News Contented Dad on 11 Jan 2009 06:42 pm
Is It A Good Idea To Punish Savers?
Punish savers and make them spend money was published in the Opinion columns of The Times on Thursday 8th January by Anatole Kaletsky exhorting us to ignore the advice of David Cameron and as individuals to spend our way out of this current recession.
Whilst admitting that this sounds paradoxical Mr Kaletsky nevertheless “explains away the paradox” by claiming that weak debtors should be replaced with strong ones – presumably meaning those prudent individuals who are capable of living within their means and have not buried themselves in a welter of unnecessary debt during the last decade or so in spite of the unrelenting sales pressure on the part of the banks to do so.
My own humble opinion is that this is complete and arrant nonsense.
There are institutions within our economic system whose primary function used to be to match retail savers with good sound long term borrowers who were ideally investors in the productive economy. The expectation being that the vast majority of these long term investors would meet their interest and capital repayments from the return on their investment.
These institutions used to take an interest in the probability that the borrowers would be able to fulfil that expectation and would generally be reluctant to advance funds to those they deemed unlikely to meet that goal.
We usually refer to this type of institution as a Bank. Somewhere along the way both Mr Kaletsky and many of our banks seem to have lost the plot.
It is about time that these institutions recognised their prime function and got on with it, if necessary with a few digs from David Cameron. (Probably the worst thing about this whole mess is that I find myself agreeing with a politician!)
Until recently we were told that Consumers’ Credit was already too high, how is now sensible to increase it even further?
I don’t object in the slightest to the idea that government should bring forward spending on infrastructure that will better equip us as a nation to take full advantage of the next upswing of the economy, all credit to them if they can.
I do not see how the idea that weak debtors can be replaced with strong debtors will help us at all, they are both bad types of debt, and as such, it is a recipe for compounding the present disastrous situation and should be dismissed out of court.
So there we are Carry On Saving! If you can!
Maybe in years to come we will have the comedy version of current events featuring the good old British film industry and those stalwarts of the Ealing and Pinewood Studios to help us forget how bad the good old days of the early 21st century really were!
No prizes for suggesting who would play wicked Gordon!
