Getting Radical Might Be the Most Practical Way to Fix Inequality — Lynn Parramore interviews Adair Turner

Why we need more radical policies so that we don’t just repeat the debt-fueled booms all over again

Evonomics
Getting Radical Might Be the Most Practical Way to Fix Inequality

Lynn Parramore interviews Adair Turner

Bill Mitchell — Overt Monetary Financing – again

Adair Turner has just released a new paper – The Case for Monetary Finance – An Essentially Political Issue – which he presented at the 16th Jacques Polak Annual Research Conference, hosted by the IMF in Washington on November 5-6, 2015. The New Yorker columnist John Cassidy decided to weigh into this topic in his recent article (November 23, 2015) – Printing Money. The topic is, of course, what we now call Overt Monetary Financing (OMF), which simply means that all of the unnecessary hoopla of governments matching their deficit spending with bond-issuance to the private bond markets, as if the latter are funding the former, is dispensed with. That artefact from the fixed exchange rate Bretton Woods system is maintained as a voluntary procedure by fiat-currency issuing governments but only provides financial assets to the non-government sector in the form of ‘corporate welfare’. The debt issuance of debt has nothing to do with funding the spending and is used by all and sundry to attack such spending for creating so-called ‘debt mountains’. OMF brings together the central bank and the treasury functions of government into a coherent framework whereby the central bank merely credits private bank accounts on behalf of the government to indicate the spending initiatives implemented by the Treasury.…

Bill Mitchell – billy blog
Overt Monetary Financing – again
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

John Cassidy — Printing Money

Mostly about Adair Turner but mentions MMT.

Looks like overt money financing has gone mainstream.

The New Yorker
Printing Money
John Cassidy
ht Mark Thoma at Economist's View

Adair Turner — The Case for Monetary Finance – An Essentially Political Issue

My aim in this paper to assess the possible and appropriate role for monetary finance of fiscal deficits . And I will argue that all the really important issues are political, since the technical issues surrounding monetary finance are already well understood (or should be) and that the technical feasibility and desirability in some circumstances of monetary finance is not in doubt . Monetary finance of increased fiscal deficit will always stimulate aggregate nominal demand: in some circumstances it will be a more certain and/or less risky way to achieve that stimulation than any alternative policy lever: and the scale of stimulus can be appropriately calibrated and controlled – there is no knife edge nonlinearity which makes dangerously high inflation inevitable. 

But it is also clear that great political risks are created if we accept that monetary finance is a feasible policy option: since once we recognise that it is feasible, and remove any legal or conventional impediments to its use, political dynamics may lead to its excessive use. The most important question relating to monetary finance is therefore whether it is possible to construct a set of rules and responsibilities which will guard against its dangerous misuse, while still enabling its use in appropriate quantities and in appropriate circumstances. But the majority of this paper is still devoted to making the technical case, since the fact of technical feasibility and desirability is still not universally accepted within the economics profession, and needs to be if we are to move on to the crucial issues of political economy.

Paper presented at the 16th Jacques Polak Annual Research Conference

The Case for Monetary Finance – An Essentially Political Issue
Adair Turner, Institute for New Economic Thinking

ht Ralph Musgrave

Diane Coyle — The devil take the debt

Mini-review of Adair Turner's Between Debt and the Devil: Money, Credit and Fixing Global Finance .

Given the difficulty of tackling the three drivers of the crisis – a limited supply of land and real estate, income inequality and global imbalances – what does Turner, a former head of the FSA, recommend? His answers are interventionist, suggesting a total rejection of the idea that finance can be left to ‘the market’. “To achieve a less credit-intensive and more stable economy, we must … deliberately manage and constrain lending against real estate assets,” he writes. He also advocates central bank monitoring of credit growth, constraining it when necessary; taxation of land values; taxation of debt to bring its treatment in line with taxation of equity; and raising bank equity ratios and minimum liquidity requirements (a step advocated by every, but every, economist who has given a moment’s thought to the crisis – shocking that the banks have lobbied their way out of this minimal step towards systemic stability).…

The Enlightened Economist
The devil take the debt
Diane Coyle | and a former adviso freelance economistr to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation

Edward Lambert — Adair Turner: Is it Debt Deleveraging or the Fall in Labor Share?

Decreasing labor share results in contracting demand, which in turn results in a sluggish economy that then turns into debt deflation if private debt levels are sufficiently high. Duh.

Angry Bear
Adair Turner: Is it Debt Deleveraging or the Fall in Labor Share?
Edward Lambert

alittleecon — MMTers: Does Adair Turner have a point?

There’s quite an interesting interview with Lord Adair Turner published here. This bit in particular caught my eye…

Lord Turner admits that fiat money provide extended policy space and then suggests the Positive Money control of a monetary policy committee at the politically independent central bank. These people don't trust democracy and are in love with command systems run by technocrats.

alittleecon

MMTers: Does Adair Turner have a point?

Adair Turner — Have We Become Too Flexible?

Oh, well.

Project Syndicate
Have We Become Too Flexible?

Adair Turner | former chairman of the United Kingdom's Financial Services Authority and former member of the UK's Financial Policy Committee, is a senior fellow at the Institute for New Economic Thinking and at the Center for Financial Studies in Frankfurt

Wanker of the day.

The ECB’s New Macroeconomic Realism
Jeffrey D. Sachs | Professor of Sustainable Development, Professor of Health Policy and Management, and Director of the Earth Institute at Columbia University, is also Special Adviser to the United Nations Secretary-General on the Millennium Development Goals.

Mike Bird — Adair Turner: Germany Is Wrong About Economics And 'Terrible Things' Threaten Europe Because Of It

Turner's warning of a secular stagnation for the UK is nothing compared to his grim diagnosis for Europe. The threats Turner identifies from extremely high household debt levels in the world's advanced economies are small beer in comparison to the dangers he thinks is facing Europe's currency union. And Germany is a huge part of the problem.…

Although I have huge respect for what Germany is as an economic success, a very strong political system…. And I entirely understand their fears of high inflation, etc., I think the predominant German attitude to macroeconomics is simply wrong. There’s a failure to deal with the fallacies of aggregation that are at the core of macroeconomics. It is not possible for the whole world to succeed in the same way that Germany succeeds. We cannot all be export led economies. We can’t all run surpluses unless we find another planet.

Business Insider
Adair Turner: Germany Is Wrong About Economics And 'Terrible Things' Threaten Europe Because Of It

Mike Bird

Yves Smith — Adair Turner: The Consequences of Money-Manager Capitalism

Yves here. This is a terrific interview with Lord Adair Turner, former head of the FSA. Most of it focuses on the things missed in contemporary economics, particularly macroeconomics, and how some disciplinary “back to the future” would be desirable. 

A major topic of discussion is how wealth is becoming as concentrated as it was in the 18th century, and the driver then and now was the disproportionately large role real estate has come to play. Then, it was income-producing agricultural land. Now it is urban property, bid up by domestic and international elites who want to live in particularly prized cities. Turner points out the irony that access to cheap finance for housing, meant to help middle and lower income buyers, has instead contributed to rising wealth inequality. He also describes how the ability of banks and financial markets to supply virtually unlimited amounts of credit, against a limited stock of particularly sought-after locations, has the potential to create tulip-mania type results. 

Perhaps due to time constraints, Turner didn’t venture into the views of classical economists, that profiting from land, which they derided as rentier capitalism, was economically unproductive. As Michael Hudson has stressed, they urged heavy taxation of land as the remedy 

An aside: Turner has an extremely plummy accent which he normally uses to theatrical effect. It isn’t clear whether the recording quality flattened that or whether he decided to tune his intonation a tad for North American listeners (not sure why that would be a plus, since a British accent is worth at least 20 attributed IQ points here, and the more obviously Oxbridge, the better).

 Naked Capitalism
Adair Turner: The Consequences of Money-Manager CapitalismYves Smith

Ben Dyson — Economics textbooks teach a “mythological” story about what banks do, claims former bank regulator Lord Adair Turner (Full transcript)

Video and transcript of Adair Turner's INET presentation.

Positive Money
Economics textbooks teach a “mythological” story about what banks do, claims former bank regulator Lord Adair Turner (Full transcript)
Ben Dyson

INET — Institute Senior Fellow Adair Turner’s Debt Addiction Remarks Turn Heads

Lord Turner, who is the former head of the United Kingdom Financial Services Authority and currently a Senior Fellow at the Institute for New Economic Thinking, pointed to continually rising levels of private debt as a key culprit holding back the recovery of the global economy.

INET
Institute Senior Fellow Adair Turner’s Debt Addiction Remarks Turn Heads

Adair Turner — "In Praise of Capital Market Fragmentation"

Financial liberalization was lauded because it enabled capital to flow to where it would be used most productively, increasing national and global growth.

But empirical support for the benefits of capital-account liberalization is weak. The most successful development stories in economic history – Japan and South Korea – featured significant domestic financial repression and capital controls, which accompanied several decades of rapid growth.

Likewise, most cross-country studies have found no evidence that capital-account liberalization is good for growth. As the economist Jagdish Bhagwati pointed out 16 years ago in his article “The Capital Myth,” there are fundamental differences between trade in widgets and trade in dollars. The case for liberalizing trade in goods and services is strong; the case for complete capital-account liberalization is not.

One reason is that many modern financial flows do not play the useful role in capital allocation that economic theory assumes....

And yet, despite the growing evidence to the contrary, the assumption that all capital flows are beneficial has proved remarkably resilient. That reflects the power not only of vested interests but also of established ideas. Empirical falsification of a prevailing orthodoxy is disturbing. Even economists who find no evidence that capital-account liberalization boosts growth often feel obliged to stress that “further analysis” might at last reveal the benefits that free-market theory suggests must exist.

It is time to stop looking for these non-existent benefits, and to distinguish among different categories of capital flows. Some are valuable, but some are potentially harmful....

In the past, policymakers have been at pains to stress that no such fragmentation will be allowed. But we need to be blunt: Free flows of short-term debt can result in capital misallocation and harmful instability. When it comes to global capital markets, fragmentation can be a good thing.

Social Europe Journal
"In Praise of Capital Market Fragmentation"

Adair Turner



Adair Turner

Steve Roth — Michael Woodford and Adair Turner Agree: CBs Won’t (and Shouldn’t) Sell the Bonds Back

Taboos are made to be broken. The Fed should just burn all those bonds. Welcome to MMT World.

Asymptosis
Michael Woodford and Adair Turner Agree: CBs Won’t (and Shouldn’t) Sell the Bonds Back
Steve Roth

John Carney — Deflation Is 'Persistent Risk': Money Manager Dan Arbess

[At the Milken Institute Global Conference] the Wednesday morning presentation by Dan Arbess, a partner at Perella Weinberg and chief investment officer at PWP Xerion Funds, was startling because of how deeply it broke from the standard narrative.

We've been wrong to assume that the economic crisis is over, Arbess said. We stopped the crisis from reaching Great Depression levels through drastic fiscal actions such as TARP and the Obama administration's fiscal stimulus. But almost as suddenly as we started, we stopped these efforts, which Arbess says has resulted in us being "mired down" for the past four years.

What's kept us afloat has been monetary policy, but that's now reaching its limits, according to Arbess. The threat of deflation is once again rearing its head.

"The persistent risk in our economy is deflation not inflation," Arbess said....

His proposed solution is that we start directly funding government expenditures through the central bank. That is, we should stop relying on taxes or further debt issuances to finance government—or at least reduce our reliance on taxes and bonds. Just let the Federal Reserve pay the government's bills by exercising its money creation powers.

John points out that Arbess was clearly influence by Adair Turner and this recommendation has academic precedent in a 1948 paper by Milton Friedman. This is the genuine "helicopter money" (fiscal) rather than QE (monetary).

CNBC
Deflation Is 'Persistent Risk': Money Manager Dan Arbess
John Carney | Senior Editor

INET — Macroeconomic Policy and Economic Stability - Adair Turner Keynote at INET Hong Kong

Video and paper.

INET Senior Fellow Adair Lord Turner delivers the day 1 keynote address at the Institute for New Economic Thinking's "Changing of the Guard? Conference in Hong Kong, with an introduction by George Soros.

INET
Macroeconomic Policy and Economic Stability - Adair Turner Keynote at INET Hong Kong

Soros on Japan — Video

George Soros on Adair Turner's Groundbreaking Keynote and Why BOJ Stimulus is Risky

from INET Blog

Stephen Grenville — Helicopter money

What would the overt monetary financing of fiscal deficits involve? This column explains the differences between “printing money”, quantitative easing, and overt monetary finance. Lord Turner’s proposed “helicopter drop” raises issues for banks’ balance sheets and central bank independence.

VOX.eu
Helicopter money
Stephen Grenville | Visiting Fellow, Lowy Institute for International Policy

circuit — Helicopter money: an operational view

Turner v. Seccareccia

Fictional Reserve Barking
Helicopter money: an operational view
circuit

Anatole Kaletsky — A breakthrough speech on monetary policy

Wednesday night may have marked the “emperor’s new clothes” moment of the Great Recession, in which the world suddenly realizes its rulers are suffering from a delusion that doesn’t have to be humored. That delusion today is economic fatalism: the idea that nothing can be done to break the paralysis in the global economy and therefore that a “new normal” of mass unemployment and declining living standards is inevitable for years or decades to come.

That such economic fatalism is nonsensical is the key message of a truly historic speech delivered on Wednesday by Adair Turner, chairman of Britain’s Financial Services Authority and one of the most influential financial policymakers in the world. Turner argues that a virtually surefire method of stimulating economic activity exists today and that politicians and central bankers can no longer treat it as taboo: Newly created money should be handed out to the citizens or governments of countries that are mired in stagnation and such monetary financing of tax cuts or government spending should continue until economic activity revives.

Reuters
A breakthrough speech on monetary policy
Anatole Kaletsky | Financial Economist, Reuters
(h/t Max Keiser)