Turner: Time for helicopter money?

 
Lord Turner Lord Turner's speech was his last at Mansion House as head of the FSA

Lord Turner warns that the process of businesses, households, banks and the government trying to cut their big debts built up in the boom years, what is known as deleveraging, may bear down on the British economy's ability to grow for many years yet.

He is also concerned that quantitative easing, or the purchase by the Bank of England of government debt, may be becoming less and less effective in promoting a recovery.

So the City's top regulator, who is seen as one of the two leading candidates to be the next governor of the Bank of England, says that the government and the Bank may have to consider new unorthodox policies to overcome what he calls the powerful economic headwinds.

Although he does not make explicit what he means by these innovations, it is understood he believes the Bank of England should consider telling the Treasury it never has to repay some of the £375bn of government debts the Bank acquired through quantitative easing - which many conventional economists would regard with horror, because it would be seen as the government, in effect, printing money to finance public spending.

Since some of this debt is due for repayment next year, the Bank of England has a deadline for deciding whether to roll it over into a perpetual zero-interest debt - which would be seen as, in effect, writing off the debt.

The economists' slang for this kind of policy is the creation of "helicopter" money, because it is seen as the equivalent of dropping money on all of us from out of a helicopter (see this column by Simon Jenkins for more on this).

Lord Turner, in what will be his last speech to the City at the Mansion House in his current role, also broke something of a taboo among prominent British ministers and officials by speaking openly about how if the eurozone cannot save itself through making bold reforms, it should attempt to dissolve itself in what he called a "controlled rather than chaotic fashion".

 
Robert Peston Article written by Robert Peston Robert Peston Economics editor

End of QE is whimper not bang

As the Fed Reserve ends quantitative easing, those who prophesied that these trillions of dollars of debt purchases would spark uncontrollable inflation have been proved wrong. But QE could still prove toxic.

Read full article

More on This Story

More from Robert

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • Comment number 52.

    All this user's posts have been removed.Why?

  • rate this
    0

    Comment number 51.

    46.
    UKGoingBust
    OK people can cut Sky T.V. subscription, cut sports club subscription "

    Oh my, how we are suffering, surely not this too. Naughty banks must have forced you to buy them. Or did you consciously buy into the dream, " no more boom & bust ". We are all paying for our mistake, but let's blame someone else for our ignorance. It was banks, government & you, Happy back then, now enraged

  • rate this
    +2

    Comment number 50.

    Do the numbers.

    Own as many properties as you like. There is no reason on earth for the state or anyone else, to pay off your mortgages.

  • rate this
    +1

    Comment number 49.

    How many housed do you own?

    If more than one, l will just call you stupid. Now, don't get annoyed. I could use much stronger language, like how did you manage to own two properties, or is it three, or four, or... what is wrong with you?

    Let me guess - you perspite. Sorry (whoops) you aspire!

  • rate this
    0

    Comment number 48.

    @46.UKGoingBust
    Helicopter money will go directly to the banks, you do know that don't you?
    if the concept of it going anywhere has any real meaning then it goes to the treasury, Essentially QE exchanged bank assets, primarily gilts for cash accounts. At the end of the QE process, BoE net monetary gain is supposd to be terminated, Instead Turners effectively suggesting giving it to the treasury

  • rate this
    +2

    Comment number 47.

    How to pop a bubble without adding to the headwinds?

    The game is percentages and the size of the shark.

    The game, that is what it is, is percentages %.

    Sectors.... which one to start with?
    Where could modest devastation fall... ?

    Cringe.... the buy to let 'bright idea' that is actually an insane rip-off, paid for by..... have a guess...

    Take out the middle-man and nada. No consequences.

  • rate this
    +2

    Comment number 46.

    Robert - you know where this helicopter money will go and what it will do. Please cover that. Ordinary folk just wish to work, get paid, feed family, watch TV, play some sport, . . they are starting to suffer badly! OK people can cut Sky T.V. subscription, cut sports club subscription but can't cut food & energy bills. Helicopter money will go directly to the banks, you do know that don't you?

  • Comment number 45.

    All this user's posts have been removed.Why?

  • rate this
    +1

    Comment number 44.

    We need to learn from the gravy train that was the US proprty market, and how it is turning around. They took the hit, in all its agonies and disregards. There are lessons.

  • rate this
    -1

    Comment number 43.

    You would think this guy would know - everything has to balance at the end of the day. Printing money favours the debtor by robbing the creditor. There should be a law against it and he should be brought to book. The answer is - become more productive.

  • rate this
    +1

    Comment number 42.

    @41.purple
    "List ALL similarities between banking and bonking -
    No1 -Name St. George's mount. The bonk of England. "

    Ummm... nearly related, Half Man Half Biscuit lyrics for "Lord Hereford's Knob":

    "Ever since the chattering classes invaded Hebden Bridge
    And priced the likes of me and mine
    To the pots of the Pennine Ridge"

  • rate this
    -2

    Comment number 41.

    Sorry to steal the topic, but -

    List ALL similarities between banking and bonking -

    No1 -Name St. George's mount. The bonk of England.


    In regards the govenor and his acolytes, it matters immensely, what they do. That is protecting value. Others run amok


    Ps It does matter what the Govenor and his acolytes do, they protect value. Others are allowed to run amok. Status wo, boy. Steady there.

  • Comment number 40.

    All this user's posts have been removed.Why?

  • rate this
    +4

    Comment number 39.

    In regard a Euro break up - those doing ok simply don't care. Each of those doing ok, did it by themselves, with perhaps the exception of Germany who think they can overcharge the world forever, for the rubbish they vorsprung upon us.

    UK ha£ a million or so idle disenchanted youngsters milling about. What is very likely to happen?

  • rate this
    +1

    Comment number 38.

    You can't fight demographics. The baby boomers are ageing fast. They save now, they don't spend. Japan was a decade ahead of us, and the pattern was the same. Here, as there, the city slickers made the problem even worse by selling impossible dreams to would be retirees, sowing fear and mistrust as it all turned to ashes. Musn't grumble,

    G.

  • rate this
    +1

    Comment number 37.

    @31.ComradeOgilvy
    "Why should we all live in poverty simply because the state (the treasury) owes money to the state (the BoE)?"

    Perhaps, if the BoE is part of the "State", we should demand from the BoE trustees a full explanation. Why would it still be granted special Royal dispensation after the FoI Act? Robbing Peter to pay Paul isn't "commercially confidential" information...

  • rate this
    -1

    Comment number 36.

    Apparent abuse by Savile is so trivial compared to the massive abuse by previous government and banks of the ability to borrow and lend money to create an illusion of 'growth' (completely pointless anyway) regardless of future consequences. Turner and your ilk, stop the abuse now. Helicopter money - NO - that's just more of the same abuse.

  • rate this
    +5

    Comment number 35.

    Key to recovery is confidence.

    That means for each of us. (Turner rightly cites private debt reduction as central).

    How can confidence be increased with relentless attacks by the tories on people's job security?

    GO's latest brainwave is typical. Shares for precarity. Brilliant.

  • rate this
    +1

    Comment number 34.

    neo-liberals have a morbid irrational fear of printing money (doesn't mean I'm advocating it) which they've instilled into the people so this idea will be the subject of much hysteria. People will also have to get it into the heads that QE is NOT printing money but this in the neo-classical view at least is. Turner proposes it cos they've long since run out of monetary ideas & refuse fiscal route

  • rate this
    +6

    Comment number 33.

    @15.John_from_Hendon
    "The ONLY solution is debt deflation (taking decades) as it did in the 1870s."

    http://en.wikipedia.org/wiki/Panic_of_1893

    Or 1857. Or 1907. And the same old tired 15-20 year boom-bust continued. The more cynical would believe it's a subtle attempt at population enslavery through debt, others merely that it's political incompetence. Few agree it's still acceptable.

 

Page 6 of 8

 

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.