Interest Rates. Why So Low?

[Anna B 1,412]

4 hours ago, Westie1889 said:

I think the big difference compared to the 70’s is globalisation. Businesses are far bigger than they used to be as it’s easier to grow internationally.

The market for people capable of running businesses of this complexity and size is competitive, and the growth a good CEO can deliver a businesses of such scale is huge so they expect their cut for the skills they bring and the sacrifices they make.

I’ve no issue with someone delivering huge growth getting a big pay packet as many other people in the business will also benefit financially.

The CEO of my employer earns $19m a year, much linked to performance through share options. In the 7 years I’ve worked there it’s market value has grown from $20 to $65 billion so shareholders see that pay packet as well worth it. Also every single employee has also benefitted from this growth through share options and bonuses so the CEO’s remuneration is not stopping those at the bottom from also benefitting.

What is wrong is people bleeding businesses dry, such as Philip Green who profit whilst the business struggles.

As an aside I know how much time our CEO works and how much pressure he is under. I also see the amount of time he spends away from his family often on different continents, I can honestly say I would not swap places with him.

In my view no amount of money is worth the stress and sacrifices he has to undertake, especially in the last 12 months when he has had the responsibility of 270,000 employees and their families futures on his plate throughout the pandemic.

Probably true, but globalization also goes hand in hand with neoliberalism. which means there's no stopping it, as it sucks more and more wealth to the few at the top end at the expense of those lower down.

 

Sure employees can buy shares if they have the money, and that's a good thing, but it's not a new thing, John Lewis and Marks and Sparks have been doing it for years. There will be plenty who can't do that and get left behind, and certainly none will ever reach the heights of the CEO. I appreciate your CEO works hard, but so do the workers. Does he work 700 times harder than them.?

With £19 million in the bank just for one year he has options - if it all gets too much for him he can probably afford to give up work altogether and still have a nice life.  Most people earn less than 1 million in an entire working lifetime. 

[Westie1889 0]

9 hours ago, Anna B said:

Probably true, but globalization also goes hand in hand with neoliberalism. which means there's no stopping it, as it sucks more and more wealth to the few at the top end at the expense of those lower down.

 

Sure employees can buy shares if they have the money, and that's a good thing, but it's not a new thing, John Lewis and Marks and Sparks have been doing it for years. There will be plenty who can't do that and get left behind, and certainly none will ever reach the heights of the CEO. I appreciate your CEO works hard, but so do the workers. Does he work 700 times harder than them.?

With £19 million in the bank just for one year he has options - if it all gets too much for him he can probably afford to give up work altogether and still have a nice life.  Most people earn less than 1 million in an entire working lifetime. 

Our employees get share options so they don’t have to buy them so everybody benefits. They also receive higher than the market average salaries and annual bonuses based on the business performance - exactly the same plan as the CEO. Hourly paid employees have also received an extra bonus last year equivalent to 4 weeks wages for working through Covid.

 

Whilst it’s impossible to work 700 times harder than someone else it’s not about that as anybody can work hard if they choose too, that should be a given in any job in my view.

Where he is relatively unique is the skill set and experience he has to run such a complex international business, also I would argue he does have over 700 times more responsibility than the lowest paid worker and with that comes huge pressure.

Ultimately its market forces, people at that level have options as they could easily start successful businesses themselves, or get well paid directorships and consultancies. There is a very limited pool of people with the ability and experience to run these huge globalized businesses so they are paid to reflect that.

If everyone in the business is treated well then I don’t see an issue with it.

If you lowered the calibre of people running these huge businesses they could fail which ultimately would affect those at the bottom of the ladder the most.

 

Huge remuneration for failure should not be allowed, but if someone brings success and growth due to their leadership capabilities and everyone benefits I don’t see the issue.

[Padders 2,863]

On 23/01/2021 at 20:21, El Cid said:

Think again!

 

The amount of quantative easing in 2009 was £200 billion, in 2020 quantative easing was £2,285 billion, wow just wow.

 

https://www.bankofengland.co.uk/monetary-policy/quantitative-easing

Interesting,

Why not print a bit more money and give every household, say £10k to help them through the pandemic ?

[El Cid 216]

20 minutes ago, Padders said:

Interesting,

Why not print a bit more money and give every household, say £10k to help them through the pandemic ?

I was a little shocked. I believe the UK stock market crashed more than other countries. I need to check that, but the USA market is higher than a year ago.

But they probably propped it up by spending millions too.

[Westie1889 0]

26 minutes ago, Padders said:

Interesting,

Why not print a bit more money and give every household, say £10k to help them through the pandemic ?

That’s what the US have done, they call it ‘parachute’ payments and are soon to send a cheque for $2,000 to each working age person on top of previous ones. 

We have had a more targeted approach to those that need it as not everybody does through things like the furlough scheme which doesn’t exist in the US.

The real danger with increasing the supply of money by too much is that it can cause really high inflation as there is too much demand for the amount of goods and services that are available.

However, in the current climate I would argue the bank has replaced money that would have been generated through normal economic activity rather than increased it over and above, so it’s of limited risk in terms of inflationary pressures.

[nightrider 13]

On 22/01/2021 at 18:08, Anna B said:

 

 

You continue to perpetrate these uninformed myths. But then as you have no wish to engage with anything that might contradict your views, it's no surprise you continue to expound them. 

Educate yorself with a different point of view. You might learn something

 

As for saving like Derek and Dierdre, you must be joking. At the time we could barely afford the essentials and were continually robbing Peter to pay Paul.

Savings? Ha  ha  ha. 

 

However, now the house is paid for and we have managed to save a bit over the years, we find there is no interest whatsoever to supplement pensions or counter inflation.. We lose again.

If you are saving for the long term (i.e are sure you don't need the money in the next 5 years) you should consider using stock market trackers for saving to counteract that issue. Over the long term that kind of investment is not generally considered risky.

[sheffbag 227]

On 23/01/2021 at 14:06, Anna B said:

That doesn't take into accounts student living costs which are outside the student loan costs. Student accommodation has also been upgraded in many instances and is now very expensive. Students usually have to take on personal loans to pay these, and these costs have to be repaid in full plus (high rate) interest. 

Evidence for either of your claims?

 

Having a final year Uni student in the family i would contest this. she has lived in both Student halls, student accommodation and is moving into private landlord accommodation for her masters (which is no dearer than the student accommodation currently in). There are student maintenance loans available which are family income based on a sliding scale (household income of £40000 yr equals a grant of £7,225 per student. income of £24K equals £9200 per student)

there are also additional funds available depending on your personal health or family circumstances as well as support from universities available. 

 

I can only speak on my own families experience but there is about £40 week left over after bills paid plus she (like many others) have taken a part time job while studying to supplement her funds.

18 hours ago, Anna B said:

Well paid? I think obscenely well paid is closer the mark. 

 

Prior to Thatcher's reign those at the top were paid roughly 5 - 15 times the pay of the average worker. Now it's more like 2,000 times the pay of the average worker - how did that happen? And so quietly.

Compare that to the furore  when miners wanted the princely sum of £100 a week. Chaos, strikes, blackouts, arrests, mounted police charging at people and pitched battles.

 

As for shareholders taking action - there have been many well documented cases where they have overwhelmingly voted against such bonuses etc only to be totally ignored.  When Companies/CEOs get to this size the power they wield can slay all before it.

Evidence? 

 

Or is it, as reported by the High Pay Centre in 2020 that "Figures released by the High Pay Centre thinktank showed that the typical FTSE 100 chief executive is paid 117 times more than the median worker, at £901.30 an hour or £3.46m a year." https://www.theguardian.com/business/2020/jan/06/pay-ratios-source-national-shame-high-ftse-boss

Yes its the guardian but its quoting an independent report.

 

so whats your answer? the Chief exec of a mutli million (or billion) pound company should only be paid 5 times more than the office junior or cleaner? 

[sheffbag 227]

On 23/01/2021 at 01:09, Anna B said:

 Average interest rates on a personal loan is 9.41%  (according to Experian data from Q2 2019.)

Depending on the lender, and the borrower's credit score and personal financial history, personal loan rates can range from 6% to 36%  

Student loans are currently 5.6% 

 

So not cheap.

 

But especially considering they are getting our money for free (almost 0% interest) when we lend it to them. Hardly seems fair.

 

That rate is out of date.

In 2020 the average rate was 7.1-7.4% https://moneyfacts.co.uk/news/loans/loan-rates-rise-as-pandemic-hits-struggling-households-the-hardest/#:~:text=Personal loans rates rise,2020 to 7.4% in June.

You can personal loans now for 5K and over at 2.8-3.5% today https://www.moneysavingexpert.com/loans/cheap-personal-loans/

Are they still high in comparison to interest received on savings? Yes

But would i rather (values are for example)

Pay 1.5% interest on my outstanding mortgage of £40K  and receive 0.1% interest on my savings of £3K

or

Pay £12% interest on my outstanding mortgage of £40K and receive 5% interest on my saving of £3K

 

to the average person on the street low interest rates helps them with the biggest payment that most people make

 

 

[Agent Orange 11]

On 22/01/2021 at 18:08, Anna B said:

 

 

You continue to perpetrate these uninformed myths. But then as you have no wish to engage with anything that might contradict your views, it's no surprise you continue to expound them. 

Educate yorself with a different point of view. You might learn something

 

As for saving like Derek and Dierdre, you must be joking. At the time we could barely afford the essentials and were continually robbing Peter to pay Paul.

Savings? Ha  ha  ha. 

 

However, now the house is paid for and we have managed to save a bit over the years, we find there is no interest whatsoever to supplement pensions or counter inflation.. We lose again.

Let me get this right, it was unacceptable for interest rates to be high when you had a mortgage, but now you are mortgage free, you are complaining that the interest rates are too low  and does not benefit you?

Edited January 26, 2021 by Agent Orange

[Anna B 1,412]

On 25/01/2021 at 11:27, nightrider said:

If you are saving for the long term (i.e are sure you don't need the money in the next 5 years) you should consider using stock market trackers for saving to counteract that issue. Over the long term that kind of investment is not generally considered risky.

Unless the banks crash again as they did in 2008. All about the timing. The stock market is really one big casino.

Having had my fingers burned in the past I am very risk averse, however I may have no choice.

But thankyou for the advice.

4 hours ago, Agent Orange said:

Let me get this right, it was unacceptable for interest rates to be high when you had a mortgage, but now you are mortgage free, you are complaining that the interest rates are too low  and does not benefit you?

I didn't say it was unacceptable, it was a fact of life so I paid it, and very difficult it was.

[El Cid 216]

2 minutes ago, Anna B said:

Unless the banks crash again as they did in 2008. All about the timing. The stock market is really one big casino.

Having had my fingers burned in the past I am very risk averse, however I may have no choice.

But thankyou for the advice.

You could either buy a unit trust to spread your risk, or buy shares in Centrica PLC, 49.34 now

[nightrider 13]

15 hours ago, Anna B said:

Unless the banks crash again as they did in 2008. All about the timing. The stock market is really one big casino.

Having had my fingers burned in the past I am very risk averse, however I may have no choice.

But thankyou for the advice.

I didn't say it was unacceptable, it was a fact of life so I paid it, and very difficult it was.

Having cash is also a risk because it is losing value every year.

 

If you buy a tracker you won't be risking one type of share crashing, its spread across the whole index so is a lot safer. Obviously it is still subject to the whole index crashing, but you can hedge against that by using trackers of several stock indices in different parts of the world.