Articles by Adair Turner
Adair Turner is a British businessman and academic. He was Chairman of Britain's Financial Services Authority until its abolition in March 2013. A former Chairman of the British Pensions Commission and the Committee on Climate Change, as well as the former Director-General of the Confederation of British Industry, he is an advocate of so-called "Helicopter money" whereby central banks would finance directly government spending or cash distribution to citizens.
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Adair Turner: A New Debt-Free Money Advocate
February 10th, 2013. Econintersect:
This past week one of the leaders in global finance, Adair Turner, chairman of the FSA (Financial Services Authority), gave a speech of historic importance. In an address to the Cass Business School, 06 February 2013, Turner proposed that governments should use money for themselves and for ordinary citizens that is directly produced and not be restricted to that obtained via issuance of private bank credit as the global financial system has operated by and large for 100 years. He said that we are only slowly learning what factors got us into the financial crisis and how they "constrain recovery." And as we learn more he thinks the evidence indicates there are options that should be considered and have not been on the table. Here is a quote from the introduction to the talk: We must think fundamentally about what went wrong and be adequately radical in the redesign of financial regulation and of macro-prudential policy to ensure that it doesn’t happen again. But we must also think creatively about the combination of macroeconomic (monetary and fiscal) and macro-prudential policies needed to navigate against the deflationary headwinds created by post-crisis deleveraging.
Turner says that monetization of government debt should not be excluded. He referred to "helicopter money", obviously thinking of the U.S.'s "Helicopter Ben," Federal Reserve Chairman Ben Bernanke. He went on to say that the process of printing money to finance deficits has "the status of a moral sin - a work of the devil." Turner rejects the moral sin status. He invokes Milton Friedman (an ultimate exorcist): Friedman argued in an article in 1948 not only that government deficits should sometimes be financed with fiat money but that they should always be financed in that fashion with, he argued, no useful role for debt finance. Under his proposal, “government expenditures would be financed entirely by tax revenues or the creation of money, that is, the use of non-interest bearing securities” (EXHIBIT 1) (Friedman, 1948). And he believed that such a system of money financed deficits could provide a surer foundation....
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How is Japan managing its debt?
16 March 2015
Adair Turner former chairman of the Britain’s Financial Services Authority is a senior fellow at the Institute for New Economic Thinking and at the Center for Financial Studies in Frankfurt.
Over the next few years, it will become obvious that the Bank of Japan (BOJ) has monetized several trillion dollars of government debt. The orthodox fear is that printing money to fund current and past fiscal deficits inevitably leads to dangerous inflation. The result in Japan probably will be a small up-tick in inflation and growth. And the financial markets’ most likely reaction will be a simple yawn.
Japanese government debt now stands at more than 230% of GDP, and at about 140% even after deducting holdings by various government-related entities, such as the social-security fund. This debt mountain is the inevitable result of the large fiscal deficits that Japan has run since 1990. And it is debt that will never be “repaid” in the normal sense of the word.
Figures provided by the International Monetary Fund illustrate why. For Japan to pay down its net debt even to 80% of GDP by 2030, it would have to turn a 6%-of-GDP primary budget deficit (before interest payments on existing debt) in 2014 into a 5.6%-of-GDP surplus by 2020, and maintain that surplus throughout the 2020s.
If this was attempted, Japan would be condemned to sustained deflation and recession. Even a modest step in that direction – the sales-tax increase of April 2014, for example – produced a severe setback to economic recovery.
Instead of being repaid, the government’s debt is being bought by the BOJ, whose purchases of ¥80 trillion per year now exceed the government’s new debt issues of about ¥50 trillion. Total debt, net of BOJ holdings, is therefore falling slowly. Indeed, if current trends persist, the debt held neither by the BOJ nor other government-related entities could be down to 65% of GDP by 2017. And because the government owns the BOJ, which returns the interest it receives on government bonds to the government, it is only the declining net figure that represents a real liability for future Japanese taxpayers.
The stated aim of the BOJ’s giant quantitative easing operation is to raise asset prices, reduce interest rates, weaken the yen’s exchange rate, and thus stimulate business investment and exports. These indirect transmission mechanisms are certainly having some positive impact on inflation and growth: private credit has turned positive since QE was launched. But the bigger economic stimulus derives from the government’s continued large fiscal deficits, effectively funded with BOJ-created money.
That reality is not yet openly admitted. The official doctrine is that the BOJ eventually will sell back all of the government bonds that it has acquired. But it need not do so. Indeed, the BOJ could maintain its current level of government-debt holdings indefinitely, making new purchases as existing bonds mature. And if the money created – in the form of commercial bank reserves at the BOJ – ever threatened to support excessive credit growth and inflation, the BOJ could offset that danger by imposing reserve requirements on the banks...........
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Lord Adair Turner on the “largely fictional” world of finance
Interview by Matt Phillips 20 January 2016 on Quartz.com
With his silver hair, rich baritone, Cambridge education, and British peerage, Adair Turner, Baron of Ecchinswell, would be last person you’d suspect of being an economic radical. But Turner came away from a four-year stint as the head of Britain’s chief financial regulator, the Financial Services Authority (FSA), with a range of ideas that just a few years ago would have been considered unmentionable in polite political or financial company.
In his recent book, Between Debt and the Devil, Turner’s conclusions are dictated by what he sees as the paradoxical character of modern developed economies. As currently structured, rich economies seem to need to borrow ever more money to generate economic growth. But that very addiction to debt makes them vulnerable to periodic busts that deeply damage the economy.
Turner was deeply involved in the clean-up after the latest global debt crack-up. The former vice chairman of Merrill Lynch Europe took over the FSA on Saturday Sept. 20, 2008. (The financial crisis had crested just five days earlier with the bankruptcy of US investment bank Lehman Brothers.)
The sometimes harrowing experience there, as well as his extensive work both at financial institutions and in academia, have given Turner an insider’s view of the world of finance and economics. But his conclusions—that the banking system needs to be fundamentally restructured, and that periodically, instead of a government running up debt, the central bank should just print money for the government to spend—are far from conventional.
Turner recently visited Quartz’s New York offices to talk about the book, why what most people understand about banking is “largely fictional”, and why, in some instances, central banks just need to bite the bullet and print more money.
Here are excerpts of our conversation, edited for clarity and concision.
Quartz: This book makes some recommendations that would have been unthinkable before
the crisis, for someone coming from your background. You don’t strike me as a wild-eyed
radical. So tell me a little about how you came to some of these positions?
Adair Turner: I took over as chairman of the UK Financial Services Authority on Sept. 20, 2008, five days after Lehman Brothers Collapsed, lived with the emerging responses of that autumn, and
spent four years of my life as the chair of the Financial Stability Board’s policy committee, redesigning the global financial regulation system.
But increasingly I thought, “We’ve got to think more deeply than we are about why the crisis of 2008 occurred and why there’s been such a long post-crisis malaise.” Why the recovery has been
so weak? And then I just started reading and thinking.
And I’ve always had a tendency to take my thinking wherever it goes. Even if it ends up in uncomfortable directions. And I think I’m getting more and more like that as I get older...........