Bank Deposit Protection about to vanish?

[JohnfromUK]

Put £100 under the mattress - and when you take it out it is still £100, but due to inflation, it buys you less goods (because the price of goods has inflated).

Put £100 under in an interest bearing account - and when you take it out it will be more than £100 (due to interest (less tax)), it may buy you more goods, or due to inflation, it may buy you less goods.  It depends on whether inflation has been higher than the net interest received.  Some years it is, some it isn't.

[RockySpears]

" David Icke's"  No, not ever, he seems a little unstable to me.

" dodgy source,"  The European Central Bank?  Bill Blain?  ZeroHedge - Dodgy because Wikipedia says so?  What is a good source?

"tables of figures"  these were provided by a contributor to the discussion, I merely expanded the data set (from the same site) to show that between them, the Banks and The Government are NOT there to help us and indeed actively destroy an individuals wealth.

grrclark  Yes, lots of ways to interpret/calculate inflation and lots of causes. However, how does this in anyway affect the FACT that the Bank of England is mandated to have a 2% inflation rate?  Why does it not aim for 0% and try and protect our money from the devastating effects inflation inflicts?  I think I have shown that our Wealth is being eroded by these institutions and no one seems to think twice about it and given that that was my aim I think I have done so.  I think I have tried show the PW readers that they must look to their own way of managing their wealth. 

Gordon R You brought up Gold, what about it?  I never mentioned it?  Some sort of "barbarous relic" is it not?

    "what is he suggesting - sticking the money under the bed"  It would have been a better investment if you had done so, I think I showed that.  Some would just use the savings rates and shown that the £100 had in fact grown to £1,527.50 and Joe public goes "Wow, great job Banks", what Joe was never shown was that his £1,527.50 now, had the purchasing power of £75.2 or, after tax deduction on interest, about £60.  It is this disingenuous nature of the financial world.  They utterly fail to inform Joe that they have taken him for a ride and that bugs me.

Thanks to all for the discussion, 

Yours,

RS

 

 

3 hours ago, JohnfromUK said:

Put £100 under the mattress - and when you take it out it is still £100, but due to inflation, it buys you less goods (because the price of goods has inflated).

Put £100 under in an interest bearing account - and when you take it out it will be more than £100 (due to interest (less tax)), it may buy you more goods, or due to inflation, it may buy you less goods.  It depends on whether inflation has been higher than the net interest received.  Some years it is, some it isn't.

  I love it when posts cross.  Missed that due to 2nd Page of posts 

 

Thanks  John

 

RS

Edited November 22, 2017 by RockySpears

[grrclark]

1 hour ago, RockySpears said:

grrclark  Yes, lots of ways to interpret/calculate inflation and lots of causes. However, how does this in anyway affect the FACT that the Bank of England is mandated to have a 2% inflation rate?  Why does it not aim for 0% and try and protect our money from the devastating effects inflation inflicts?  I think I have shown that our Wealth is being eroded by these institutions and no one seems to think twice about it and given that that was my aim I think I have done so.  I think I have tried show the PW readers that they must look to their own way of managing their wealth. 

Does it somehow accord greater prominence to your argument that you write the word fact in capital letters and mandated in bold?

I don't believe anybody contested that the BoE have a mandate to try and maintain inflation at 2%, the reason for that is actually pretty simple.  Inflation is also a measure of growth, too much inflation is bad and too little is also bad, but growth in the economy is good.  Inflation is an imperfect and coarse measure of economic performance, but it is a relatively simple and straightforward metric to use.

We can of course argue about the merits or otherwise of capitalism and there are a few contributors to PW who might join in that debate, but despite all our protestation we live in a market economy and growth is an essential part of that, hence inflation is also.

As I said earlier inflation has been around since the very first day we as people exchanged goods or services for other goods.  Even if we used a standard backed currency, such as gold, then if we introduce more gold into the economy because someone struck lucky in a gold mine, the value of the gold decreases relative to the cost of the goods, because there is now much more gold, and that there is the definition of inflation.  If we use bags of grain as our currency the rules remain the same, in a bumper harvest year we have high inflation as our currency is worth less relative to the goods as we have so much more of it (monetisation), but if we have a rotten harvest and very little grain then we go into economic depression and likely to move towards deflation.

What you have demonstrated on your spreadsheets is an arithmetical equation of how inflation reduces the numerical worth of currency against a fixed relative measure, but with no recognition of growth.  We have no fixed relative measures in our economy, absolutely everything is variable.

An example, if my £1 pay, for 1 hour work, is used to buy two pints of beer, but we have 100% inflation, i.e. the cost of the goods have doubled, and can now only buy 1 pint of beer then the value of the currency has halved, wealth erosion. However, if through economic growth I now have £2 pay in my pocket, for 1 hour work, I can still buy 2 pints of beer so my purchasing parity has remained the same, hence my wealth is the same, regardless of the 100% inflation rate.

You cannot measure wealth on the basis of inflation alone, you have to use a much wider range of measures, hence your argument is specious.

 

[Gordon R]

I think Rocky took too many punches in Rocky 1-6. Thinking isn't his strong point. He presents his opinion as fact, in the manner of a zealous convert. The usage of upper case, bold type and excessive cut and paste devalues any post.

grrclark has shredded your argument, but I suspect your ego will demand the right to be heard. So it should, as there can be no argument - you are right. Shame about the dodgy quotes, rigid thinking and poorly constructed text.

With banks taking such a panning, I was tempted, briefly, to ask Rockeeeee what his alternative was. I decided against it, because I couldn't face more cut and paste lectures.