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
    +13

    Comment number 20.

    because it would be seen as the government, in effect, printing money to finance public spending.


    QE has done NOTHING i repeat NOTHING for the public it has only allowed the banks to continue to function in the same failed way as they have become accustomed too.

    The public are being hammered from all sides to protect the Banks and this is set to continue with more failed policy.

  • rate this
    +12

    Comment number 8.

    "quantitative easing,.......may be becoming less and less effective in promoting a recovery".
    ~
    More garbage. You must try to get your tiny mind around this:
    QE was NEVER intended to promote a 'recovery', it's purpose is merely to support the banks, to allow them to carry on skimming the rest of us, to keep the rich peoples gravy train on track, to transfer wealth from us to them.
    WAKE UP!!!!!!!

  • rate this
    +12

    Comment number 68.

    It is incredible to me that Turner is a potential candidate for Governor of the BoE. As other commenters below have pointed out, the current financial mess happened on his watch!

  • rate this
    +11

    Comment number 60.

    What I really don't understand is QE in its entirety. Had the BoE not pumped any QE into the economy would it have made any difference?
    The answer to solving to problem of getting the UK out of recession is to increase the amount of money normal people have to spend on goods and services.

  • rate this
    +9

    Comment number 62.

    Robert, I realise that Turner is trying to keep his name in the limelight for future BOE Governor, but how short is the collective memory?
    Turner is responsible for much of this mess and still no prosecutions of his banking chums!
    I fervently hope that anyone else, anyone at all, gets appointed as BOE governor rather than Turner.
    That probably means it's in the bag!

 

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