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The Spaniard

Lord Turner About Credit, Money And Leverage (Video)

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Thanks for posting the link to the video. Very interesting overview of how economic theory has become completely untethered from reality.

Most current macro-economic theory, and certainly the thinking of the central banks, assumes that setting interest rates primarily affects business investment, and then by extension, growth in the economy in general. If you look at where credit goes, though, it's clear just how tenuous that theory is. More than 80% of lending in the UK now goes towards property speculation or consumption, and central banks in the West have allowed this lending to get completely out of control over the past 20 to 30 years. The idea that we can just go back to our pre-crisis ways is just ludicrous.

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Steve Keen has been pointing this out for years so it's not exactly original insights from Turner here- but it's good to see such an 'establishment' figure coming out and saying it.

But the real problem is not lack of insight- it's the fact that the current arrangements benefit too many people and for every critical voice there are dozens of 'think tank' economists who will be happy to support current theories for the simple reason that their jobs depend on them providing that support.

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