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General News    H3'ed 2/10/13

A Mainstream Economist goes off the reservation and calls for direct money issuance into the real economy

By       (Page 1 of 1 pages)   4 comments, In Series: Economic Reform
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Adair Turner, Chair of Britain’s Financial Services Authority
Adair Turner, Chair of Britain’s Financial Services Authority
(Image by Reuter's)
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Adair Turner, Chair of Britain's Financial Services Authority by Reuter's

Adair Turner

Taking a page from Monetary reformer Stephen Zarlenga's playbook (though I doubt he has read him), the chairman of Britain's Financial Services Authority, Adair Turner, calls for direct issuance of money to Main Street, not the banks, debt-free.  See the Reuters article here and the full truly historic speech.

A couple of years ago I might have argued only for monetary stimulus by means of paying for actual work instead of direct-to-consumer money, but now, after so many QEs have effectively pumped up the elite money power, we need to send some money to Main Street just to re-achieve some sort of balance (which is why the bankers will fight this tooth and nail, so be prepared to not accept their lies).  Turner's full paper tackles the inflation worries honestly, thoroughly, and provides historical examples of support from major economists - Chicago School founder Henry Simons, Milton Friedman, "Helicopter Ben" Bernanke, etc. traditionally, and wrongly, thought to be in opposition.  He provides direct quotes from them going "off the reservation" at a time when it was safe to do so (Bernanke in 2002, before he became Fed Chairman, for example, but see my "Fantasy Fed Speech," just for what could and OUGHT to be said by Bernanke).

This may indeed be the breakthrough we've been waiting for.  We can ratchet it back when inflation rises due to an excess of demand over ability to produce.  Right now, we have vastly subpar production, and while it would be preferable to put the money towards actual production, the fact remains that if you give $1000 to every man, woman and child, it WILL stimulate the economy through increased "aggregate nominal demand" exactly as Turner says on page 2 of his speech (only 46 pages, not 70 as in his academic paper).  $1000 to buy goods will mean more goods made, more goods sold through retailers, and hiring in all those sectors.  When we get down to unemployment of, say, 3%, than we can start to worry about over-heating, not now.
Whatever inflation we DO have now - and that IS real in the real world basket of goods and services middle class people actually use - is caused by commodity and land speculation (read: inflation) brought on by excess money printing (QE) pumped at a rate of a trillion/year into the banking sector with nowhere else to go.

Those who knee-jerk respond with cries of "Inflation!  Ruination!  Zimbabwe!" etc., including the majority of commenters on this article, lack rigor.  They are trading economics for the self-flagellating Austerian religion.  Kudos to Ellen Brown for going beyond all that, and for finding this article and posting it to the Public Banking group.  She is far more rigorous and practical than 99% of the economists out there.  We need to be the same.

Austerity does not work, as they are finding out all over Europe

It didn't work for the banks (at least from their P.O.V.), as they knew from the very beginning, and the only reason you hear it preached from that sector is so they can keep their relative wealth compared to the rest of the population, not because it's sound economics.  This is why they will fight such a proposal, especially from one of their own.

I hope Turner doesn't have any skeletons in the closet, or can't be set up like Elliot Spitzer or Jean Claude Trichet were, but he'd better watch his back.  These guys don't forgive and they don't forget. 

*** UPDATE ***
A major analysis of Turner's speech by the UK-based Positive Money campaign can be found here.
They too, point out how past economic scions, even supposedly conservative giants like Milton Friedman and Henry Simons (founder of the Chicago School), promoted a system of "overt money finance" (Bernanke's term) to stimulate the economy.

As Turner explain(s), this leads to a great paradox -- one of the father figures in the Chicago school of economics, Henry Simons, "believed that financial markets in general and fractional reserve banks in particular were such special cases that fractional reserve banking should not only be tightly regulated but effectively abolished."

So, we have Milton Freidman, Henry Simons - one of the founders of the oft-maligned (at least by progressives) Chicago School, even Ben Bernanke in 2003 (before he was responsible for the large banks as their Central Banker), Minsky (at least diagnostically), Henry George, Stephen Zarlenga, Ellen Brown, the Positive Money folks, etc. all advocating some form of government issued money to put money into the real economy, not the banks via much less effective QE.  On the other side we have lesser economic figures like Greenspan (does he still believe this?), Geithner (is he really an "economist" at all?), the Robert Rubin contingent including Larry Summers (shills for the banks, all), and other Big Bank Pushers.  It's not much of an intellectual debate, is it?  But then, it was never about rigorous analysis, was it?  It was about power, and keeping that power in the hands of the 1%.

Still, when someone of Turner's stature goes rogue, maybe we have reached a tipping point.  But not unless the self-flagellating struggling masses stops masochistically asking for more austerity, when more money is what's needed.  It amazes me that people would willingly punish themselves just to stay in their psychological comfort zone.  It's why we continue to get obsequious State of the Union speeches like the president's last night, looking for a "balance" of cuts and revenue enhancements, as if the problem-solving power to "coin Money" was not his and Congress' to begin with.  With proper safeguards, which all the pundits mentioned above, including Turner, strongly advocate, there's no reason for Scarcity Thinking (Economic Austerity), except some deep-seated need to please the Austerity God of our own creation.

Why do people continue in this mode, and how can we recognize it?  I came across this comparison between scarcity thinking and abundance thinking that might help explain things, recently:
Here are some comparisons of mental attitudes:
Scarcity thinking: There will never be enough.
Abundance thinking: There is always more where that came from.
Scarcity thinking: Stingy with knowledge, support, and compassion
Abundance thinking: Thrives on sharing knowledge, support, and compassion
Scarcity thinking: Suspects everyone
Abundance thinking: Does not fear trusting everyone.
Scarcity thinking: Hates competition, fearing he will "lose."
Abundance thinking: Welcomes competition, believing it makes him
better and the pie bigger.
Scarcity thinking: Regards talented employees as a threat.
Abundance thinking: Regards talented employees as assets.
Scarcity thinking: "How can I get by with less than is expected?"
Abundance thinking: "How can I give more than is expected?"
Scarcity thinking: Thinks the worst is yet to come
Abundance thinking: Thinks the best is yet to come
Scarcity thinking: Thinks small. Avoids risk.
Abundance thinking: Thinks big. Embraces risk.
Scarcity thinking: Spiteful and fearful.
Abundance thinking: Grateful and confident.

Which mode does society function under?  Which mode do progressives function under?  Which mode do YOU function under?
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Scott Baker is a Managing Editor & The Economics Editor at Opednews, and a former blogger for Huffington Post, Daily Kos, and Global Economic Intersection.

His anthology of updated Opednews articles "America is Not Broke" was published by Tayen Lane Publishing (March, 2015) and may be found here:

Scott is a former and current President of Common Ground-NY (, a Geoist/Georgist activist group. He has written dozens of (more...)

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