Clearly, when the Bank of England's rates change, then all other interest rates in the economy follow. Therefore it must be the central bank that's depriving hard-pressed savers of a decent return with their obscure yet half-baked schemes to re-boot the UK's growth.
Actually, there is a bit more to it than that. Arguably, the greatest mystery in economics is why interest rates are so low all over the developed world. After all, if the Bank of England - as seems likely - gets round to charging commercial banks for leaving excess reserves in their accounts with the central bank, then it will still be only the fourth central bank to levy negative interest rates (after Switzerland, Japan and Sweden).
Sure, we all know that the 2008-09 financial crisis left the developed world in a funk from which it is has yet to recover fully and that the consequent lack of growth reduces the demand for capital and, therefore, the cost of money. Even so, the world has encountered financial crises before without interest rates falling so low for so long; even in the 1930s depression the Bank of England's base rate got no lower than 2 per cent.
To get at the truth we need to forget about 'nominal' interest rates and focus on 'real' rates - ie, the interest rate with the inflation component removed. Do that and, according to Sir Charles Bean, the former deputy governor of the Bank of England who was responsible for monetary policy for the six years to 2014, and "the decline in real rates is emphatically not just a reflection of the extraordinary policies pursued by central banks". He adds: "More persistent and deep-rooted forces have clearly been at work."
Their persistence is revealed by the decline in real interest rates throughout the developed world starting as far back as the early 1990s. Updating research by Mervyn King, his former boss at the Bank of England, and writing in the summer edition of The Economic Journal, Sir Charles shows that real interest rates on 10-year government debt throughout the developed world were, on average, above 4 per cent in 1994 and then began a continual decline into negative territory by 2014.
Meanwhile, this being a matter of economics, the forces at work are related to supply and demand - specifically, the supply of savings and the demand to use them. There has long been the notion that the world is experiencing a savings glut. This was first popularised in 2006 by Ben Bernanke shortly before he became chairman of the Federal Reserve, the US central bank, when he used it to explain the size and the sustainability of the US trade deficit.
Sir Charles updates the savings-glut hypothesis to highlight compelling demographic factors at work. First in the west and then in the developing world - especially China - the propensity to save rose rapidly from the mid 1980s onwards. In the west this was driven by the attainment of peak earnings power - and therefore peak savings capacity - of the post-War baby boomers. In China a young population has been enduring the harrowing process of ageing rapidly - largely due to the infamous one-child policy - without the support of a decent welfare system. In short, that's a great way to scare a population into excess saving.
Meanwhile, there is less evidence that low interest rates have been caused by lack of demand for capital. True, the slowing growth of working-age populations implies less need for capital spending. Even so, returns on capital over the past 20 years have remained fairly stable yet they would be expected to fall if demand for capital was also falling. Besides, given the drop in real interest rates, the spread between the return on capital and its cost has actually widened during the period.
Which leaves us asking, where next? As Sir Charles says: "The demographic influences pushing up savings should soon begin to reverse as the present bulge of high-saving middle-aged households moves through into retirement." In other words, the global savings glut will gradually shut down as the absence of employment income and the necessities of healthcare spending reverse the flow.
Not that savers are likely to notice much difference in a hurry. And when the benefits do start coming through, they will be mixed. Sure, it will be nice to get half-decent returns on savings accounts and annuity rates that do a little bit more than return the capital paid up front. On the other hand, quantitative easing (QE) may be much missed. Throughout the developed world, QE has done a great job at inflating asset prices - chiefly government bonds, although retail investors have mostly noticed its knock-on effect on share prices. In the absence of that stimulus, equities may find it even harder to make progress in the low-growth years to come.
