BoE "won't abandon savers"

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MERVYN KING, the Bank of England governor, will insist this week that the monetary policy committee’s aggressive cuts in interest rates do not mean savers in Britain have been abandoned.

He will say the best interests of savers will be served by steering the economy out of recession as rapidly as possible and returning rates to normal levels. Insiders say the Bank is not insensitive to the effect of record low rates, particularly on older savers.

There are occasions when the mask falls, and the true face of policy makers is revealed. This is such an occasion.

King must really think that UK savers are stupid. He must think that people can not distinguish between a one percent and a five percent interest rate. He must also think that savers don't understand the damaging consequences of inflation upon personal savings.

UK savers fully understand that King and the rest of the MPC drove the UK economy straight into recession by cutting interest rates. Yes, it was the MPC that caused most of our problems. With each rate cut, the MPC sent a powerful signal that the UK economy was in deep trouble. This was one memo from the BoE that we received and acted upon. UK consumption fell, investment contracted and GDP growth went negative.

In terms of reviving the economy, the rate cuts were utterly ineffective. It merely redistributed income away from prudent savers to feckless borrowers. Above all, it meant that the Bank of England abandoned savers, condemning them to watch helplessly as their hard earned savings are destroyed by a ruinous, short-sighted and futile policy.

So King says the BoE are not "insensitive" to the plight of savers. His actions speak far louder than his press releases.