow or die" mentality. The incentive 'stick' was, if you didn't grow or at least risking your money to growth, your money slowly died by inflation. It's not anything new. Risk-free savers have long been punished.

And, hey, people consume like hell in most hyperinflation cycles. Anything tangible at all is better than a Weimar Mark or a Milpengo.

[gt1370a]

I'm not sure if it was Bernanke who originated this idea, but he did talk about it in his "Deflation - Making Sure 'It' Doesn't Happen Here" paper.

Taxing savings will not prompt people to spend. It will prompt bank runs and hoarding under the mattress, where the cash can't be taxed.

[IslandCrow]

Taxing savings will not prompt people to spend. It will prompt bank runs and hoarding under the mattress, where the cash can't be taxed.

+ 1

And it would mean that the banks have less to lend out.

The other problem with this is that it would discourage savings for large items. With the housing market this would mean that it would be hard to save for a deposit for a house, so with the banks being a little more cautious (no longer 120% mortages) this proposal should crash the housing prices even more.

For me, if I can't save how will I be able to buy that abandoned field across the road from my house? (It may not be worth buying as it is in a zoned area for housing and so could be very expensive)

[mattduke]

I'm not sure if it was Bernanke who originated this idea, but he did talk about it in his "Deflation - Making Sure 'It' Doesn't Happen Here" paper.

A+

[bratticus]

Let everybody out of jail since it costs too much and they could be buying stuff or at least stealing it (which makes someone buy a replacement.)

[bratticus]

Let everybody out of jail since it costs too much and they could be buying stuff or at least stealing it (which makes someone buy a replacement.)

Would also result in a HUGE increase in homicides. Both of the good guys and the bad guys.
Guess I better head to the gun shop and buy more ammo. Lots more!

More money for hospitals too.

[Sixstrings]

Instead of reducing taxes on interest payments, the Government could tax all bank deposits and other risk-free savings.

Some of the ultra far left stuff that comes out of the UK just amazes me.

Taxing savings is ridiculous. People already don't save all that much, or the US and UK wouldn't be in this boat to start with.

As for this being an economic theory, it's not really necessary. Low savings rates can be encouraged though easy and large lines of credit. And savings are really just *delayed* consumption anyway. The money gets spent eventually, even if it's through a billionaire's charity trust after he passes.

And the bottom line is really.. has any economy ever collapsed from people saving too much?

[Tyler_JC]

I'm speechless.

This is, perhaps, the dumbest proposal I've ever read in a financial publication.

And that includes the BUY BUY BUY TECH and "Why Homes Will Never Lose Value" crap.

Do you know what happens when you steal people's savings? They don't put money in the bank.

And what happens when there are no deposits in the banks?



How are businesses and consumers going to borrow money to buy factories or homes if there is no savings pool?

The mere discussion of a savings tax in Congress would prompt the collapse of the entire banking system. (And no, the entire banking system is NOT already collapsing, my local humdrum bank is doing just fine)

[EnergyUnlimited]

Anyway, if one is still keeping his savings in bank, he must be a moron, so they may tax him as well.
Peoples should pay for being stupid after all.

Savings tax in UK is alive and well for many years.
Pensioners and other citizens with savings have adequate cuts of some of their SS benefits and they also need to spend most savings before they are entitled to state sponsored residential care.
Those who have no savings are entitled to state assistance at once.

[uNkNowN ElEmEnt]

Savings tax in UK is alive and well for many years.

That would be a good reason to ahve accounts in foreign countries... back to the idea of the original poster -> idiots should be taxed, god knows they tax my patience.

[thor]

Taxing savings is ridiculous.

As ridiculous as it sounds, in The Netherlands (Holland) we do pay 1.2% tax on savings above 20k euros. This is government tyranny at its best.

I'm wondering when we start paying taxes on the air we breath.

[IslandCrow]

I'm wondering when we start paying taxes on the air we breath.

Well in the past all sorts of things have been taxed: In England a lot of the old stately homes have windows that have been bricked up - not to save heat, but because of a 'window tax'. On a visit to a museum here in many of the mirrors the glass was neatly divided into two because "they were then technically broken and one did not need to pay the mirror tax on a broken mirror".

[Javaman]

Let everybody out of jail since it costs too much and they could be buying stuff or at least stealing it (which makes someone buy a replacement.)

Would also result in a HUGE increase in homicides. Both of the good guys and the bad guys.
Guess I better head to the gun shop and buy more ammo. Lots more!

More money for hospitals too.

Ah, the broken-window fallacy.