Adair Turner: Escaping The Addiction to Private Debt Is Essential for Long-Term Economic Stability

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Financial reforms introduced since the crisis still have not addressed the fundamental driver of economic and financial instability – continually rising levels of private debt, argued Lord Adair Turner, former chairman of the Financial Services Authority, in a speech at Goethe University in Frankfurt on Monday 10th February 2014

“Over several decades prior to 2008, private credit grew faster than GDP in most advanced economies and leverage therefore grew. That was a major cause of the crisis and the main reason why the post crisis recession was so deep and the recovery so slow and weak.”

“To achieve long-term stability, we will need to address these fundamental drivers of the crisis and the post-crisis recession.”

“It’s very easy for us now looking back to say ‘weren’t our bankers lunatics? They must have been crazy and irresponsible.’ But in order to stop it happening again, we can’t point to individuals; we need to look at why the system is bound to push them towards it.”

Read more in the Guardian, Telegraph, Independent

Paper & presentation available on the Institute for Economics Thinking blog

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  • Vince Richardson

    From the Independent

    ” in an ideal world, bank-capital ratios would be “as high as 20 per cent to 25 per cent” – more than twice current levels.”

    Ok, this is a half way house(or rather a quarter way house)to 100 % reserve banking.Is this up for negotiation or are we sticking our heels in?Will 25% be enough?

    We still need to remove the payments system from the deal.Curret accounts must remain 100% reserve.I think I could live with 25% reserve on interest bearing accounts.

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