Post by peterv on Apr 11, 2013 11:16:04 GMT
We are used to thinking in Positive Money that “few economists understand where money comes from”. Well here’s one who clearly does, and an influential one at that! Lord Adair Turner, former chairman of the FSA, has recently become a senior research fellow at INET (Institute for New Economic Thinking) and he gave an important speech at their recent conference.
He argues that we should re-visit the work of both Keynes and Hayek, and that of the Chicago School from the 1930s and ‘40s who believed that fractional reserve banks should be regulated out of existence, and that the creation of money should be a monopoly function of the state.
Although he doesn’t go all the way to supporting full-reserve banking, he does appear to agree with much of the Positive Money analysis. He believes that economic depression is a self-inflicted wound, and private money creation is inherently unstable.
He says “you often hear that banks take deposits and intermediate it through to investments. This is a lousy description! Banks create new money … credit is strongly pro-cyclical, over provided in the upswing and under provided in the downswing … these are variables which we ignored in the pre-crisis period”
He gives some arguments to retain fractional reserve banking – “up to a point” – but his final conclusion is that we need what he calls “overt permanent monetary finance”, effectively debt-free public money. He says we should always finance 100% of fiscal deficits with newly created money, and this is non-inflationary if there is spare capacity in the economy.
Adair Turner’s speech starts 9 minutes in, and lasts about an hour. It’s a bit heavy going in places, but if you want to hear a high-profile economist putting the case for monetary reform, this is it. Hopefully this “new economic thinking” will start to trickle down to our politicians and educationalists, and I think this speech is a significant turning point in our campaign.
www.youtube.com/watch?v=ZhrY_coLK_k
He argues that we should re-visit the work of both Keynes and Hayek, and that of the Chicago School from the 1930s and ‘40s who believed that fractional reserve banks should be regulated out of existence, and that the creation of money should be a monopoly function of the state.
Although he doesn’t go all the way to supporting full-reserve banking, he does appear to agree with much of the Positive Money analysis. He believes that economic depression is a self-inflicted wound, and private money creation is inherently unstable.
He says “you often hear that banks take deposits and intermediate it through to investments. This is a lousy description! Banks create new money … credit is strongly pro-cyclical, over provided in the upswing and under provided in the downswing … these are variables which we ignored in the pre-crisis period”
He gives some arguments to retain fractional reserve banking – “up to a point” – but his final conclusion is that we need what he calls “overt permanent monetary finance”, effectively debt-free public money. He says we should always finance 100% of fiscal deficits with newly created money, and this is non-inflationary if there is spare capacity in the economy.
Adair Turner’s speech starts 9 minutes in, and lasts about an hour. It’s a bit heavy going in places, but if you want to hear a high-profile economist putting the case for monetary reform, this is it. Hopefully this “new economic thinking” will start to trickle down to our politicians and educationalists, and I think this speech is a significant turning point in our campaign.
www.youtube.com/watch?v=ZhrY_coLK_k