Another Snake Oil Seller Pops Up

Another snake oil seller pops up: Adair Turner

acting-man.com / By Pater Tenebrarum / February 7, 2013

It’s Failing All Over the Show – So Let’s Do More of It!

The insanity that has gripped policymakers all over the world really is a sight to see. There was a time when central bankers were extremely careful not to do anything that might endanger the currency’s value too much – in other words, they were intent on boiling the frog slowly. And why wouldn’t they? After all, the amount by which the citizenry is  plucked via depreciation of the currency every year is compounding, so that the men behind the curtain extract more than enough over time. That they thereby retard economic progress by decades over time as well is not something anyone would notice after all, since we cannot engage in a controlled experiment that proves it to all and sundry beyond doubt. We only know that it is so if we employ sound economic theory. Since sound economic theory is by its nature not statist, it is not employed by the mainstream, and so most citizens are successfully shielded from the truth.

The latest example for the growing chutzpa of these snake-oil sellers is provided by Lord Adair Turner in the UK. To give you a little bit of background: the UK is about to fall into its third recession in a row (a ‘triple dip’, something that has never before happened) not in spite, but because the Bank of England has monetized a cool quarter of all outstanding gilts, which has allowed the zombie TBTF banks to remain on artificial life support.

However, that is not Turner’s conclusion. The policy is evidently failing, so he naturally concludes that there should not only be more of it, but it should become more brazen by veering off into the ‘Weimaresque’. After all, we will be able to stop in time, right? We just need a ‘little bit of it’. Although Turner for some reason also thinks it is ‘not appropriate for the UK’ (why not? The UK for some reason ‘does not respond to demand and price signals’, which would really be a first in economic history…where do they find these people?), he thinks everybody else should do it.According to the FT, under the heading “Print Money to Fund Spending”:

“Lord Turner, the departing chairman of the Financial Services Authority has defended financing government spending by printing money arguing that, within limits, it “absolutely, definitively [does] not” lead to inflation.

Speaking before a farewell speech in London on Wednesday, Lord Turner, who applied unsuccessfully to be the next Bank of England governor, called for “intellectual clarity” in economic policy, including breaking a taboo that permanently printing money to pay for government services is always bad.

“I accept entirely that this is a very dangerous thing to let out of the bag, that this is a medicine in small quantities but a poison in large quantities but that there exist some circumstances, in which it is appropriate to take that risk,” he told the Financial Times.

The tool should have been used in 1930s Germany and 1990s Japan, he said. It should be considered across the world, he added, at a time when banks, companies and households are trying to pay down debts and seeking to return to growth by borrowing more is seen as perverse.

In a direct challenge to the German authorities who shudder at the memory of the hyperinflation of the Weimar Republic, Lord Turner suggested that the absence of monetary financing in the early 1930s, which led to depression, falling prices and the rise of the Third Reich, had been a greater disaster.

“Is [monetary financing] desperately dangerous because every pound of money financed turns into inflation? Absolutely definitively not. There is no coherent rigorous bit of economics that takes you in that direction,” he said.

He did add, however, that the country where monetary financing was least likely to be needed was the UK. There he accepts that more stimulus might lead to higher inflation as the underlying health of the economy is weak and could not “respond to demand and price signals”.

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