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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

UK Savers Continuing Negative Real Interest Rates Punished for Bankster Crimes

Personal_Finance / Savings Accounts Feb 25, 2011 - 12:10 PM GMT

By: Nadeem_Walayat

Personal_Finance

Best Financial Markets Analysis ArticleThe tax payer bailed out vampire-esk banking sector continues to suck the life blood of savers by paying sub inflation interest rates to savers on even the governments highly doctored and under reported inflation measure of CPI. This analysis seeks to evaluate to what degree today's savers are subsidising the high street banks when comparing their BEST instant access savings accounts against the official CPI inflation rate.


The analysis also allows for the fact that most savers in Britain pay a 20% tax on all interest, therefore the actual return on for instance a 2% interest rate is 1.6% net of tax, which in large part continues to go towards servicing the costs and consequences of bailing out the bankrupt banks.

The table below illustrates that not one single bank or building society is paying savers a real return on the funds they have deposited in the banks instant access accounts. The real loss of value on savings is anywhere from -1.6% at the Nationwide to -3.68% with First Direct. Also many of these accounts are subject to the banking sector trick of including a bonus component that is usually limited to no more than 12 months before rates are dropped to a mere pittance of as low as 0.1%.

The average of market savings interest rates stands at minus -2.43%, and illustrates a continuing deterioration of the position of savers when a year ago the average real rate of interest was -1.48 as illustrated by the below graph.

UK Savers are NOT paid to deposit their cash in the banks as there is NO REAL RETURN on savings. Clearly the objective of savers should be to first beat inflation and then the 20% savings tax, To achieve this savers today need to receive a return of a minimum of 4.8% just to break even. This IS as a consequence of tax payers bailing out the bankrupt banks in that there IS NO FREE MARKET in the banking system. Instead the banking system is highly manipulated to ensure that the banks are able to generate maximum profits for the purpose of rebuilding their balance sheets that is instead resulting in large part banks paying bonuses on the basis of fictitious tax payer funded profits.

Therefore my continuing conclusion of now over 2 years is that UK savers have NO INCENTIVE to park their cash in any INSTANT ACCESS Savings Accounts, as the banks continue to generate huge profits from the spread between the high rates that banks lend at (to borrowers) and the ultra low rates that banks borrow at (from savers / money markets and the Bank of England).

UK Inflation Forecast 2011

The the in-depth analysis and forecast for UK inflation for 2011 (17 Jan 2011 - UK Inflation Forecast 2011, Imminent Spike to Above CPI 4%, RPI 6% ) concluded in UK inflation spiking to a high of 4.2% early 2011, and thereafter trend lower towards 3% by the end of 2011 and therefore remaining above the Bank of England's 3% upper limit for the whole of 2011. However, crude oil going super nova as a consequence of the breakout of freedom in the middle east, resulting in the the oil price spiking as high as $200 could see UK CPI break above 7%, resulting in a far worse blood bath for savers than the on going bankster feeding frenzy.

UK Inflation Forecast 2011

Analysis and concluding forecast trend for UK interest rates for 2011 will be imminently completed, ensure you are subscribed to my always free newsletter to get this analysis and forecast in your email in box.

Comments and Source: http://www.marketoracle.co.uk/Article26545.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-11 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Toby
28 Feb 11, 12:16
Daily Trading

Hi Nadeem,

Is there anywhere or anyhow we can follow your investments, analysis and trading on a daily basis?

Thanks

Toby


Nadeem_Walayat
28 Feb 11, 14:06
Trading - Portfolio

Hi

I had planned for such an excercise at a new site called walayatstreet.com, but 2 years on, I have just not had the time to implement it.

Ironically, I need to greatly reduce the size / spread of my portfolio so as to free up time, which I am in the process of doing.

Best

NW


Toby
28 Feb 11, 16:40
Trading - Portfolio

Hi Nadeem,

Its a shame for people like me you have not had the time. Your articles and analysis on Market Oracle have been a huge help for me. The internet is so diluted with rubbish these days and although I do not know you, after following you for the best part of 2 years I have a huge respect and trust in your work. I would love to know what you envisage for the UK and the rest of the world in 5,10,15 even 30 years time? Will everyday luxuries we take for granted in the UK be a thing of the past as we are spending the majority if not all of our earnings on food and necessities. I think Inflation/hyper inflation will effect us all but things probably need to get worse/change before they can get better anyway. I feel that so many different problems all related to money across the world are now bottle necking and changing times and priorities for us all are coming, which is maybe not a bad thing going forward just quite scary having a very young family as this all unfolds.


Surinder
28 Feb 11, 17:35
Mentorship

Hi Nadeem,

Any chance that you may offer trader mentorship programmes?

Regards,

Surinder


Diane
01 Mar 11, 11:23
Trading

Hello Nadeem,

I have to support the comments of the others here, as your analysis on trading is very refreshing and accurate. I find your articles on interest rates etc much less interesting, and would much prefer you to return to the subject of the DOW and trading, and I know a lot of others feel the same.

I also agree that you would have success in mentoring programs, if you were ever interested in going into that area.

I look forward to your analysis on the DOW for 2011.

All best wishes,

Diane :)


Nasir
02 Mar 11, 09:09
Dow Analysis

I too regularly read your analysis, but mostly find the Dow analysis useful, Would love to see more of this.

Keep up your hardwork.

Nasir


Nadeem_Walayat
02 Mar 11, 15:15
Dow

Hi

Okay my next (after rates) will be an attempt to map out a trend for the dow for 2011.

but you need to appreciate that all of my analysis is accumulative, i.e. the UK rates analysis impacts on aspects of dow expectations.

Best

NW


Nadeem_Walayat
02 Mar 11, 15:25
UK / West Future - 10 years....

Hi

I don't think people in the west have too much to worry about, though real growth will only come from capitalism driven competition that will create new industries such as the internet.

The degree to which the future is limited is how socialist will future governments be, the greater the socialism the lower the growth.

So, yes the next 10 years will be tough, but not to an extent that peoples in the west will suffer as they did say during the great depression or the early 1980's.

Its the likes of countries such as Egypt that will suffer a lot, because there people will fight to feed themselves.

Best

NW


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