I don’t have any sympathy for whiny savers

1:54 pm - August 10th 2013

by Left Outside    

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Whiny is the word that comes to mind when I think of savers. But that’s unfair. They can’t have nice things and that’s not nice. None of us can have nice things and the reason savers can’t have nice things are similar to the reason I can’t. It’s all about time travel.

Frances’ newsnight debut yesterday [watch it! This cuts straight to the panel] was all about savers. Savers are, understandably, annoyed. For a couple of decades they have been able to save cash in banks, they money has been perfectly safe and they’ve got a healthy return.

All that changed 5 years ago. First everyone thought they might lose everything. This gave well to a slow realisation that they were going to lose something, just less dramatically, slowly through inflation.

This has led to faintly ridiculous complaints from people like Save our Savers and others that savers are being “punished for a recession they didn’t create” or expropriated or swindled or denied a risk-free return by the malfeasance of central banks.

I want to make three points.

First, this is another example of those hard done by, but not the worst off getting the press and attention. If you’re sparing a thought for savers then you’ve a spare thought too many. Nobody likes to think of the pensioner having their savings eaten away, but lots of pensioners haven’t even got any savings.

Second, in no sense are savers being punished by central banks. They’re being helped as much as the rest of us (which is still not enough, of course). There is a scenario where savers get a large positive return following a depression. It’s called use, decay and obsolescence,

Without central bank support savers would get a bigger return…eventually. After banks collapse, firms go bust, machinery rusts and hands lie idle eventually we’ll begin to need to replace and rebuild. Once we hit rock bottom savers will receive a very handsome return. It’s just they might not have much of their savings left by the time we get there.

My third point is the most important.

The framing of saving is all wrong at the moment. Money allows us to move purchasing power through space. I make a coffee, you give me money which I use to buy a haircut. That all happens almost simultaneously. What if I want to make a coffee now and have a hair cut in 5 years? Well then I’d have to save up. Saving allows us to move purchasing power through time.

But saving isn’t just a thing you hold like money, it’s a process, and this is where the framing of saving needs to change. To move purchasing power through time you have to buy something now which will be worth something in the future which you can sell. It might look like the same £10 I end up spending on a future haircut, but it’s not.

Most saving ends up invested in structures, but some of it could be in intellectual property, a private business, or anything tangible. Cash doesn’t cut it. If you’re saving cash, you’re really lending money to a bank who then goes out and buys something with it. If you’re holding physical cash then someone else is doing this for you and you’re riding on their coattails.

You cannot escape the fact that you are buying something now, to sell in the future (minus some financial frictions)[1], this is the physical process behind financial saving. At most times, because we are getting richer we can buy durable stuff now and expect it to be worth more in the future. But that doesn’t hold during a depression or steep recession.

When times are hard we cannot expect people to get a good return. This is because more people want to buy safe assets now which pushes up their value, because the value of assets in the future becomes more uncertain (and hence less valuable) and because financial intermediation becomes less efficient at times of economic stress.

If we could travel through time this problem wouldn’t exist. I could make a coffee now and get my haircut in the future. Our alien barber from the year 3000 could come back, because coffee has been rendered extinct by global warming and we wouldn’t need to worry about saving or structures as above. But we can’t travel through time so we do need to think about how we physically save.

There’s no way savers can get a good return at the moment because the process which physically enables it is blocked. The best for everyone is for a reflationary central bank to boost demand and return to normality. We are the 99% and we have a shared interest in full employment.


[1] It’s this phrasing of saving and financial intermediation that eventually led me to stop being an obsequious leftie and to take FIRE seriously.

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About the author
Left Outside is a regular contributor to LC. He blogs here and tweets here. From October 2010 to September 2012 he is reading for an MSc in Global History at the London School of Economics and will be one of those metropolitan elite you read so much about.
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Reader comments

What a bizarre ‘argument’.

It wasn’t ‘whiny savers’ who screwed up the world’s economy, it was profligate lenders and spenders who frittered away, when they should not have, what savers had carefully stored away.

Irresponsibly spending money that is not actually yours is a great way to bring disaster on everyone. That is what happened in 2008. Evidently you have forgotten that or didn’t understand it at the time.

Start here with basic economics: ask yourself is it a better thing to have ten pounds in your pocket or to owe someone else ten pounds? Or doesn’t it matter if you have no intention of paying that ten pounds back and think someone else will just give you another ten pounds? Economies do not and cannot fucntion on the basis that re-paying money you borrow is just an optional thing you can do or not do as you please.

Britain has asuffered massively economically not because of prudent savers but because governments, financial institutions and individuals were completely irresponsible with money that was not actually theirs. The people who have picked up the tab for that have been savers moreso than borrowers and spenders.

Here’s another one: is it better to have some food in the cupboard, or to have eaten all your food and have none?

Perhaps you can argue that it’s better to have none because it means your cupboard now has more space for, er, food.

Finally, try this: you are going to a restaurant with a group of people. You decide not to bring your wallet. Is that okay because someone else will possibly pay for you? Or do you just hope that the restaurant won’t mind you having the meal at their expense? Could anything possibly go wrong?

Your inversion of economic good for bad isn’t just immoral, it is unsustainable lunacy.

2. Legal Flamework

Crises of Capitalism by David Harvey. A lecture in 2010.

Lamia, come back when you’ve engaged with the post instead of having a tangential rant.

4. Paul peter Smith

What are you trying to achieve with this argument? Sneering at savers as though they are somehow separate from society because they were not as fiscally irresponsible as the banks, or government or most of the population, why? Your a history student so its understandble you have a shaky grasp of economics but I’m sure you know what a Kulak was. Is that your angle, turn the working class on itself?

Finally, try this: you are going to a restaurant with a group of people. You decide not to bring your wallet. Is that okay because someone else will possibly pay for you?

Being a leftist..yes.

Your a history student

Chancellor in a few years then? But as a student he is limited to telling people how the world works LOL

6. Baton Rouge

Full employment is an absolute must but it cannot come about through Keynesian inflation which would certainly mean global warming for your alien barber if nothing else.

The savings of the savers were rightly saved during the credit crunch but in the wrong way. They could have been used to pay the bankers’ creditors as they were in Cyprus recently (a genuine bank robbery) but that would have destroyed most of our investment capital which we are going to need. Instead they were guaranteed by the government who pledged to pay the bankers creditors in their stead using disability, unemployment and sickness benefits, money previously earmarked for public services, wage freezes and QE.

What should have happened is that the bankrupt banks were allowed to go bankrupt and their deposits, estates and staff transferred to a new National Bank that could lend at base rate to small business and facilitate social investment in accordance with a democratic and sustainable plan. This bank would have a monopoly of credit so that privateers can never rip us off again by creating trillions of counterfeit claims on wealth.

Of course it would be criminal right now to put up interest rates for the sake of savers as this would cost millions of jobs but let’s not believe for a second that the Coalition have pledged to keep interest rates low for that reason. Interest rates are being kept low so that the bankrupt banks can continue to borrow money at 0.5% from the BofE to give to its creditors as their Ponzi bonds mature in their billions every month and year, to speculate with on the Stock Exchange and to lend on at Wonga rates to the public and business.

No we need the savings of the savers for future non-inflationary investment but there is only one reasonable way of creating full employment and that is by sharing the already available productive work. All school and college leavers and unemployed who cannot find their own job must be bought into the workforce to share the work with each being paid the minimum of a trade union living wage. That is the platform from which we can go forward to a new future based not on rampant consumerism but sustainability and inclusion with society and other people seen as an end in themselves rather than a means to an end as is the bourgeois want.

7. Just visiting

Left Outside

Everyone of pre-retirement age is potentially a saver- it would be short-sighted to reach retirement with nothing planned.

Your article’s first sentence reveals your cold-hearted contempt for those prudent enough to have spent less than their income- calling a whole group like that ‘whiners’, not very grown-up political thinking, IMHO

I’m still trying to work out what LO is trying to say. The first sentence was just appalling. Was the second supposed to make us smile?

I think the argument is: “Many” (been taking tips from the Daily Mail have we?) pensioners don’t have any savings. Those pensioners who do should therefore count themselves lucky and STFU.

And the jolliness continues: “Once we hit rock bottom savers will receive a very handsome return. It’s just they might not have much of their savings left by the time we get there”. LOL ROFLMAO etc.

LO, why are you posting on LC? Isn’t this one for “The Commentator”?

Reading your blog I’ve come to a conclusion.

You are concerned about the aging population and the savings they have in their bank accounts and pension schemes.

As somebody who has worked in industry for 45 years I am concerned about my pension and savings sustaining me through whatever remainder of my life I have left.

One of the overwhelming resentments I have is that I have to pay indirectly for a “metropolitan elite” at such establishments as the London School of Economics.

I feel that I have earned the right, through long and arduous graft, to fight tooth and nail for my pension and savings – what has Left Outside earned.

If he is so concerned about there being insufficient people to carry out the services required in the future, and if he believes that there will be insufficient labour to financially support our metropolitan elite, then why doesn’t he forgo his privileged LSE status, roll his sleeves up, and get stuck in – as a hospital porter, for instance.

Until I see the likes of Left Outside giving up their champagne lifestyle ambitions and getting dirty alongside we plebs I don’t think that they have any right to lecture me on my savings and pension.

10. Legal Flamework

71% of full time students at the LSE are from outside of the UK so think of all the course fees flowing in from overseas.
UK students have to take out loans in order to pay for their higher education.

Lots to unpack here.

1) Savers put billions into banks, retail deposits were a massive source of financing for banks. Savers did no due diligence and offered no criticism of the way banks were run in the 00s. In fact they often chased high interest rates and invested with the most poorly run, riskiest banks i.e.

So please don’t give me the “Savers virtuous/everyone else sinners” sticht. It isn’t going to wash.

2) I agree it is important for people to save, but at the moment people are saving too much as is illustrated by the fact it is really hard to get a positive return. This whole article is about why people can’t get a positive return, not why.

3) Given the fact that, no, savers are saints, and no, there’s no reason for them to be receiving a positive return on their savings I find the amount of sympathetic press coverage annoying.

4) We aren’t talking about massive dispossession here, just a slow erosion of the value of cash (not assets) while the economy sucks. The only solution for savers to get a positive return is for the economy to return to health, they won’t get a good return before then

5) Almost by definition if you have savings you are not the most vulnerable of people economically. The press coverage savers receive is disproportionate to their need and the logic of their case. They get press coverage because media and news luvvies are savers and they sympathise.

6) Just Visiting, I actually agree with you for once:

Your article’s first sentence reveals your cold-hearted contempt for those prudent enough to have spent less than their income- calling a whole group like that ‘whiners’, not very grown-up political thinking, IMHO

However, my point isn’t that savers are bad generally, that’s the opposite of what I believe, saving is awesome! But in a depression savers (or at least their self appointed defenders) have been demanding high rates and ignoring the fact that they would crater the economy. They’re been very self regarding and, frankly whiny. These are people, as I’ve said, who have lots of money and they’re annoyed they don’t get a healthy unearned income from it. Tough. Lots of people don’t have any savings and can’t get an earned income. That’s why I said whiny. The rest of the most however is much more sympathetic.

7) I’ll just ignore the ad hom stuff.

@11. So you seem to be saying in your point 2 that the Keynesian approach should be privatised. Instead of governments stimulating the economy by spending and investing, savers should go out and spend, spend, spend.



Oh, I’m all for those wonderful students coming to the UK and paying their fees.

The point I’m making is why should my pension and savings be the subject of somebody from the, supposedly, self-financing closed system of the LSE.

The problems that we are experiencing now are the result of the expertise of people such as those trained at institutions like the LSE.

The workers and savers didn’t cause these problems – why should they forego the stability in old age that they have worked so hard for.

@Left Outside

I apologise if you see my comments as ad hom attacks – but, believe me, I see your post on pensions and savings as far more sinister.

14. Paul peter Smith

With regard to your first point, the financial catastrophe was caused by people saving too much? The SHTF because the banks were levereged to the skies so your argument is if savers hadnt deposited so much the banks wouldnt have been been able to leverage it as much? And as for savers not restraining the recklessness of the banks, a depositors legal relationship to their bank is that of unsecured creditor. A role which confers neither the role nor powers for any kind of control.

15. Baton Rouge

wg: you should concentrate your fire on the people who are actually stealing your pension and savings. Soon there will be negative interest rates and maybe what are wrongly described as `haircuts’ for savers when it is the gamblers in bankers bonds, their actual creditors, who should be taking the hair cuts. Capitalism is finished. Get used to the idea. It is monopolised, glutted, sclerotic and bankrupt. A combination of falling disposable income for individuals and states, the bankruptcy of the banks and the mega profits of the profiteering, cash hoarding global and national corporations ensure that global depression is on the way.

I’m more concerned that the left doesn’t get lumbered with the blame for hyper-inflation by supporting QE and Keynesian policies. Socialism is the answer.

Viva Jimmy Savile – the god of all gods. He should be posthumously declared king for all eternity. I worship that utter, utter god.

The author does himself no favours by phrasing what may well be a sensible Keynesian argument in such provocative and counter-intuitive terms. “Whiny savers” have just as much right to be whiny as anyone else, it seems to me, assuming they do not sit on the boards of any major banks.

All we need remember is that their justified “whininess” does not justify special treatment. Interest rates are low because, ultimately, the economy is in the toilet. The economy being in the toilet, savers will eat the same shit sandwich as the rest of. While they eat it, let’s allow them a well-earned grumble.

Gosh, I hate whiny poor people always wanting stuff like food and shelter and never doing a dam thing about it.

19. Churm Rincewind

@ (11) Left Outside:

Although I agree that savers have no absolute right to interest rates over and above the level of inflation, I do think your post is unsympathetic, to say the least. I have a number of points.

For example, you say that “savers did no due diligence and offered no criticism of the way banks were run in the 00s”. Are you seriously suggesting that savers were at fault in their diligence? And that my old granny, with a deposit account at her local high street bank, really should have spent more time considering its capital ratios and its exposure to collateralised debt obligations?

You also say that “people are saving too much as is illustrated bv the fact that it’s really hard to get a positive return”. Well, no, the reason it’s hard to get a positive (i.e. above inflation) return from a cash deposit is because the Bank of England is keeping interest rates low and is tolerating inflation at a higher level. We can argue about the BofE’s reasons for its decisions, but it’s a separate discussion.

You seem annoyed by the fact that the plight of cash depositors is getting sympathetic press coverage. Given that some 70% of the British population are savers, I can’t see that the press is guilty of wilful overstatement of public concern. This is not because “media and news luvvies are savers and they sympathise”. It’s because they’re reflecting genuine and widespread anxieties.

I also can’t see that “the only solution…is for the economy to return to health…they won’t get a good return before then”. But at the same time you exclude asset ownership from this analysis, which seems to me to be a strange distinction. Homeowners have done rather well recently, and the BofE’s commitment to continuing low interest rates will no doubt continue to fuel substantial increases in house prices. Obviously that’s great for homeowners, but if you’re an OAP who’s sold their house in order to allocate the proceeds to an income-producing deposit account, you’re pretty much fucked. You may consider them to be “whiny savers” but I just can’t see it like that.

In Keynes’s model, there is no reward for thrift. The amount of saving is determined by how much entrepreneurs invest as motivated by their “animal spirits”, meaning their business confidence.

The rate of interest is a reward for giving up liquidity and holding bonds instead of money, thereby incurring the risk that the rate of interest might rise in future, which would mean bond prices falling. One implication of this model is the paradox of thrift: if consumers decide to spend less on consumption in order to save then national income would fall – other factors equal. The fall in incomes would reduce the transactions demand for cash balances thereby creating more liquidity in the economy, which would increase the demand for bonds, raising their prices and so lowering interest rates.

Just saying. Keynes’s model was developed to explain how a capitalist market economy could get stuck at a relatively high level of unemployment. But see Franco Modigliani on: Liquidity Preference and the Theory of Interest and Money (Econometrica 1944)

For a “justification” of a positive rate of interest with a “productivity and thrift” theory, we need to go back to Austrian school economics – try: Eugen Böhm-Bawerk: Capital and Interest (1890)

Most of those accused of failing in their due diligence will have had no need to do so as their deposits would have been covered by government insurance.

Of course richer savers have benefited from rising share and house prices.

Meanwhile @16 has it right.

23. Man On Clapham Omnibus

2. Legal Flamework

Thanks for sharing the lecture, the implications of which circumvent most of the discussion on this site.

Crisis of Capitalism? As Douglas Adams wrote: 42 is the Answer to The Ultimate Question of Life, the Universe and Everything.

25. Man On Clapham Omnibus

23. Bob B

please expand

“please expand”

For a source, try: Hitchhikers Guide to the Galaxy, by Douglas Adams.

PS the sensible debate is about how to regulate market capitalism and the fiscal structures for dealing with divergences between private and social costs and benefits. Few will vote for “Socialism” without knowing which of the 57 varieties it is intended to implement.

27. Golden Leaf

Surely you should mentioned the currency held by the passengers of the B Ark rather than Deep Thought’s 7½ million year program?

I think the esteemable Douglas Adam was having a satirical poke at those who stuck labels on prescriptions for solving all societal problems, be it Free Market Capitalism, Socialism, Neo-Liberalism or Deregulation.

Btw between Bohm-Bawerk and Keynes, the theory of what determines the rate of interest reached its high point with Irving Fisher:

@22. cjcj: “Most of those accused of failing in their due diligence will have had no need to do so as their deposits would have been covered by government insurance.”

In the case of Icelandic banks, it depends on how you classify ‘most of those’.

Many private UK savers put their pot in an Icelandic bank. No guarantee.

UK councils and UK government bodies put their pot in an Icelandic bank. No guarantee.

‘Most of those’ are fucked up. They might get their money back, eventually.

Sorry guys, this is the using a pseudonym to make fun of the powerful while making important contributions to a public dialogue. I’m not fucking Swift, but you lot do have thin skins and I am right about why savers can’t receive a decent return.

“Gosh, I hate whiny poor people always wanting stuff like food and shelter and never doing a dam thing about it.”

I’m rather late to this “debate”, but I figured I might as well dive in.

The problem with quoted analogy is the simple reality that people with savings *can* do something about it but virtue of having resources at their disposal. (The rest of this post isn’t just aimed at DtP, in case they feel I’m being a little harsh on a single sentence!)

Judging by the comments on this posting it seems to me that many savers have lost sight of the reason for having savings. It’s not just about building an ever-growing pile of money that you can point to and say “look how responsible I’m being”. Part of the idea is to save “for a rainy day”: well, that rainy day arrived several years ago.

Like it or not, part of the reason savers got relatively high rates of return pre-crisis was due to other peoples’ risk taking. If you’re demanding fiscal “prudence” from everyone else, you can’t demand high, risk-free rates of return for yourself. Take your savings, and put them to use. Should you gamble it all on the stock market (for example)? No. But some of it? Absolutely.

Investing just 10% of your savings in Lloyds at the start of this year would have been equivalent to a 6% return on investment for the entirety of your savings, while leaving 90% of it risk-free. And yes, obviously I’ve picked out a single instance of very good performance in a relatively short time period (though I would stress, as stock market investments go, this one was on the predictable and low risk side, and I avoided picking the low from one year ago, which would have doubled the above return), but the point is that opportunities for good returns are out there without risking all of your savings.

Stop expecting something-for-nothing and take responsibility for *your* decisions instead of just lecturing others about them.

Wicksell’s discussion of the consequences of possible divergences between what he called “the Natural Rate of Interest” (roughly, the return on business investments) and “the money Rate of Interest” (roughly, the cost of raising capital on the financial markets) provides insights into the present situation:

Low interest rates haven’t been doing much to promote business investment.

The latest data show household lending is just 0.3% below its 2008 peak. But lending to firms is 22% lower.

“Bank loans to business fall again despite Funding for Lending” [BBC website 3 June 2013]

34. Churm Rincewind

@ (31) Andy C:

I can’t dispute your overall analysis, but the effect falls unequally depending on where any given individual is in the savings cycle. Equity investment is a pretty good bet in the medium to long term, but if you’re in your nineties you’re probably pretty much preoccupied by safeguarding your capital and short term returns by way of interest on cash deposits. These are the people who are currently suffering most from low interest rates, and I don’t think it’s realistic to expect them to take an active interest in stock market opportunities.

Now, several posters above have taken an alternative overview of the UK’s current economic situation, but I’m not sure that their views would be sympathetically received by my old granny who has seen her annual income sunstantially reduced from what she thought was low-risk and hence relatively low-return allocation of funds. It’s all gone tits up for her.

You might say, well, such is life, but surely we can have some sympathy with those who are most disadvantaged by low interest rates?

As for (30) Left Outside: I really don’t understand your point. You say that “when times are hard we cannot expect people to get a good return”. Yet although times have indeed been hard, UK homeowners have done rather well recently. My point here is that a low interest rate environment favours some and disadvantages others.

As for what low interest rates are doing to pension funds, try this:

“The combination of a low-interest-rate environment and increased life expectancy raises additional concerns, as low interest rates magnify the present value of future increases in longevity, further worsening the solvency situation of annuity providers and DB pension funds. As a result, these institutions are likely to scale back future benefit promises, with negative implications for retirement income adequacy.”
Source: OECD The economic impact of protracted low interest rates

I’ve got friends who depend for their incomes on the interest on their savings. Because of low interest rates and inflation, they keep having to eat into capital.

@Churm Rincewind

“surely we can have some sympathy with those who are most disadvantaged by low interest rates?”

Some sympathy, yes. As you say, some savers will be hit harder than others. For me however, that sympathy gets rapidly used up by the (seemingly large proportion of) savers that take the attitude that “people with debt don’t matter, it’s their fault, give me my high rates” (or similar).

They seem to think that they can stand by, do nothing to actually boost the economy with their savings, and expect a high rate of return. Where do they think this money comes from? I’m assuming they don’t want the BoE to print it for them?

If people (and companies) with debt are deleveraging (which, broadly, they have been), someone else has to step into the void to make up for the fall in demand.

They need to stop treating this episode as a morality tale, where certain groups of people (other people) deserve to be punished, while other groups (specifically them) deserve to be rewarded, and start acting in a way that might help all of us get out of this mess faster.

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