The government has raided the bank accounts of every single citizen in the UK by dramatically and deliberately reducing their spending power over the last few years, according to one economic analyst.

Simon Rose, financial journalist, and spokesman for Save Our Savers has revealed how the gradual increase in inflation has slowly eroded our savings.

Although many people have become accustomed to rising prices, Simon argues that this is slowly but surely leading to the erosion of our currency.

He said: “It is not something that is a force of nature, it is not accidental, it is intentional. The government sets a target to reduce the value of your money by two per cent every year and people seem quite happy to go along with that. The real value of interest in the UK are back to the levels they were ten years ago, but many people who have retired and no longer have wages are trying to preserve their money, without being able to get pay rises every year.”
Figures by the Office for National Statistics revealed that inflation in the UK was at a record low of 0.50 percent in May 2000, but last month was recorded at 2.80.
Save Our Savers also examined figures such as the Consumer Prices Index (CPI), Retail Prices Index (RPI), the Essentials Index produced by Tullett Prebon, bank rates and their own statistical analysis to arrive at their conclusions.

Unlike many who argue that inflation is good for the economy, Rose says that all it does is reduce the amount of money available for individuals. And if the recent economic crisis seen over the last few years indicates anything, it is that years of rising inflation has done little to resolve economic problems.

Rose said: “If you were being cynical, you would say that inflation penalises savers but benefits borrowers and of course, the biggest borrower of all is the UK government, which is currently £1.2 trillion in debt.

“We live in a world of technological progress where the price of things should go down in the natural order of things, it should not always go up. I think people need to open their eyes and realise that the government and the Bank of England connive in effectively stealing money from our pockets bit by bit. If we did wake up to it, perhaps inflation would not be quite as strong as it is.”

Rose emphasised the need for financial education in the UK, to educate people about the value of money and their savings. Too many people, he argued, do not understand the difference between inflation, hyperinflation, stagflation and deflation. So what is the difference?

Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. Hyperinflation occurs when a country experiences very high, accelerating, and perceptibly “unstoppable” rates of inflation. In such a condition, the general price level within an economy rapidly increases as the currency quickly loses real value. It is often accompanied – or even triggered by – the catastrophic loss in confidence from the public. In this case, the price of goods shoot up rapidly, more money is printed as the government desperately try to rein in on the debt. In the most severe cases, war and social upheaval breaks out, as has been seen in the case of 1930s Germany, when their economy plummeted to monumental levels.

Stagflation on the other hand, is where the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. In this situation, governments are effectively stuck in a catch 22 situation, where anything they do to lower inflation may only serve to increase unemployment and vice-versa.

But deflation? Well according to Rose, deflation is what we should all be aiming for. Deflation is a decrease in the general price level of goods and services, and is often confused with disinflation, which is a slowdown in the inflation rate.

“I’m afraid it is the economists and the government who think that inflation is good, I’ve rarely met an individual who actually likes the fact that their money is worth less with every passing year,” says Rose, “The problem is that most people think that money and economics is a bit dull. They want to be able to spend it, but somehow the government and economists seem to prefer to make it as complex as possible to keep people in the dark.”

Recent news has revealed that pay rises are failing to keep pace with inflation, with basic rises stuck at around 2.5 per cent in recent months. Current wage rises in private firms are set to be around 2.75 per cent, compared to the current RPI inflation rate of 3.3 per cent.

But wage rises in the public sector are expected to be stuck at just one per cent.

Effectively it means that the British public are taking a cut in their salary while the price of goods continues to rise. Rose urged people to defend their income and compared the current situation to that in Cyprus.

He added: “Twenty per cent of the value of savings has been taken from savings and pensions in the UK over the last four years alone.There was outrage in Cyprus when it was proposed that savers were going to lose 6.7 per cent overnight and you can see that the situation is actually worse in the UK, it is just happening at a slightly slower rate.

“It is difficult to protect your money, but you must do everything you can. Yes it may seem dull, but what is the point of working hard to earn money, and then seeing it taken away without trying to defend it?”

So just how can people ‘defend’ their income? According to Rose, although it is impossible to protect your money from inflation, people should seek to get the best rates they can on their savings. “An amazing number of people are in accounts which once had a bonus but then that then dropped out. It is hideous that people are getting 0.1 per cent annually on their money.”

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