economonkey

Anybody with a tracker mortgage will no doubt be happy that the Bank of England has kept interest rates at their all time low of .5% today, but there’s no light at the end of the tunnel for anybody hoping to get a good return on their savings. The media is reporting that Alistair Darling [...]

This is an article that I could have written a few months ago, when the Bank of England stated its intention to begin ‘queasing’. But it has become rather more relevant now that one of the pronouncements of the G20 summit is that the International Monetary Fund (IMF) will itself begin to ‘print’ additional SDRs (Special Drawing Rights, effectively the IMF’s own currency) which its contributor countries can draw down in the shape of dollars, euros, etc.

Note my use of the word ‘print’ in the above paragraph. The days when first world countries used the printing press to increase the volume of money in circulation have long gone, assigned to eras such as Weimar Germany. Paper and ink are still heavily in use in Zimbabwe, of course, but for countries like the UK, where the notes and coins in circulation account for only about three percent of the total ‘money’ in the system, we’re really talking about digits on a computer screen.

Even so, while the phrase ‘quantitative easing’ sounds nice and strategic, in reality it has a similar effect to printing addition bank notes and throwing them out of the Bank of England’s window into the street.

To take a step back for a moment, let’s look at the main blunt instrument used by policy-makers to control the velocity of money and the rate of growth of an economy: interest rates. Set the base rate low, goes the received wisdom, and people will ‘invest’ their money rather than leaving it idle in a bank account earning nothing (or, depending on the level of true inflation, less than nothing). If the economy starts to run away from itself and bubbles form in a particular investment market, interest rates can be raised, increasing the appeal of saving and reducing the relative gains to be made by investing in speculative markets.

Buying Premium Bonds from the government owned NS&I has long been viewed as the safe alternative to stock market investment for the British public; you get to keep all of your original capital, you stand a chance of making a million, and an even better chance of winning a smaller amount.
But if you’re one of [...]

There’s been a noticable change in the noises coming from our politicians over the past few days. Up until recently, they seem to have been largely preoccupied with helping ’struggling homeowners’ (i.e. baling out the simpletons who bought houses they couldn’t afford) and ‘restoring confidence’ (i.e. convincing people it’s safe to keep digging themselves into [...]

I’ve been waiting to finish this article until the UK’s inflation figures were released. They show the CPI figure for November to be 4.1%, higher than predicted by the majority of economists. This figure is more than double the 2% target that the Bank of England’s Monetary Policy Committee is supposed to aim for, yet [...]

In the UK the government has a system called the Financial Services Compensation Scheme designed to protect savers’ deposits in the event of a bank collapsing, which seems to be happening every other week at the moment. If a bank, building society or credit union goes bust, the government will refund your money within certain [...]

In case you didn’t already know this, the first £35,000 of savings you deposit in a bank or building society are guaranteed by the government in the event of that institution collapsing. Judging by the mass panic amongst Northern Rock customers last year, it seems likely that most people aren’t aware of this safety net. [...]

People in the UK are saving the lowest amount of money in almost fifty years, according to research from the Office of National Statistics. In the first three months of 2008 Britons saved just 1.1% of their income, compared to 3% in the winter of 2007 and 6% in the summer of 2006.  The last [...]

It’s been said that there are two types of people in the world: those who understand compound interest and those who are doomed to pay it. In this article we’ll investigate what that means and whether or not it’s actually true.
First, we need a definition of compounding and compound interest. When your interest is compounded [...]