Taxing Savers

From today’s Times.

The question, of course, is what to do about the recession. Specifically whether the way out is “to spend, spend, spend or to save, save, save” – as David Cameron has so clearly put it.

I believe, in line with the vast majority of non-socialist economists, that Mr Cameron’s campaign for savings is completely wrong; that “borrowing our way out of debt”, paradoxical as it sounds, is exactly the right prescription for our present problems.

Well, that’s fine. However, I am busy working on reducing my debt. I do have some money put aside. In part to pay my tax bill and when the thieves’ shareout is done, I will pay off some more debt. I will keep some back as a buffer. That is my choice. It is, after all, my money.

Meanwhile, the central banks in both countries are trying as hard as they can to make people save less.

Frankly, I don’t give a shit what they are trying to do. I repeat, it is my money and I will decide whether to spend or save, not the government and not the Bank of England and not the US treasury department. If I want to save my money, I damn well will.

At noon today the Bank of England will almost certainly cut its base rate to the lowest level in its 300-year history – my hunch is that the cut will be at least a full percentage point, to 1 per cent, or even below.

Given that my UK mortgage is significantly greater than my savings, that’s dandy with me. I won’t be rushing out to spend my savings, though.

The next logical step, although it may be politically controversial, would be to do the opposite of what the Tories suggest. Instead of reducing taxes on interest payments, the Government could tax all bank deposits and other risk-free savings. This would create a negative risk-free interest rate, encouraging savers either to invest in property, shares and other productive assets – or simply to save less and consume more. In either case, the result would be more consumption and physical investment, less unemployment and faster recovery from the slump.

It is not up to the government or the Bank of England to tell me what to do with my money – I will decide what I will spend, when I will spend it and on what. I will decide whether to save or not; not them. If they tax me on my savings, I will simply withdraw them and keep the physical cash somewhere safe until I need it. I will not consume more and save less, I will not play their game. What I do with my money is none of their damned business and if banks don’t want me to invest it with them, so be it; I’ll look after it myself. But, whatever happens, I will not play their grubby little game and will not be manipulated by these bastards and I will not pay them to keep it for me. If I want to save my money, I damned well will.

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Update: Leg Iron takes a similar view. And note Merseymike’s comment:

Thankfully, though, the free market dogmas which led to this mess have been shown for what they are.

I’m amazed that people still believe this twaddle. We do not have free markets, therefore it cannot be a failure of free markets.

Not that this has anything to do with the point I was making; that my money is my concern and I will not pay a bank to look after it for me and I will not be manipulated by the government or the Bank of England – my money is none of their damned business.

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Update: Via Prodicus, the Letters page in the Times delivers the obvious verdict. Kaletsky is a half-wit.