In the United Kingdom feelings run high against banks and bankers. I think that the nation has decided that the bankers are primarily to blame for the depth and duration of the recession. People do not accept that very small increases in growth are meaningful, and so for most people the recession is a continuing event.
Frequently newspaper headlines are full of news that banks are “ripping off” their consumer customers with extortionate charges and usurious interest rates. There is also a growing feeling, entirely justified that banks are either not lending to small and medium sized businesses or are lending at rates that are too high to be justified.
The feeling is that having used our money to get bailed out, banks owe the British public a fair deal. Instead bank customers are being made to bear the cost, not only of the bail out, but also of the rebuilding of the banks’ balance sheet.
People are simply distrustful of banks after the shenanigans of recent times. They are trying to reduce (and indeed are marginally doing so) the most expensive debts they have to banks; they are trying to repay credit cards and overdrafts and trying to avoid borrowing. The distrust is justified.
If you see banks being bailed out with taxpayers’ money (and that of several generations to come) taking advantage of their near monopoly in lending by charging high rates, when base rates are at an all time low, it is hardly surprising that people are not borrowing and if they are not borrowing then they are not spending, because most spending is with borrowed money these days.
The government may urge people to spend to help end the recession earlier, but people realise that if they borrow they are being “ripped off” so it is better to curtail your spending than to push yourself further into the arms of this monster that has already eaten so much of our prosperity.
Some expenditure in the present financial climate by consumers may make sense; capital expenditure which leads to long term savings is always sensible and may well be worth while borrowing to make the savings. You might borrow to buy a bike, to save commuting fares (and get healthier) or install some renewable energy to soften the future cost of energy price hikes. These expenditures make sense because in the long run they are simply another form of saving.
The Bank of England’s deputy governor, Charlie Bean, has suggested that savers should spend some of their savings to boost the economy. Most savers (or those in debt) would feel that the banks should be charged for the mortgage that they have taken out on our futures, and the charges used to boost the economy