ALL >> Business >> View Article
More People Are Turning To D-corp After Five Years Of Pitiful Savings Rates, And There’s More To Com
Total Articles: 8
It has now been over four years since the Bank of England cut Bank Rate to 0.5% – the lowest-ever point that interest rates have reached, in a 319-year history stretching back to 1694.
And I don’t know which is the more shocking: that after four years on, Bank Rate hasn’t budged; or the fact that four years on, the prospect of an increase in interest rates seems more remote than ever.
Just recently, for instance, we’ve learned that not only did three members of the Bank of England’s Monetary Policy Committee – including governor Sir Mervyn King himself – vote to increase the Quantitative Easing programme by £25 billion to £400 billion, but that the Bank has been seriously considering negative interest rates.
That’s right: negative interest rates. This would see High Street lenders pay the Bank to place their money with it, thus encouraging them to lend more to businesses and households.
Too fanciful to ever be implemented? Don’t be too sure. Denmark, it turns out, did just this last year.
And you don’t need me to tell you what such a move would do to the interest paid on savers’ deposit accounts and savings bonds.
It wasn’t supposed to be like this. March 2009, you’ll remember, was a very different world – a world full of fear, uncertainty and doubt; one with car plants shuttered for months on end in the wake of plunging consumer demand; and one where memories of bank collapses were still very raw.
The cut in Bank Rate was seen as a way of getting the economy going again: giving borrowers an incentive to borrow, in order to create demand and jobs; and giving savers a disincentive to save – and thereby spend money in order to stimulate demand and create jobs.
But economic growth remains stagnant. Wednesday’s latest GDP figures from the Office for National Statistics, for instance, showed that the economy grew by just 0.2% in 2012. And that, believe it or not, was seen as good news – zero growth, or even a contraction, had been expected.
Consequently, the flow of commentators willing to put a date on when interest rates might rise has slowed to a trickle. Back in 2009, pundits were predicting a rise in rates in just a matter of months. The horizon then moved out to the end of 2010, and then to the end of 2011, and 2012 – and I’m now seeing predictions of rates staying stuck where they are for a further three or four years.
Inflation erodes your purchasing power
For retirees banking on living off that interest, that’s obviously bad news. For savers hoping to build up a retirement nest egg – or even fund a house purchase – it’s just as disturbing.
But here’s something that makes it even more disturbing. In real terms, savers are actually going backwards.
That’s right: factor in the effect of inflation, and savers’ real returns have been zero or negative.
Put another way, this week Adrian Lowcock of brokers Hargreaves Lansdown (LSE: HL) pointed out that over the four years that Bank Rate has been 0.5%, inflation has eroded the purchasing power of money saved in a typical savings account so that it’s now worth 13.2% less than that it was four years ago.
The new normal
And this sorry situation isn’t going to change any time soon.
Under governor Mark Carney, who arrived in July, the Bank’s use of Bank Rate as a tool for targeting inflation is widely predicted to be abandoned, in favour of a target of generating economic growth.
For which, read: a ‘double whammy’ environment of low interest rates and a willing acceptance of a moderate level of inflation. And for several years.
Is there an alternative?
The answer, thankfully, is ‘yes’. The respected annual Barclays Equity Gilt Study, published every year since 1956, repeatedly highlights that over the long term, the inflation-adjusted returns from shares consistently beats the returns from savings accounts and government gilts.
Over the short term, the degree of out-performance fluctuates, to be sure. But at D-Corp have developed advanced trading systems that have been proven over a number of years to provide consistent returns for clients.
The trick, though, is to identify those shares that will best deliver and at D-Corp, they have an edge when it comes to doing this.
DCorp membership numbers are going from strength to strength. You can join D-Corp today and find out how you could grow your money, rather than see its purchasing power dwindle away.
Business Articles1. Five Things You Could Be Doing Wrong While Choosing Your Renovations Team
Author: Stephen Kavita
2. Add Value To Your Lancaster Home With The Right Renovations & Remodeling
Author: Cory Frank
3. Get The Most Out Of Family Counseling
Author: Cory Frank
4. The Case For Composite Decking
Author: Blue Star Carpentry
5. Motivation & Support
6. What Is A Leased Line And Its Advantages
Author: Ketan Shah
7. Carpet Cleaning And Flood Damage Repair
8. General Description About Bolts
Author: Harpreet Chhabra
9. Garage Door Service Irvine
10. Carpet Cleaning In Tustin
11. Colorado Garage Door Company
12. Hollywood Hills Carpet Cleaners
13. Custom Home Bars Make The Perfect Spot For Your Home Parties
Author: Larry Lynch
14. Overview On Benefits Of Telco Cost Saving To Benchmark Your Business
Author: Amber Brake
15. Corona Del Mar Carpet Cleaning