UK, EU and U.S. Siphon Off Billions of Householders’ Savings

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Today’s AM fix was USD 1,283.50, EUR 950.04 and GBP 797.01 per ounce.
Friday’s AM fix was USD 1,281.75, EUR 953.99 and GBP 797.65 per ounce.

Gold rose $0.10 or 0.01% Friday, closing at $1,287.80/oz. Silver slipped $0.06 or 0.29% closing at $20.75. Gold rose 0.03% while silver fell 3.26% for the week. Platinum fell $5.50 or 0.4% to $1,437.74/oz, while palladium dropped $6.50 or 0.9% to $729.72/oz.

Gold prices pulled back this morning as traders booked gains and stagnant physical demand had the yellow metal out of favour. Recent confirmation by Janet Yellen that she will continue Bernanke's loose monetary policy lifted gold, but tapering appears priced into the metal already.

The McKinsey Global Institute recently reported on the effects of Quantitative Easing or QE on the UK economy or to be more precise the net transfer of £110 billion from UK households to the UK government. This is a wealth transfer game being played out across the world and the report from McKinsey shows that the hardest hit are elderly households on fixed income forms of savings.


Estimated Cumulative Change in Net Interest Income, 2007-12 ©McKinsey & Company

The Mckinsey chart above clearly shows that QE has been kind to governments and since the financial crisis began in 2007, those UK households that have increased their levels of savings have been severely penalised to the tune of £110 billion. This £110 billion is in effect removed from the UK high street and further deprives the UK economy of much needed consumer spending. At the same time the UK government has saved itself £120 billion of net interest payments.

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The chart also shows the Eurozone and the U.S. are engaging in similar debt transfers from households to government. Those citizens that were prudent and wise are being unjustly penalised for their ability and desire to save.

The UK Prime Minister, David Cameron, has every reason to be worried as Paul Sykes has indicated that he will fund Nigel Farage’s UKIP to the tune of millions to do “whatever it takes” to help UKIP top the EU polls in May 2014.

Sykes, one of Britain’s wealthiest businessmen, was a keen supporter of the Tories under Margaret Thatcher but is determined to pull the UK out of the EU. Sykes and the UKIP party could not have asked for a powerful or more potent argument than the silent transfer of wealth from hard pressed UK households to their government.

As it stands the UKIP party currently has 13 seats in the European Parliament and estimates vary but it is believed that the UKIP would need to secure about 27 per cent in the elections in May to overtake the Tories as the largest UK party in the European Parliament.

It would be foolish to second guess what will happen in the UK EU elections come May 2014 but it appears that those households that save by placing cash on deposit will continue to lose out as the UK, the Eurozone and the U.S show no signs of easing their respective QE programmes.

The case for financial insurance or diversification into gold and silver is being reinforced by the actions of the UK, Eurozone and U.S governments.

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