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

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  • rate this
    0

    Comment number 152.

    Hacky@149,150
    "Information asymmetric"
    Worse & better than that
    "Information unique"
    Still worse & better, ever changing

    'Saving grace' is One World

    We accumulate facts, rules-of-thumb, theories, laws: to be tested, refined, discarded, replaced

    Learning humility
    Choosing faith (existence & care)

    'Priorities' emerge: equal-sharing, for survival, discovery, outreach

    Leaving behind the apoptotic

  • rate this
    0

    Comment number 151.

    The most urgent need is to increase the supply of money actually in circulation - not piling up in idle bank reserves. Let the Bank of England finance the government's continuing but declining fiscal deficit with newly created money. Then there need be no crowding-out effect associated with newly issued government debt.

  • rate this
    0

    Comment number 150.

    All for All @144, 145

    Information is produced by search. Life searches a physical, temporal and genetic space. Neurology searches information (storage and experience). It's a naturally asymetric process. All information is asymetric therefore unequal.

  • rate this
    0

    Comment number 149.

    The problem I have with your campaign for equality generally is that information is naturally asymetric because life is a form of search. Individual search implies unequal information.

    I do agree that a universal credit should be a flat payment to everyone for no other reason than equality of effective demand. It fits with my general rule that the role of government is to maximise freedom.

  • rate this
    0

    Comment number 148.

    For those purveyors of history, just check out the money printing ideas of Lincoln and Kennedy.

    Bang, bang.

  • rate this
    0

    Comment number 147.

    QE to Infinity won't clear the City out of the over leveraged, derivative based madness they created while successive governments and regulators ignored all the signs in the early 00's

    They remain Too Bust To Save

    Until our institutions act on that basis - Vickers in full & a whole load of new banks - we 99% will continually be gradually robbed as per last 3 years

    And it still won't be enough

  • rate this
    0

    Comment number 146.

    Its time for proper Monetary Reform, and the abandoning of fractional reserve banking Robert, and I and many others have been saying since 2008.

  • rate this
    0

    Comment number 145.

    Hacky @142

    @30, "with you" on replacement or liberation of sequestered capital

    Agreeing need to 'play chicken' with inflation, 'ride tiger' as hoarders spend

    As @132, 'giving to poorer' of short-term 'help for aggregate' (as well as poor)

    But, what of long-term, breaking the Big Game cycle?

    Unless to be vain & bureaucratic, Universal Credit must be Equal?

  • rate this
    0

    Comment number 144.

    Hacky @32
    "Reclaim Universe"
    The audacity of hope!

    I know you will have in mind the long-run, the 'structural' viability of context for any 'helicopter drops'!

    Not really aero-science, the need to be 'grounded' on intelligence, full use of the talents of all, to ensure relevant good design, and conscientious good quality

    Making our quality of life worth sharing - exporting to 'pay' for imports

  • rate this
    -2

    Comment number 143.

    Better than helicopter money would be to cut VAT to, say, 15% - with an even lower rate for restaurants. That ensures the cash goes straight into spending money for Xmas. Moreover, supporting restaurants (posh & popular) gives those labour intensive businesses cash to hire staff who'll then spend their modest wages quickly. We know it works & that it can be done!

  • rate this
    0

    Comment number 142.

    All for All @32
    We could start a campaign for a real universal credit. Maybe we could call it 'reclaim the universe'.

    The funny thing about this news story is that it seems pretty clear that Lord Turner has absolutely no confidence in the deficit reduction strategy of the current government. If he had confidence then why would he think they need a bailout?

  • rate this
    -1

    Comment number 141.

    Dangerous Dave @108
    'Mismanaged Vineyard'

    Indeed, the young either 'unemployed' (to find 'alternative work'), or commanded for 'Grand Designs' (of the frightened near-to-death)

    Utterly, fatally, 'mad'

    And not as if lacking viticultural heritage!

    Was it not 'a vineyard owner' who paid all equally?

    How else to see families and economies 'supported'?

  • rate this
    0

    Comment number 140.

    ARHReading @103
    "why the BBC" gives air time?

    However needful, BBC cannot speak in 'political' contradiction of Government, at least not until pro-democratic public awareness is sufficient to protect against strike-back

    Outside the gated farm-estates of the Wizards of Oxbridge, we rely on the verge, chance-germinations and roadkills, to supplement our diet of turnips

    Have sympathy?

  • rate this
    0

    Comment number 139.

    135 EFW - possibly but suspect world energy prices still on a rising trend despite any speculation. This may turn eventually - but when it does you can expect the world economy to be in very bad shape so there will then be other challenges. In the UK the increased costs associated with green energy are likely to be more material.

  • rate this
    0

    Comment number 138.

    Dripfed@132
    'Give to poorer'

    Yes, would 'work', to 'square one' again

    Two problems, inter-related:

    1. 'Wider markets' would see 'irresponsibility', & might be right!

    2. Sense needs to be long-run, understood, explained, 'sold as such'

    How can 'we' become 'powerhouse', sure to 'pay our way'?

    Full employment, liberated

    All glad to compete to be our best

    No conflict of interest

    Equal sharers

  • rate this
    +3

    Comment number 137.

    So we really are going the way of Zimbabwe and Wiemer.

  • rate this
    0

    Comment number 136.

    109 AF there are three main reasons why borrowing is still increasing;

    1. Tax receipts have been reduced owing to reduced economic activity.

    2. Despite all the screaming there have been no major cuts to date and

    3. Public sector pay has continued to increase despite the wage freezes adopted by govt as policy.

    Next question.

  • rate this
    +2

    Comment number 135.

    British Gas announce yet more price rises.

    Can anyone say this is unconnected with QE money being used speculatively on energy futures?

    One way or another, I think it will tend to be inflationary.

  • rate this
    0

    Comment number 134.

    Lee @76
    "simple context"
    Simply misleading

    Two wrongs will not make a right

    Yes, collective un-wisdom: too much of bling, perhaps of convenience; not enough invested 'to pay our way'

    But, as with sale of native lands for beads, 'responsibility' shared with 'leaders': beads worthless, land priceless. We should have shared

    'The money' is not 'gone': just in wrong hands wrongly 'incentivised'!

  • rate this
    +1

    Comment number 133.

    92JfH

    EZ

    Greece still sliding & unemployment 25>%, 50>% for

 

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