ALEX BRUMMER: Our savings rate has fallen to the lowest level since records began – it’s time to end the splurging

We are not saving enough. Well, some of us are, but as a nation our savings rate has fallen to the lowest level since the present set of records began in 1960.

It was 1.7 per cent of GDP in the first three months of the year. Not good. Over the past 30 years it has averaged around 8 per cent. In the US it is 5.5 per cent, in Germany just under 10 per cent. In the medium term this means trouble.

So why are we not saving? There is a short-term explanation in the current squeeze on real incomes.

The combination of stagnant incomes and rising prices, plus the extra tax from the self-employed at the end of January, pushed down on already compressed savings. We kept our standard of living up by borrowing more.

Trouble ahead: Britain’s savings rate has fallen to the lowest level since records began

But it is not just our natural human response to the squeeze. In the early 1990s, when recession was savaging our living standards, household savings were around 12 per cent of GDP.

So what has changed? The answer surely is the policy of near-zero interest rates. The incentives are all geared to encourage us to borrow rather than save.

What will happen? Well, at last the central bankers are beginning to appreciate that they should do what they should have done some time ago.

In the words of William McChesney Martin, legendary chairman of the US Federal Reserve from 1950 to 1971, they should ‘take away the punchbowl just as the party gets going’.

So US rates are rising and there must be an even chance that our rates will start to rise in the autumn too.

This last week has seen a change of mood in the markets, with bond prices falling in response to fears that the days of easy money are drawing to a close. Interest rates will, in all probability, remain pretty low, but once you have passed a turning point things can move faster than people expect.

In practical terms Britons have a window of opportunity to fix their finances. This includes paying off credit cards, taking advantage of tax breaks, and sorting out pension plans. If this window of ultra-low interest rates is closing, it is a useful reminder that people get rich by saving, not by splurging. Boring but true.

Investors cooking on gas

Unless you spend a lot of time in the US you probably haven’t cooked a Blue Apron meal. I have done a few (the chicken balls in hoisin sauce were better than I expected) and can see the appeal.

A box of ingredients arrives once a week, complete with detailed instructions on how to cook them, for four nights of meals for two. It fits in that space between cooking a meal from scratch and getting a takeaway.

But is this a business that sells food kits worth nearly $2billion? That was the value put on it when it went public this week.

And that surely says something about the febrile mood of American capitalism. Everyone is hunting for the next corporate winner, the next Tesla. Losing money doesn’t matter if there is enough potential.

From the investor’s perspective all you need is the occasional bulls-eye. It is a bull market mentality, and while there may yet be life in this one, bull markets don’t go on forever.

In a slightly different corner of the investment forest, the bears circling Ocado, Morrisons et al clearly think it is time to take some money off the table.

Cash is still king

Sweden is nudging towards being a cashless society. The Bank of England would love us to do so, and you can see why: no heaving cash around, every transaction traced, less opportunity for tax evasion, and so on.

If this sounds Orwellian, relax. It ain’t going to happen. The stock of bank notes in circulation has been rising much faster than inflation and is up to £73.2billion. That is about £1,100 for everyone in the UK.

So are Europeans going cashless? No, the stock there is more that €3,000 for every resident in the eurozone and it is rising too.

And Americans? There are some $4,000 in circulation for every US citizen, though a quarter or more of the dollars and euros are held outside the US and Europe by people wanting to stash money away.

It seems dollars and euros are the drug dealers’ currencies of choice. Poor devalued sterling doesn’t get a look in.

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