Why So Many Americans in the Middle Class Have No Savings

Could you come up with $2,000 in 30 days if you had to? As many as 40 percent of American families can’t, despite the improving economy. Among them is Neal Gabler, who is frequently broke despite his successful career as a writer. As part of a collaboration between The Atlantic and the PBS NewsHour, Judy Woodruff looks at why Gabler and so many other Americans are struggling with savings.

Mervyn King: Helping Savers Would Push Britain Back into Recession

THE DAILY TELEGRAPH: The Governor of the Bank of England has ruled out help for savers hit by “negligible” returns on their savings, warning that moves to reward their prudence would tip the economy back into recession.

Sir Meryvn King also suggested that growing household savings rates are one reason for Britain’s recent poor economic performance.

He also warned that the UK economy is set to “zig-zag” between growth and contraction this year, partly because of an additional bank holiday for the Diamond Jubilee.

The Governor was speaking amid growing public and political unease about the impact of the Bank’s emergency measures – pumping £325 billion of new money into the economy and Bank rate at a historic low – on savers and pensioners.

Those policies have cut the returns on savings and annuities to record lows. Saga, a campaign group, estimates that more than 1 million pensioners have retired with permanently lower retirement incomes because of the impact of the Bank’s quantitative easing programme.

Savers have also been hit by high inflation, though the bank predicted that inflation will fall back to 1.8 per cent by the end of 2014, easing the recent squeeze on household budgets.

Sir Mervyn insisted he understood the problems facing savers, but made clear he believes he can do nothing to help. » | James Kirkup, Deputy Political Editor | Wednesday February 15, 2012

Betraying Savers and Law-abiding Citizens Is Neither Modern Nor Compassionate
TELEGRAPH – BLOGS – NORMAN TEBBIT: Extract: … There is not much doubt that QE will help the economy to grow, but it will be at the expense of a further rise in inflation. That will cut the value of wages, but also reduce the value of savings and the burden of debts. Borrowers will be winners, and savers will be the mugs again. I am not sure that is either compassionate, or very modern. It is a cruel deception that has been played at the expense of the vulnerable too often in the past. – Norman Tebbit … Read the complete blog here » | Norman Tebbit | Friday, October 07, 2011

My comment:

Excellent blog, Mr. Tebbit. As a lifelong Conservative voter, I feel alienated by Mr. Cameron's version of Conservatism. I feel particularly alienated by his government's lack of concern for savers. I also feel very concerned about the Bank of England's propensity to print money whenever there's a problem. Turning on the printing press is no sound solution to anything. Haven't any of these people ever studied any economic history? Have they not heard of the disaster of hyperinflation in the Weimar Republic, caused in no small part by turning on the printing press?

I wish someone could tell me why this country has for many years paid such scant regard to saving and savers. It seems to me that in any sound, well-run economy, it is a great advantage to have a well-to-do, cushioned populace. For some inexplicable reason, successive governments in this country seem not to have thought so. The current government is no exception.

I thought that having a Conservative government again (albeit tempered by the LibDems) would usher in a period of economic sanity after the foolhardy years of Labour control, or lack of it. I have been sorely disappointed. – © Mark

This comment also appears here

Inflation Steals £2,500 from Typical Savers in Slow Motion Bank Robbery
THE DAILY TELEGRAPH: The average easy access savings account has lost nearly £2,500 of its real value or purchasing power during the last decade, according to calculations by Yorskhire Building Society.

Inflation is the insidious enemy of savers because it stealthily reduces what their money will buy. But with the Government’s favoured yardstick, the Consumer Prices Index (CPI) rising at an annual rate of 4.5pc – and the Retail Prices Index (RPI) showing 5.2pc – many may underestimate the cumulative threat.

Simon Broadley of Yorkshire Building Society said: “With the average savings account standing at £11,648 this can have a significant effect on a person’s savings – especially over the long-term, given the current market.

“Over 10 years someone with the typical savings pot in a basic easy access savings account would have earned £1,624 in interest, leaving its nominal value at £13,272. However, for them to have the same spending power as when they invested – their savings would need to have grown to £15,700 – a difference of £2,428.”

Michelle Slade of the independent website Moneyfacts, added: “People can see the impact of rising prices on their everyday spending, but neglect to see the impact on their savings as the actual size of their savings pot is still seemingly growing. » | Ian Cowie | Wednesday, September 28, 2011

NS&I Pulls Saving Products Amid Austerity Drive
THE TELEGRAPH: Savers have seen two of the most popular state-backed investment products withdrawn from the market amid the Government’s austerity drive.

National Savings & Investments has pulled its inflation beating and fixed interest savings certificates and cut rates on other products after seeing record inflows of cash.

The group feared demand from consumers could place too high a burden on the taxpayer, at a time when the public finances are under unprecedented strain.

The products had attracted more than a million savers with their promise of high returns and Government-guaranteed security.

The announcement is the latest blow to savers who have seen their income plummet at a time when most savings accounts fail to offer any real rate of return once inflation and tax are taken into account.

NS&I is tasked with raising a fixed amount for the Government coffers each year and can often offer better deals than commercial banks because it is not required to turn a profit.

It is even permitted to make a loss of up to £2bn, to the benefit of its customers. However, it feared this cap could be breached this year because of the unusually high level of demand as consumers seek a safe place to keep their cash as a result of the financial crisis.

Experts yesterday accused the Government of punishing the responsible behaviour of savers as it battles its own deficit. >>> Myra Butterworth, Personal Finance Correspondent | Monday, July 19, 2010

EC Moves to Protect Savers' Deposits
THE TELEGRAPH: People holding accounts at banks that fail could soon have their savings of up to €100,000 (£84,000) returned to them within a week, under new EU plans.

The draft laws from the European Commission, published on Monday, are designed to shore up confidence in the wake of the financial crisis.

Current minimum compensation levels in member states are set at just €50,000, while people who bank with a collapsed lender face a three-month wait for their money. Read on and comment >>> Emma Rowley | Monday, July 12, 2010

Greeks Face Tax, Pensions and Pay Misery in Austerity Plan
Photograph: Times Online
TIMES ONLINE: An increase in the retirement age from 53 to 67, a three-year wage freeze and cuts in public sector pay are understood to be among the austerity measures agreed to by the Greek Government in exchange for a €24 billion (£21 billion) rescue package.

The measures include severe cuts in Civil Service wages, with public servants losing their “13th and 14th” months’ salary and pension entitlements, a reduction of state benefits and tax increases on alcohol and tobacco to help cut the deficit. >>> Emily Ford | Friday, April 30, 2010

Savers Should Have £500,000 Worth of Savings Protected, Says Financial Services Authority
THE TELEGRAPH: Savers should have £500,000 worth of their savings protected if a bank or building society collapses, says the Financial Services Authority.

The City watchdog called for the "quantum leap" in the level of protection offered by the Financial Services Compensation Scheme from its current level of £50,000, saying it would boost confidence among savers.

If a bank goes bust, the FSCS will repay up to £50,000 per person, per authorised bank or building society.

However, there would be a time limit of six months on the additional protection covering balances stemming from selling a property or a divorce settlement.

Thomas Huertas, a director at the FSA, said: "Our proposals will protect people who have little or no choice about holding a high balance for a limited period over the current FSCS limit of £50,000 before they can diversify it, if they wish, between different institutions."

Experts welcomed the proposals, saying they would help to reassure savers amid the economic turmoil. >>> By Myra Butterworth, Personal Finance Correspondent | Tuesday, March 31, 2009


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