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, economics editor 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.

 

Comments 5 of 152

 

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