As the Bank fiddles with QE, saversare getting burned
The Romans knew what caused inflation, but at the moment we seem reluctant to remember
Sunday 22 April 2012
Surprise, surprise: when you print about £325bn of new money you get higher inflation. Who'd have thunk it, eh? The Romans knew that too much money chasing too few goods means rising prices, but it's a lesson that the Bank of England, mad keen on its quantitative easing splurge, seems unwilling to accept. Last month prices again overshot forecasts and, as anyone who keeps an eye on their weekly shop knows, the real rate of inflation that impacts on our daily lives feels greater than three and a bit per cent.
The massive threat of inflation is something I have been warning about for more than two years. It's utterly corrosive to personal finances and the economy as a whole, and it affects those lower down the income scale much more than those at the top. For me it's the effect on savers which is most pernicious. Since the financial crash of 2008 they have subsidised the debtors of this country to the tune of £100bn.
We have created a completely cockeyed economy where savings are raided and indebtedness is given excessive forbearance. Yet the evidence is that consumers are paying off their debts at an almost microscopic level: they are sitting there festering away. This in turn is understandable; if you are not forced to divest your debt by higher interest rates and circumstance, you are going to sit tight.
The psychological drivers which are crucial to the proper working of the economy are being avoided rather than deployed. We have had a collective economic mental breakdown and the synapses are no longer transmitting the right messages.
The Bank's QE programme, although launched for understandable reasons, just exacerbates this wholly false economy. And, once again, I return to savers. You see, if you don't properly reward savers then literally nothing in the economy works correctly. A better deal for savers isn't just a matter of fairness, it's absolutely crucial.
Watching claim firms
I am a bit of a fan of the gonzo consumerism propagated by sites such as Moneysavingexpert.com. Whatever you may think of its founder Martin Lewis's quite shouty appearances on the telly and radio, he and his site are no doubt a force for real good. And the seemingly million-strong army of Moneysavingexpert users – Mr Lewis himself has 112,329 followers on Twitter and counting – are a massive power. So much so that the old consumers' association Which? is increasingly trying to grab hold of Mr Lewis's coat-tails.
Last week, Moneysavingexpert and Which? (with the former, not accidentally, getting top billing) launched a joint campaign to help make refunds for payment protection insurance mis-selling easier. They want to cut the ground from under the claims management industry by getting people to submit claims themselves, without coughing up exorbitant fees in excess of 30 per cent of any compensation.
As our report on page 91 on council tax banding highlights, the compensation industry is much faster moving than the regulators. On Friday I was contacted by one of these firms about the very recent County Court ruling that bad debts run up on store cards which had been upgraded to a credit card are uncollectible – Harrods was the test case. This may well be overturned in a higher court but you can bet that the claims firms will be cold calling in the interim. Ultimately, that could mean more work for Mr Lewis and Which?
Chuck out the Chuggers
Good to see that the number of councils restricting the actions of face-to-face fundraisers – chuggers to the rest of us – is fast approaching 40. These commission-paid salespeople litter the pavements of the nation's towns and cities, pouncing on shoppers and people going about their business using guilt and pushy techniques to get them to sign up to a direct debit.
The street outside this office is horrendous, with teams of chuggers planting themselves in the narrowest parts of the pavement shouting at people who don't want to listen. Many charities, rightly, see that chuggers damage their reputation and don't use them, but others persist. With a council revolt, begun by Shrewsbury last year, gathering pace, lets hope we will soon be rid – especially outside my office.
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