The book makes up around 320 pages of rather interesting read on global finance by Adair Turner.
Adair Turner became chairman of Britain’s Financial Services Authority just as the global financial crisis struck in 2008, and he played a leading role in redesigning global financial regulation. In this eye-opening book, he sets the record straight about what really caused the crisis. It didn’t happen because banks are too big to fail―our addiction to private debt is to blame.
Between Debt and the Devil challenges the belief that we need credit growth to fuel economic growth, and that rising debt is okay as long as inflation remains low. In fact, most credit is not needed for economic growth―but it drives real estate booms and busts and leads to financial crisis and depression. Turner explains why public policy needs to manage the growth and allocation of credit creation, and why debt needs to be taxed as a form of economic pollution. Banks need far more capital, real estate lending must be restricted, and we need to tackle inequality and mitigate the relentless rise of real estate prices. Turner also debunks the big myth about fiat money―the erroneous notion that printing money will lead to harmful inflation. To escape the mess created by past policy errors, we sometimes need to monetize government debt and finance fiscal deficits with central-bank money.
Between Debt and the Devil shows why we need to reject the assumptions that private credit is essential to growth and fiat money is inevitably dangerous. Each has its advantages, and each creates risks that public policy must consciously balance.
Among valuable take-away from the book, or at least from my notes are as follow:
- Many struggle to surmount that the free market automatically provides an economy with the optimal amount of credit.
- Low interest rates and financial innovations allowed speculation to feed a real estate bubble (US) before the 2008 financial crisis.
- Global imbalances and inequality fueled debt and held down inflation.
- Technology and wealth have shifted banks toward property lending.
- This one is interesting: The financial sector is too big, focused on trading and adds little to the real economy.
- Most economist suggest that leaving money creation to banks is unwise.
- Slow economic recovery justifies more imaginative “monetary finance”
- Economies have changed, so monetary policies should change as well.
- Free market advocates who favor banks’ money creation over government monetary finance should reconsider.