Transforming Finance

23 May 2016

The Financial Health Exchange attended a conference in central London on Wednesday 12 May called Transforming Finance, run by the Finance Innovation Lab.

After introductory words from Chris Hewett at the Lab, we heard from Lord Adair Turner, the former chairman of the Financial Services Authority (FSA) turned Senior Fellow at the Institute for New Economic Thinking, and author of the recent book Between Debt and the Devil: Money, Credit, and Fixing Global Finance.

Going through a range of heavy subjects in his keynote speech from the financial crisis to the minutiae of how banking is done in the UK, Lord Turner’s thesis is to show why Britons today have an addiction to private debt.

Lord Turner challenges the idea that in order for the UK’s economy to grow, credit growth is needed as an essential addition. For him such growth in credit only leads to real estate booms and busts and risks financial depression.

He mentions the view among some economists (albeit a small number) that debt and growth are inherently linked, however for him not only is this wrongheaded but ought to be considered a form of what he calls “economic pollution”.

As for those he refers to as “official economists”, he pointed out that if anyone had said to them seven years ago that for the following seven years there would be near-zero interest rates and a £375bn Quantitative Easing (QE) programme (or, colloquially, a “bank bailout”) they would have said “wow that will cause drastic inflation!” The fact this hasn’t happened surprised everyone.

This has given confidence to some commentators that Quantitative Easing in the future could be paid directly to households – what some call “QE for the people” or “helicopter money” – which we’ve previously written about in the context of Lord Turner here.

The event also included a parallel unconference, with a series of roundtable discussions facilitated by members of the Transforming Finance Network, including the New Economics Foundation (NEF), Positive Money, Share Action, Finance Watch, Move Your Money and the Royal Society of Arts (RSA).

The subject of “QE for the people” is something on which the Financial Health Exchange facilitated a roundtable session, which elicited a number of interesting points by other participants.

Some of the challenges included the majority of people not really knowing what it is, that if they did there would be some opposition to giving money away for nothing, and that for others it might appear like an exercise in redistributing money to beneficiaries of consumer spending including retailers with controversial tax arrangements.

Others pointed out that one opportunity was that “QE for the people” could help reduce household’s debt burden, benefit the growth of local economies, and challenge the debate that welfare payments are only taken by so-called “freeloaders”.

Whatever its merits, Helicopter Money transcends typical Left/Right conversations. With Lord Turner leading the conversation, a very well-respected figure, it will be interesting to see where the conversation leads in the next few years.