Merryn Somerset-Webb

You wouldn’t buy Britain in this state, so why hold your cash in pounds?

Merryn Somerset Webb on investing in currencies

A few minutes reading the Daily Mail and you might think that there wasn’t a person left in Britain with a penny to their name. But it isn’t so. Half the nation may have spent the last five years churning credit cards and overpaying for city-centre new-build flats, but the other half has been busy getting rich.

The long bull market, the housing bubble, the City bonus boom and an entrepreneur-friendly culture (yes, really — try starting a business in France) have all combined to make a lot of people a lot of money. The question now is what on earth they should do with it. They can’t buy houses and they don’t really want to put it into the stock market, given its shocking volatility and clear downward trend — and hedge funds have spent the last couple of years proving they’re no safe haven either. Add all this up and clearly the smart money is in cash.

But once you’ve made that choice, then what? The rates offered on most UK savings accounts are not marvellous: take into account tax and inflation and the higher-rate taxpayer in the UK has to make 6.5 per cent to get any real return on his cash. And the highest-paying banks are hardly the kind of places to put your life savings anyway: you can get over 6 per cent on your money in an Icelandic bank, but given that the credit markets are suggesting most of them are about five times more likely to default than the average European bank, do you really want to chance it?

But the best reason to think twice before you put all your cash into a domestic savings account is the state of our currency.

Already a subscriber? Log in

Keep reading with a free trial

Subscribe and get your first month of online and app access for free. After that it’s just £1 a week.

There’s no commitment, you can cancel any time.

Or

Unlock more articles

REGISTER

Comments

Don't miss out

Join the conversation with other Spectator readers. Subscribe to leave a comment.

Already a subscriber? Log in