To think it's depressing that everyone seems to think after this recession we should just return to exactly how things were?

[kake]

Does anyone else get this sense? What I mean is that everybody is lamenting this recession, quite rightly as it's awful, and I feel for everyone who has lost their job or is struggling.

But on the other hand there doesn't seem to be an acceptance that in some ways this has been at least a little bit caused by complete over-consumption in the good times and that we need to change our ways a little bit. Or a lot. When people talk about house prices especially, the consensus always seems to be that if there's any talk about a recovery that must be a positive thing, with the implication that we should be getting back to stupidly inflated house prices as soon as possible.

I find it depressing, as someone who didn't buy partly because we couldn't really afford it but also because we were really cautious and didn't want to overstretch ourselves. But now we're seeing a lot of friends who did somehow being rewarded as their mortgages have been slashed.

I'm also someone who wishes that taxes had been much higher for what I consider to be well paid people (and that would include my DH!) during the boom, so that there hadn't been such a disparity in income in this country then. It's a shame that higher tax levels in future will have to pay off debt not contribute to the national benefit! If I mention this to (well paid) friends they look at me as if I'm mad, although they are people who in principle I think sort of do believe in equality, just not if it affects their/our pockets. My view is that as satisfaction with income is largely relative (ie it matters more to people apparently that they get paid more than their neighbour than their absolute wealth), then if everybody is taxed more at higher income levels, then we'd all be in the same boat and it wouldn't make much difference.

But I feel like I'm STILL swimming against the tide, just when I would have thought more people would begin to feel like this. We have lots of friends who work in the banking sector for example who've been through a bit of a rocky time but now seem to be out the other side and better off than ever and sort of with no lessons learned!

It just seems ... so wrong! Or maybe I just got out of bed on the wrong side. And this post isn't as articulate as I would have hoped!

I'm a bit puzzled by this "low interest rates reward irresponsible borrowers & punish us savers" viewpoint.

Interest rates are changed according to inflation outlook. Now that it seems we are in deflation (negative inflation), it is very normal that interest rates will approach zero. All this is Econ 101 and none of it is personal (to you savers or to others who borrowed).

Just wondering - When times were good, inflation was higher and so interest rates were higher, did you people perceive that as punishing borrowers and rewarding savers? Because I can assure you none of that was personal, either.

Interest rates have been too low for too long and have encouraged some to borrow too much as they have looked at the monthly repayment and not the bigger picture.there is no doubt that we are due high rates at some point as the current status is not going to last long. Savers are being punished there is no incentive to save but plenty to borrow its just paying it back thats the prooblem.

Does anyone know when interest rates are likely to go up and what will cause them to rise?

by the way thank you abetadad for explaining the Matrix thingy.

For all those who are renting now surely you will need to buy a house at some point and pay off the mortgage before retirement. Otherwise how will you afford to live in old age? I could not imagine paying rent out of a pension.

The point is that savers are not being punished now, just like borrowers were not being punished when interest rates were on the rise.

The goal of central banks is stable inflation, mostly in lower single digits. Interest rate policy serves to control inflation - increase rates when inflation is on the rise, lower rates when inflation is on the decline. In deflationary times like the present, bring interest rates close to zero.

What some people don't seem to understand is:
(1) real rates are still positive, since inflation is negative.
(2) there are alternatives to parking your money in a bank account. If you don't like deposit rates, buy bonds and get 4-5%.

'For all those who are renting now surely you will need to buy a house at some point and pay off the mortgage before retirement. Otherwise how will you afford to live in old age? I could not imagine paying rent out of a pension. '

With what? Brass buttons? Our good looks?

How will you afford to live in old age?

That's a very good question, and not just for renters.

Pension/retirement age will have to be increased and the government is going to have to get serious about age discrimination.

It's not sustainable for any society to expect to support in any way a huge percentage of the population not working for 20+ years.

There are many people who will never own their own home, especially now that lenders are tightening conditions of loan, which they should have been compelled to do in the first place.

And let us forget, until the deeds are in your name, the lender owns the property.

I don't believe the figures aren't fiddled though.they were saying inflation was 2-3 % at times when prices were rocketing.they are looking for a way to cut benefits and stop wages rising it is obvious nothing seems to be any cheaper to me. It was because there were no savers that the banks looked elsewhere for funds to lend and look where that got us.

Let us not forget, that is.

We are not in deflation now look at your shopping trolley for proof of that, just more bloody spin to try and get the savers out there spending.
For years the government have used the RPI as a way of measuring inflation but that's too high now so they've decided this month, the one of the budget to use CPI. Do they think we're all stupid or something.
As for the savers going out and buying property instead, well if you want to catch the falling knife be my guest but when those savings have disappeared you'll wish you'd just had the 1% interest - oh and the capital.
However I do think the next step is inflation in which case those who own property and have debt are home and dry, it's not right but do believe that'll be the case, if you have a job hold on to it tight.

I think it is becasue of the conflicting messages we are getting from the governemt: we/the banks overstretched oursleves, hence the "credit crunch", but we need you to start spending again to get out it so we are going to drop the interest rates/VAT/implement quantitative easing to encourage you to spend again"

There is no golden age to hark back to. It has only ever happened to one generation - the baby boomer's - they live lavish lifestyles which have never happened before and will never happen again.

My dh's (dead) grandfather - minor civil servant (never earned more than average wage), half million pound house in Surrey, raised 5 children, wife never worked.

That is a snapshot of the luckiest generation ever.

For everyone else in the world life is a struggle and i don't know why people think it isn't supposed to be - the majority of the world live in poverty

Yes, the retirement age will have to be raised - it's ridiculous to think we are entitled to work for 30 years and then live for a further 30 on savings and pensions - it just does not make financial sense.

We live, we provide for ourselves and we keep providing until we get too old/ill health and then we die.

This idea we're all entitled to fancy travel, holidays, new stuff and a life of leisure is utterly bizarre to me.

I think that's the point pretty bird Gordon Brown our unelected prime minister, who was the chancellor throughout the build up to this mess, had an ideology but no really plan as to how it was all going to be paid for.
Taxes should have been raised a long time ago to pay for all the investment in the public sector, everyone could see that was a time bomb waiting to happen.

Cote-d'azur. You seem bound up in economic theory and do not seem to be reading people's real life examples on this thread.

Xenia has a huge loan...she has said she is currently better off as she is paying less interest on it.

I have said I have no debts but am worse off because am receiving less interest on savings.

These are not perceptions these are facts.

The prices of certain goods like cars may be slightly cheaper but that only affects you if you want to buy a new car tomorrow. I don't expect to buy a new car in the next year.

Other goods we buy more regularly like a Waitrose chicken have gone up in price...have had to buy an unhappy select farm chicken as the free range is now £10!
Petrol is also rising although it will be no bad thing if we use our cars less.
For those who booked foreign holidays before the pound crashed against the euro the cost has gone up. Obviously a luxury to have a foregin holiday but it all contributes to things costing more and people needing to cut back on what they buy as a result.

re "inflation figures may be fiddled"

There are too many people involved in calculation of these indices for any significant fiddling to happen without a leak. So this paranoia is up there with "moon landings may be faked".

Conspiracies tend to fail if they depend on the secrecy of hundreds of people.

happywomble - I realize Xenia is better off with lower interest rates (although you are not really worse off, that is truly your perception, for reasons I explained before).

What I am saying is that interest rates were not changed to reward Xenia or punish you. There is a real and very valid reason for lower rates at this point in time.

As I said before, if you are not happy with the interest rate you are getting from your deposit account at your bank, buy bonds. This is as good a time as any to learn about your investment options, and believe me you do have some.

i hope you'll excuse me for only reading half the thread but it strikes me that a lot of people on this thread might be interested in the organisation 'do something about it' basically they're trying to get together everyone who feels this way and make some noise - if we don't tell politicians there are a lot of us out here and this is how we feel then they wont be able to represent us (afterall all they want is to get elected!)

see www.dosomethingaboutit.org.uk

So basically there is no point in attempting to provide for yourself in your old age because the state will do that for you .
I'm sorry but this is why we will flounder, we'll buckle under the sheer weight of dependancy culture.
What is there is no housing benefit when you are old Riven, what will you do then ?

there have been discrepancies in what the public are paying day to day for the basics and what the govt say we are paying for quite a long time now.If the true cost of living was represented in these figures then the govt would be facing a huge bill to increase benefits and wages in line with that.That will never happen esp not now when as a country we are in debt to the eyeballs.Savings have been used by the banks historically to lend with and so savers should be rewarded in some way.Like i said before no incentive to save plenty to borrow and surely it should be the other way round.As an aside a few people I know are delighted with the drop in rates and some are paying a pittance atm BUT they are also v worried about what they will do if and when rates rise again as the cut came just in time for a few of them.

prettybird - The message is not really conflicting. "Credit crunch" was about banks refusing to lend each other, not individuals who overstretched themselves by borrowing too much (although that is also true).

Banks refused to lend to each other because several of them went bust with little warning. Again, not related to people borrowing above their means.

Government is taking measures to encourage spending (cutting VAT, etc) because the nasty risk with deflation is that the economy can easily teeter on the blink of collapse if most people do the rational thing: postpone all but essential purchases. After all, who would buy a car today if you know it will cost less tomorrow?

I'm not even suggesting a pension is a good idea, I stopped paying into mine along time ago, but I think we'll all have to start helping each other out a lot more and for me that may entail the mother in law moving in with us and me burdening my children when the time comes, because I simply cannot see how we can carry on at this rate.