Savings Incentives

These stem directly from outdated economic ideas that if the rate of interest is varied people will save more. With 15% inflation people are feeling, quite rightly, that they'd be stupid to save money at 4% interest. Surely they'd be just as stupid to save at 5%? Besides, if they do want to invest money for three or more years, there are much better things to invest it in. On the same page in Wednesday's 'Dominion' that Muldoon said 8% interest over 3 years would attract savers, the Lombard Finance Company was advertising 12% deposits.

So it doesn't look like these savings incentives will achieve much. Who do they benefit? Directly, no one. Indirectly, they bolster the finance companies offering the high rates of interest who Muldoon reckons are 'distorting the market'. As the alternative was to hit them hard, they've come out quite well. And that means the rich benefit, as, like solicitors, these companies have heavy biases, both in borrowing and lending.

There's one more point. If the savings incentives do work, it means people will spend less. Consequently firms will cut back production (since people aren't buying their goods) and lay off staff. So, either the rich get richer or the poor get poorer. Nice choice.