Adair Turner: “Bernanke was right about helicopter money”
Articles Blog

Adair Turner: “Bernanke was right about helicopter money”

December 5, 2019

If you keep interest rates low enough
for long enough you will eventually get the economy going again. But you will
only do it in a way which creates very significant inequality because it works
through stimulating a growth of equity prices or bond prices which is good for
the owners of wealth. And ultimately it only really works by restimulating
the very thing that got us into this mess in the first place, which is too
much borrowing. If you try to restimulate the economy by just relying on very low
interest rates, it’s like curing a hangover with a very stiff drink. Not so
very long ago I had Ben Bernanke in the studio and I said to him there are
people who believe that the most effective way of reviving the US economy
wouldn’t have been all this quantitative easing. It would have actually been
giving say a thousand dollars or five thousand dollars to every single citizen
in the United States because that way you would really stimulate the real
economy. Immediately he pooh-poohed it and said that’s ridiculous, he said
nobody believes that anymore. And it turns out you do. Well of course, I believe what Ben Bernanke believed in 2003. Because Ben Bernanke again in 2003
specifically in relation to Japan, very specifically said that what Japan
should do was a tax cut or a public expenditure increase overtly financed by
a permanent increase in the central bank balance sheet. That’s what gave him the
name helicopter Ben at the time. I think what happened – and actually Ben talks
about this in his book – he was so shocked by the fact that then he was bombarded
as being irresponsible that he shut up about it later. But I think he was right
and I think actually if we had considered using direct fiscal stimulus
funded with permanent money, we would have got out of this low inflation
faster and with less long-term risks. I think the way that we’ve done it has
actually been harmful for the long-term stability of the global economy. You seem
to be suggesting that today’s generation of central bankers – and I’m thinking in
this country of Mark Carney – that they’re wrong. Because Mark Carney addressed this
notion, well it actually was people’s quantitative easing, he was addressing,
because the opposition Labour Party is pushing that,
but essentially it’s a still another way of sort of putting cash into the economy, he said it would imperil price stability it would be inflationary, it would hit
the poor and the elderly hardest. So, you seem to be out of sync… Yes I am. I think he’s wrong on that. I mean when you’ve decided to take a position against it, you say words like that. But I think Mark would accept that if you had a mechanism to make sure that
you do it in a moderate and appropriate amount, there is no way it will produce
excessive inflation! There is no piece of theory whatsoever that says that in
technical terms it’s impossible. It’s absolutely technically possible to do a
moderate amount of overt money financing, I call it. The whole issue is
whether you believe the political risks are too big. Whether once you’ve
broken the taboo do you think we’re bound to go to excess. That’s the crux of
the issue.

Only registered users can comment.

  1. The basic problem is that people don't have money because slave wage jobs have given way to unemployment. The logical answer is to GIVE money to people so that they SPEND it stimulating the manufacture of goods and services thereby creating jobs. But when will this happen? The answer is NEVER. Not in athousand years, not in a million. The plutocrats simply will not do it.

  2. All the government and the bankers would have to do to stimulate the economy, would be to increase the social security benefits by 50 to 75% You know that all of those old and disabled people would be out spending that money.

Leave a Reply

Your email address will not be published. Required fields are marked *