…is it time to protect savings?
We are concerned that so much money is being lost or frozen by finance companies in trouble. Many of the investors are elderly and in some cases they have lost everything. Others have been saving for their retirement and their money is either gone or locked up. High interest rates can be attractive but they are often associated with greater risk.
The problem is at a time like this many depositors try to withdraw their money, causing a run on available liquid funds. The financial system is built on confidence and things go wrong when confidence is shaken.
There is no doubt that stronger oversight is required of this part of the finance industry. Investors and creditors should not have to resort to expensive legal action just to get their money back. In a lot of cases they are not getting any money back at all.
Perhaps it is time to introduce a government guarantee for deposits up to $100,000 at selected New Zealand-owned financial institutions like Kiwibank and TSB. This system could not be extended to private companies because they do not operate under the same set of controls.
The idea is to make savings safe in times of uncertainty and to invest them in New Zealand. We have done this before and it is time to look at doing it again.
August 18th, 2008 at 12:39 pm
You know, I have to tell you, I really enjoy this blog and the insight from everyone who participates. I find it to be refreshing and very informative. I wish there were more blogs like it. Anyway, I felt it was about time I posted, I
August 18th, 2008 at 3:51 pm
Its the risk investors take when deciding on putting, a bit or all of their savings into investment. Yes, the human thing to do is obvious, feel sorry for the buggers because no one wants to lose their retirement funds. Maybe Winston you could introduce a new scheme where money invested is protected in times where oversight isn’t acknowledged. It’ll definitely be a safer ground for “Generation Y” investors.
Has there been any research on age ranges, or the types of people deciding to invest? I’ve considered it, but apart from what the bank booklets tell me, It almost seems impossible to understand not only the process of investing in a certain fund, but also the ample amount of financial jargon that goes way over my head.
August 19th, 2008 at 8:28 am
Good idea. Of course such a guarantee will mean a lower risk and a corresponding lower interest rate from those banks. That old saying comes to mind - aint no such thing as a free lunch.
August 19th, 2008 at 10:42 am
World without INTEREST.
One day people will wake up and see that there doesnt need to be interest..WE have all been conned by the concept of interest…you can still have loans for just a fee.
Inflation and bankrutcies and using up resources to simply pay interest..cocept of last century!!!
All this nonsense in finance companies would go away as well.
Yes the financila industry is badly managed as is thie concept that property is a tool of profiteers…for gawds sake these are peoples houses we are talking about…who in their right mind would allow them to be some tool for profit.
Time for a change!!!!
August 19th, 2008 at 10:57 am
The Public Trust already offer this, and have done for quite some time.
But the greedies went for the higher interest rates, didn’t they. They didn’t do their homework, did they. And, in doing so, they exposed themselves to greater risk.
Would they have been happy to hand back their profits during the good times, eh?
August 19th, 2008 at 2:17 pm
The whole concept of interest on an investment is as a pay back for risk taken. If there is no risk there is no interest, then there is no investment. This is elementary stuff. Is it possible for politicians to ever gain the faculty of reason?
Winston says “Interest is paid for the use of money. The no risk/no interest concept does not seem to have taken off here.”
September 19th, 2008 at 2:27 pm
“Neither a borrower nor a lender be,
For both lender looses itself and friend,
And borrowing dulls the edge of husbandry” says the bard.
Maybe it is an advice that could be well heeded by investors.
Nevertheless, I am really sorry for the losses experienced by those who invested in good faith; being taken in by the bright brochures and advice from their financial advisers.