Lord Adair Turner, outgoing Chair of the now defunct Financial Services Authority in the United Kingdom, made an impassioned argument in favour of monetary stimulus as a tool to kick start stagnating economies.
“The current policies are not working and we shouldn’t deprive ourselves of options just because they are taboo.” Turner’s comments came during his keynote speech at the Institute for New Economic Thinking’s 4th plenary session in Hong Kong, riding on the theme of ‘Changing the Guard.’
Addressing his distinguished audience of academics, global business leaders, including Fung Global Institute Founding Chairman, Victor K. Fung, and INET co-founder George Soros, Turner said that the role of macroeconomics was to stimulate the economy. Governments should seriously consider funding their deficits through the permanent printing of money. He tempered his stance by saying that it had to be done in “small quantities,” but argued that, “there exist some circumstances…in which it is appropriate to take that risk.”
Turner’s speech came as Japan made an announcement on the same day that it would unleash US$ 1.4 trillion worth of quantitative easing to double the country’s money supply. The move is aimed at combating the deflation that has dragged on the country’s economy for more than a decade.
William White, Chairman of the Economic Development and Review Committee at the Organisation for Economic Cooperation and Development (OECD), questioned Turner’s thinking during a panel discussion following his presentation. White said, “overt monetary policy is no different than quantitative easing, and I’m worried that…the world is at pre-2007 levels in terms of being over-leveraged.” White felt that ultra easy monetary policy was exactly the same as overt monetary financing, except it was not “co-ordinated” and would ultimately threaten the health of financial institutions, health of the markets and lead to “impudent” government actions.
Both White and Turner agreed, however, that economic models used by academics and policymakers gave few insights as to how the real world worked.
To see the Fung Global Institute’s interview with Lord Adair Turner, please click here.
To see Turner’s INET keynote speech, please click here.