I may not be an expert, but......

[rich_jacko]

......how exactly does taking away all profitability from it encourage lending to increase?

Or have I got this wrong, and the real plan is to persuade all those of us with savings to decide it's simply not worth having them any more and blow the whole lot on the high street?

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In other news, I think *fingers crossed* that I might be over the worst of the lurg now. I still feel crappy; just nowhere near as crappy as I have done since Sunday. I've made it into work every day this week, but today was the first day when I actually knew as soon as I woke up that I was going to manage it.

Thank you to everyone who posted get well comments to my last entry!

Comments

[bonedancer.livejournal.com]

Erm... because a drop in prices should increase demand? If it's cheaper to borrow money, people are more likely to do so and spend it on houses/cars/setting up businesses/big pies or whatever else The Man hopes will get things back to normal.

The thing I'm finding wacky is the idea of negative interest rates - it costs you to keep your money in the bank. It's supposedly a stimulus to spending, but as far as I can see it's a stimulus to catastrophic bank runs, a boost for mattress salespersons and a huge surge in the profitability of burglary.

[vampyrefate.livejournal.com]

The interest rate cuts are supposed to mean that people with mortgages now have more money in their pockets (and , yes, I do), so they'll run out and spend it (Er... no. I'm using the difference to pay more mortgage off).

However, the banks - in fact all businesses - want liquid assets (cash) at the moment, and do not want to lock their cash down for a few years. So they're not lending it. A clever government would have looked into a loan gurantee scheme, but we have a credit card government...

My company has traditionally used a high interest bank account for our reserves, but the rate of return, which used to be enough to pay a months rent on the office, now covers about a box of tea bags a month.

It feels to me like they sre tyring to nudge us into deflation.