 Thank you very much. So the question before us is, is there a crisis looming for central banks, it's a great title to sort of grab people's attention and get them to turn up their night or clock here on a Tuesday morning at the tail end of this parliament. But, if you mean are Central Bankers going to go bankrupt up there, the answer to that, with their central banks, the idea is that they are going bankrupt, that's one of those fundamental things to realise about central banks. Felly, rydyn ni'n mynd i ddod i'r cyfnod o'r cyfnodau cyfnodau cyfnodau ymhynghori'r 2007-2008, ac mae'r bach yn ddod i'r bach yn ymhynghori'r cyfnodau cyfnodau cyfnodau. Ond rydyn ni'n ddod i'r cyfnodau cyfnodau cyfnodau, ac yn ymhynghori'r cyfnodau cyfnodau ymhynghori'r cyfnodau cyfnodau cyfnodau cyfnodau cyfnodau gyfnodau ac yn ymhynghori'r cyfnodau gyfnodau, ac yn ymhynghori'r cyfnodau cyfnodau cymaddoedd nohael i prefle cyfnodau fel brannwshiaid anthef Tel-Fassw compares bwrdd yn gyfw encoding знod dgnos ynghorifau cyfrif yang teryfiaZZio chi ganywrunning cyfrifolMusic ac, o bwynen, rhoi i territory indiwyr sy'n teithio i'r hafwyszedledu paredd Ty Seth, A'r ddechrau yn ychwanegau gwirionedd yn y cyfnod yn y ddechrau ar gyfer'r iawn, ac yn y ddweud yn y cysylltu'r ffordd yna, yn y ddweud yw'r cyfnod yn y cyfnod ymddangos ac yn y pethau, yn y ddweud yw'r cyfnod yn y cyfnod, yn y dyfodol. Roedd y gwaith ymlaen nhw bydd y cwmwysig o'r cyfnodau ffôr, y byddwch ar gyfer gyffredinol eich cyfnodau, a'r gwaith ar 2007 a 2017. A'r UK, LDP yn ystod ar y awdurdodau ar y Cymru a'r awdurdodau ar y cyfnodau, a'r gwaith cymryd yn hyn i'r ffordd yw'r adnodau. ac mae'r ffordd yn ymdeg yn ymdeg yn ymdeg arall i'r ffordd yn 2017. Gwylwch yn ein gwrs, ac mae'r rhagwm yn bwysig o'r gwahodd gyda'r yn ymdeg ar gyfer ein Cwylwdd yma yn 1830. Ysbryd ar y cyfnod ddau, mae'r wrthyn nhw'n gwybod, mae'r ddau yn fwy o ddau yn fwy o'r cyfnod. Mae'n ymdeg i'r pryn sy'n gweld, mae'r ymdeg yn ymdeg yw yw'r cyfnod gyda'r cyfnod, gan oedd y cwmhwyl ac mae'r cwmharwch yn ddweud. A wnaeth yw'r ffordd o'r ffordd o'r ystod, mae'r cyffredin, mae'r cyffredin o'r corffodd o'r cwmhwyl, oherwydd mae'n gwybod i'r cyffredin o'r cyffredin o'r cyffredin. Mae'r cyffredin o'r UK yn y euro-zone, pan yw'r capitalau yn gwybod. Mae'r cyffredin i'r roi yn dwylo sy'n ei fod yn y 2007. Wrth gwrs, mae'n gweithio yma yw'r eu cyffredin, Another advanced economy is that 4% higher four-cent over an entire decade is an incredibly low-rate growth in an environment where we used to believe that advanced economies would grow at o unrhyw y flwyddyn yn ymwiel, a roedd ynyais y cyfrifoedd fel arferio. Yn y bobl yn olygu, mae'r gweld gael o'r prosiectau yn cael mynd i fllwyedingu, ddim yn ymweliad am ddod o bwyr a'r prosiectau gwahanol, ond mae'r prosiectau mae'n gweithio ezorlain yn chlikwm ar y prosiectau y bydd yn unig ddod y prosiectau ar gyfer o'r prosiectau, oherwydd, dylai'r prosiectau yn y cantolion. Mae'r prosiectau ar y prosiectau, a mae'r prosiectau y bydd yn y prosiectau. Roedd yn cael ei hunain, i gyda chi oherwydd y dyma i ffrind Caerdyddurol, ac mae mae'r ffordd ac mae unrhyw sydd wedi rŵwnio'r werthasol yma yn y ddweud yn ystod amser ac yn iawn. Roedd yn ymygeidwch i'r ddweud yn wahasol yn y ddweud yma. Roedd yn cael ei awtodau rydych chi, fel mae'r ddweud yn ei ddweud yn ddefnydd sucksf. Roedd yn cael ei ddweud yn ddechrau oherwydd yw'r bod yn edrych yn ei ddweud yn lawer o gwnawn iechyd. per capita, normal GDP per capita, of say 4% or 5% per annum, which enables you to combine a slow but positive inflation rate of maybe 2% per annum with a 2% growth rate. There's a reasonable hypothesis that you go much higher than that and you might produce harmful inflation. If you go much lower than that, you will either have inflation too low or you'll have real growth rate too low. Well, the simple fact is that if you look at the advanced economies against that metric for the last 10 years, they've been far short. Even in the US, normal GDP, so that's real growth across inflation together, has been only 2.8% per annum. In the UK it's been 2.7% per annum and in Europe it's only been 1.5% per annum. On average across the world, the central banks have struggled to get inflation rate up to the targets that they've set themselves. We've been a bit of an exception for two periods, both after 2009 and today, because we've had higher than 2% inflation, but that's solely because we've had a significant devaluation and so on. If you strip that out across most of the advanced economies, the problem has been how to achieve adequate inflation and the central banks have fallen far short of it. They've fallen far short of it despite the fact that they've done things which if you've told us with them wouldn't do 2007, nobody would have believed you. People have said in 2007 interest rates are going to be at half a percent, a quarter percent, negative for 10 years and there's been going to be a quantitative easing where we're trying to drive down long term yield curves. They're going to do that for 10 years. What do you think the inflation rate is going to be in 2017? People have said, oh my God, they've gone mad. It's going to be 10, it's going to be 15, it's going to be 20%. What has happened is quite extraordinary. The scale of monetary stimulus has not produced anything like the inflationary impetus that all our standard models would have expected back in 2007. So why is this a curve? Well, I think there are two main examples. I think they're complementary, not competitive. One is what we might call the debt overhang an explanation and the other is the secular stagnation explanation. The debt overhang explanation is very well described in a remarkable book called Between Debt and the Devil, a money-making fixable finance favourable to all good books others. It is the main theme of my book as to why have we been stuck in this situation. I think the absolute core of it is the excessive creative information of private credit, which occurred not just in the few years before 2007, but over an entire half century before 2007. In 1950, private debt to GDP, so that's household and core group together, has a percentage of global growth of advanced economy GDP, so we're concentrating on the advanced economies here, grew from 50% of GDP to 107% of GDP. And it grew every single year from 1950 to 2007 and an accelerating price after the 1990s. And almost all of that growth in credit was credit gets real estate. It was an enormous increase in real estate indeed. One of the things that's been brilliantly pointed out in a series of articles by Oskine Orden, Maryshwyrwch, and Alan Taylor is that what modern banking systems primarily do is lend money against real estate, and not even primarily lend money against property development, but essentially to fund the purchase of real estate that already exists. Now, the reason why that's problematic is that if real estate is to a degree fixed in supply, to do agree it is, then when private banks lend money against real estate, the only thing that is likely to give is the price, and when the price goes up, both borrowers and lenders think that it would be a good idea to borrow some more money and lend some more money so the price goes up more and it goes round and round in a circle. And the circle goes on until there's a crack of confidence and then the whole thing spins in the other direction. And those circles which were well described by an economist called Heimann Minsky who was almost entirely ignored in the years before crisis turned out to be not just part of the story of what produces instability in modern economies, they are again and again pretty much the whole of the story there, what goes wrong in Scandinavia in the late 80s and early 90s, then what goes wrong in Japan in the late 80s, what goes wrong in Massachusetts in Texas in the late 80s and early 90s, and then what goes wrong in 2007 and 2008. And the problem is that if that Christ that cycle of increasing lending against real estate pops and we move to a lack of confidence and a downward smile, if that occurs in a situation where we already have a large amount of debt, where our debt is 170% of GDP, we enter what I think is a situation where we have been for the last 10 years, that the debt never goes away, it simply moves around the economy from the private to the public sector or from one part of the world to another. What do I mean by it moves around the economy? Well, you can illustrate that by looking at Japan. Japan was a canary in the mind which told us what was going to happen and to an extraordinary extent economists ignored it because they just thought Japan's different, you can't tell us anything. But actually what's happened in the advanced economy is the rest of the advanced economy since 2008 is pretty much a carbon copy of what happened in Japan after 1990. In the 1980s Japan had, as a mother of all, credit in the real estate boons, credit extended against real estate, modled by about four times in five years, price of real estate went up four times, confidence rate was in 1990, and you have a whole group of over-leverage companies in Japan and states which are married or households who feel that they're over-leveraged. And they then become determined to pay down debt and they become determined to pay down debt crucially even if the central bank moves the interest rate close to zero. And that is what was going on in Japan throughout the 1990s, attempted deleveraging by the private sector of the economy. In that environment public deficits go up and they go up automatically and usefully because the attempt of the private sector to deleverage to pay down its debt means cuts in investment, cuts in consumption. That drives the economy into a recession, tax revenues go down, public expenditure goes up, the public sector runs a deficit in a virus that shows you the chart but you can read it in a very good book. It will illustrate that throughout the 1990s the corporate sector of Japan rather than getting borrowers from the other sectors of the economy is a debt saver. The government runs deficits, those deficits are useful without them. I think that the panel has gone into a far deeper real big depression. But the net effect is that the debt doesn't go away, it simply moves around. Over 25 years corporate debt to GDP in Japan has gone down from 50% here to GDP to 100% and public debt has gone up from 50% to 200% and 50% and is still rising. The total amount of debt private and public together as the second GDP has just relented the fiscal debt doesn't go away, it moves around the economy and the total slowly goes up. If you look at the figures that is exactly what has happened across the world since 2008. In the advanced economies there has been a small amount, particularly US, to a small extent elsewhere on private sector deleveraging, private debt to some percent of GDP has gone down a small amount. In almost every developed economy there has been a more than more setting increase in public debt as a percent of GDP has been shown. You can look at it in the bank for international settlement long term database of debt. The total amount of debt public and private combined across the world is now higher than ever. The debt has just gone up. It has also gone up between countries, or to shift it between countries. One of those dramatic things that has happened over the last seven years is an unbelievable growth of debt in China. In China it's actually quite difficult to work out where you should count it private or public, which is a whole lot of quasi-state organisations. The two together it's gone up from something like 150% to about 300% of GDP. And that growth of debt in China has not just been so substantial that it isn't just that it's a curve while we're facing those prices. The one calls the other. What happened in early 2009 is that the Chinese authorities were terrified that attempted deleveraging by American consumers hitting the brakes because they had too much debt would drive the American economy into recession, drive a reduction in Chinese exports, and to offset that the Chinese authorities unleashed an enormous credit-fuelled investment pool, which has kept the Chinese economy going but in the extent of a huge increase of debt. Now the problem in this environment is that you eventually get into a situation where the debt goes up and it appears that all of our policy tools are either imperfect or have adverse side effects. What do I mean by that? Well, an immediate aftermath of the crisis when you first realise that you're in this situation, everybody agrees that we should run physical deficits, and the first order of effect for physical deficits, the first round of effects is undoubtedly similar. So here in London in April 2009, at the G20, all the countries of the world agree that we should run physical deficits to offset the fact that there's been a financial crisis and the private sector is trying to delever. That occurred, but after a while people say, yes, but what am I going to do about the fact that public debt is now rising? I don't have austerity to control that. I can't just allow public debt to go from 50% to 50% to GDP. But if you then enter a situation where the public sector is trying to delever, is trying to have austerity, while the private sector is still delevering, you will really go into a deep depression, unless you believe that monetary policy is so powerful that it can offset it. And what emerged from about 2009, 2010 onwards was, as it were, the post-crisis consensus that we had to get control over the public deficits, but that we could fully offset this by these amazingly powerful central banks which would use negative interest rates and concentrated easing to offset the effect of the beginning of the typing of physical policy. But the problem with that is that monetary policy alone is, I believe, in these environments, ineffective or imperfectly effective and has adverse side effects. What do I mean by ineffective? Well, the primary transmission mechanism of monetary policy is meant to be you reduce the interest rate, and then somebody says, oh, I'll borrow a bit more, and I'll impasse a bit more. But when interest rates are already very low, and if lots of people already have a high level of debt, it turns out that behaviour is incredibly inelastic in response to interest rates. Last March, the ECB launched a new round of concentrated easing, and that took the German tenure bond yield, down from 20 basis points to 10 basis points. That will also have reduced the cost of borrowing for major German corporates by 10 basis points. I will point one at a 10th of a percent. I will define a single German company which faced with a reduction of the cost of borrowing of one tenth of a percent when already at the lowest level of the debt rates went out and invested. It's just not that interest rates are elastic. So people say, oh no, that's not the mechanism. The mechanism is asset pricing increases. We decrease the interest rate, we use quantity easing, down goes the long term government bond yield, bonds come up in value, equities go up in value, housing goes up in value, and then people feel a bit more confident than they could spend a bit more. The answer is that may work to a degree in a direct way to attempt to stimulate the economy. It's a sort of wealth trickle-down effect. It doesn't clearly have a transition mechanism to investment and consumption. It probably works eventually. It also has a significant effect of increasing inequality. This is well shown in a very fine article and the whole day in Chief Economist of the Bank of England in a speech he gave in June last year called, Who's Reconcure? Where he illustrates that since 2007 real wages have been completely flat and wealth has gone up 40%. It's not surprising if you have incredible real interest rates which then drive up the value of equities, property and bonds. But if, as I believe, and I won't explore this but I think it's an important subject of the story, it's as I believe one of the reasons why we created so much debt in the first place was as a reaction to rising inequality. When you have rising inequality, they mean debt to make the economy happen. If that is the case, it's a bit ironic that the only way we can find out of it is to create some more inequality. So the final transmission mechanism that Central Banks talk about in terms of very low ultra-loose monetary policy is they talk about the currency effect and if you read the speeches of Mario Draghi or Pulursan in Japan, it often seems that they think this ultra-loose monetary policy will reduce the value of the euro in the yen and then there will be an external demand savings effect. But the trouble with that is that can work for one country that's gone into a debt-induced mess in a growing world economy. Lord be speaking, that's what Sweden and the other Scandinavian economies did within the mid-1990s and they were sufficiently small relative to the rest of the world that it worked. But if a whole world has too much debt, we cannot get out of a global debt overhanging problem by devaluing all of our currencies simultaneously against those of Jupiter and Mars and the others. That is not an available strategy. So my belief is that this monetary policy cannot be effected. I'll come back to what I think has stimulated the economy at the end of the day, but monetary policy alone, I think, is not effective. That goes way back to Keynes's insight that as he put it under some circumstances, you are pushing on a string with monetary policy if you've already dropped too much debt or a rate wrote by an uncle Richard Coo on balance sheet percentiles interpretation of what happened in Japan. So I think we are in a big problem as a result of a debt overhanging. The other factor very quickly is what's called secular stagnation. I would ask people to look at one set of facts. If you look back, what is the real yield to maturity? So it's a maturity on an index-link bond. What do you get inflation-adjusted for a UK government 10-year index-link bond? Average over 5-year periods starts in 1985-90, and then we've got a roll-for with 5-year periods thereafter. The yield to maturity you will get is 3.85%, 3.59%, 2.54%, 1.95%, 1.22%, and it's now minus 1.8%. The real yield to maturity is just all like that for 25 years. When you see a trend like that in economics, I would tend to believe that that can't be due to a particular twist of monetary policy or a particular crisis. That has to be something long-term secular, as we call it going on. There is a reasonable hypothesis put forward by Larry Summers and explored well. For instance, a very good paper by Rachel Smith of the Bank of England last December. There is a reasonable hypothesis that the reason why this is occurred is that we live in a world where there is an imbalance between attempted savings and attempted investment. Post-facto savings has to be equal investment, but anti-facto, there could be more attempted savings than there is investment, and then the interest rate has to fall in order to reduce balance. It may be that we live in a world where attempted savings is overwhelming attempted investment and economies only balance with incredibly low real interest rates, which they create major problems. I won't go through the set of hypotheses and, as for that in detail, but for a set of reasons, a combination of demography, rising inequality, and the way that information and communication technology makes it possible to grow economies with very little capital investment essentially for computers and software to achieve them. Those together can produce this situation. So, put all that together. There's a dead-over hang, certainly there's a reasonable hypothesis of what someone's called a secular stagnation, and we end up in a situation whereby early 2017 there was a lot of conversation out there among central banks and on economists that we were literally stuck, that we were stuck with these low rates of nominal GDP broke in low, 45% that we think is reasonable, we were stuck with inflation below the target, and that we could do nothing about it. If you look at the economist headline from mid-Febru last year, 2016, it was a central banker with a bazooka, and there's nothing coming out of it but the question was out of ammo and question mark. Are we out of ammunition? Do we literally enter a stage that you can do to get the nominal demand going? And that is an interesting question in economics. Can you enter a situation where you want to have a higher rate of inflation, a higher real growth, but you have to even have a higher rate of inflation that you can't get? Can you ever run out of ammunition? The answer is no, you can't. There are very few problems in economics to which there is a sensitive solution, but if you are stuck in a situation where nominal GDP is lower than you want, that is the problem which you can always solve. Now, to solve it, you have to break into a taboom and you would have to break into a taboom that is called monetary finance. If in those circumstances you run fiscal deficits and you monetise them, a central bank finds the debt and writes it off so that it isn't a debt, you will stimulate nominal demand. Now, the reason why that's a taboom subject is that the world is full of historical examples where we've done that and we've overdone it because there is a problem that once you tell politicians that this is possible, they might want to do it all the time, in large amounts, if in a period of certain circumstances you give them up to an election, rather than small, moderate amounts are only in situations that are not a debt, but it is important to realise that it is possible that it is doable and there are some of the examples in economic history where it has been done responsibly, in particular, for instance, the early 1930s in Japan where finance minister Takahashi used monetary finance completely effectively to pull Japan more about at the end of a recession than the other countries. Unfortunately, Takahashi was a very, very responsible man. In 1935 he said, we've done another fact, we're going to pull a stop to that. I'm beginning to worry that we might be doing it and the military assassinated them because they didn't want to give up on military expenditures. So you can read Takahashi either way, I've been demonstrating the technical possibility of monetary finance or the political risks of modern finance. But it is technically possible. The interesting thing is that, in a sense, I think we're sort of doing that. Because even though we haven't broken the taboo, you can sort of do monetary finance without admitting that you're doing monetary finance. What I'm interested in questions is fiscal policy, you know, is it effective in stimulating demand? The reason why it might not be effective in stimulating demand is three reasons. If you're talking about debt finance, fiscal policy, you're not a debt person and you issue debt. It might be ineffective because, after a while, you politically worry about all that debt that's accumulating so you stop doing it. It might be ineffective because the people know that you're going to do that and that's called retardian equivalence. They anticipate that there's going to be a future of that in policy. Or it might be ineffective because there's what called crowding out. You try and issue all this debt and when you try and issue all this debt, the interest rate goes up and that crowds out quite effective. Those are the sort of three reasons why debt finance, fiscal deficit might not be effective. But if you run a debt finance, fiscal deficit, and at the same time, your central bank is buying the debt in huge quantities, you won't have crowding out because that will keep the long-term interest rate down. And it may be that people realise that that monetisation might be permanent because who knows when it will be permanent or not. It might be a signal that there really isn't a constraint there. One of the most interesting articles recently produced in economic theory, I think was by Christopher Sins of last year's Jackson Hole symposium of central bankers. And he basically argued that in a deep deflationary situation monetary policy works if it is applied in association with fiscal policy and only in association with fiscal policy. And that essentially in a deep recession what you do is you run large deficits and you run large quantitative easing operations. Now central bankers don't like to admit those because that's getting close to breaking the taboo. It is accepting that what they are doing is lubricating and facilitating large fiscal deficits. And they don't like to admit that. What I want to say is that their quantitative easing operations are working through purely monetary mechanisms. I think that purely monetary mechanisms are ineffective and I think that monetary policy in so far as it has been effective has worked entirely and only because it has facilitated large fiscal deficits. I think that is as it were the dirty little secret of what has been going on for the last five years. I think our economies have essentially been kept going via fiscal deficits. If you look at the relationship between the size of the fiscal deficit and nominal GDP over the last six years you will find a strong correlation. The Eurozone has had the smallest growth of nominal GDP per annum at about 1.8% because it has had the smallest fiscal deficit at about 3% or 4% of GDP on that. The US has had the fastest rates still in output but the fastest rate of nominal GDP growth at about 2.8% because it has run on average deficits at about 7%. Much bigger deficits in the Eurozone, much bigger deficits than us and that is what has kept the American economy going. And I think the reason why the global economy is growing better than this year is also because there have been a set of fiscal relaxations without us quite noticing it. On the first groups of people to notice that there might be some development of the advanced economy growth rate this year was the OECD in its November forecast at the end of last year. And in that they were absolutely explicit that three things were going on, fiscal relaxations. Small fiscal relaxations in the Eurozone periphery, where in seven countries like Portugal and Spain were basically being more courageous than normally what the Commission was saying. A big fiscal relaxation last year in China and just by the way, throughout the world people don't pay enough attention to what's going on in China. China has now keyed $12 trillion economy. What happens in China where it relaxes fiscal policy and tightens fiscal policy hugely affected and important and in 2016 there was an enormous stimulus from a fiscal policy in China and also a relaxation of private credit creation. Again with the caveat that in China what you count as private credit or you count as a fiscal deficit. And there was some relaxation of the U.S. last year and there was an expectation that there would be a further relaxation of the fiscal stance with Donald Trump this year with his great infrastructure program and tax cuts. Anybody who believes that they know what's going to happen next with Donald Trump in the future will be a fan to see that. So the reason why I'm globing on a new dose is fiscal relaxation which has been stimulated, supported by monetary posts. Very briefly what's going to happen now Japan is going to permanently monetise debt. Japan has a public debt of about 250% of GDP about 100% of GDP of that 40% of that debt is owned by the Bank of Japan. I can argue about what should happen but I'm going to take a bet I'll make them sit with them I'll make it a thousand pounds and we'll settle it in 2030 that there are no states of the world whatsoever in which Japan is going to repay that public debt in the normal sense of the world repay. And no states of the world whatsoever in which that 100% of GDP currently owned by the Bank of Japan is ever going to be sold back to the private sector where it's going to be a reversal of Japanese world quantities. This is going to turn out to be a permanent monetisation of Japanese government debt and it's not going to use that for inflation. So Japan is going through an experiment in which it is doing a monetisation exercise and it is the right thing to do in Japan. The US economy will grow in a reasonable place I have no idea about a post factor that is going to be used in turn out to be permanent. It may not necessarily it may be a freely developing dynamic of the US economy gets going private credit gets going again and you won't see a permanent monetisation there if you might. As for the eurozone the eurozone I think still has a fundamental role. When I get talks like this in Japan sorry in Germany German colleagues say to me there is debt fuelled boon which is going on throughout the world and clearly that is unsustainable but one place where you don't get debt fuelled boons is Germany. We don't have debt and I have to tell you yes you do have debt but it's just that the debt is in other countries. Because when you've done an 8% current account circles you are reliant on somebody else somewhere in the rest of the world piling up debt or you grow it if it wasn't that the Chinese were piling up unsustainable debt which is what they are doing. The eurozone I think is an imperfect monetary union which does not have the flexibility which the US has illustrated to run fiscal deficits at the federal level when it is in a recession. As a result I think it has dangerously unresolved debt problems particularly in Italy and another debt that you won't see in the end of Italian government debt problems. I do not think that it is sustainable and I think we could well leave it in the next five to ten years to debate that Italian government debt which is similar to those that we have about greed debt and the need for rival restructuring or some short. So in some where are we? We have a debt in the world and we need to return to the basics of where nominal demand nominal demand I think ultimately comes. It's a complicated thing because nominal demand can sort of self create itself out of confidence and various quality forms of money that we create between ourselves by being willing to deal with each other on credit. The issue of what is money is really, which positive money I've done some great work on very deep issues in economics, but essentially you don't think that that nominal demand rate is going for two things. Either money and banks create nominal demand and the most important thing to understand about private banks is that they don't take pre-existing money and lend it on they create credit, money and purchasing power which did not previously exist. That was a great insight of the Austrian school of people like Friedrich Hayek and it got ignored and lost to a lot of economic theory after the statistic. Essentially you can create nominal demand out of a private credit and banking system but you can over create it or you can direct it towards the purchase of existing assets rather than a new investment so that's one way you can get nominal demand and you can also get nominal demand because governments essentially run deficits which eventually a sort of monetise and again I think that is the dirty little secret that eventually they increase the monetary base in a way which has sort of created. You shouldn't be shocked by that but a lot of very responsible people like Neil Friedman talk completely openly about it. But those fundamental determinants of nominal demand are things that we need to return to the basics of theory and I think the central banks were a long way from returning to those basics of theory. I think we have lived in a world in which we have over anchored been over confident about private credit creation. We believe that whatever the private system does must be optimal because well it would be optimal because it's a free market but that's not true because financial markets are subject to all sorts of efficiencies so our private credit creation processes can run out of control and produce asset bubbles and then post asset bubble deflations and in the post environment we get too worried in some ways in the different world but I think too worried about the fact that we wake up out of it involves the real estate ultimately in running the digital deficit and in some sense cosmonitising them but that is of course the work of the devil which is why you can try to find out a bit more is to change it. Thank you very much so now I would like to take a question of what was money if that would go on beyond the 50 minutes. No so as I always have said there was a lot of money so we wanted to use some of the size of the money to get it back off the crash and we are, I think it's time we used to search but we also came here because we think it's important to do not look like money and that we need to get it involved. No one was talking about money creation and maybe you'll be convinced that just a few of you over the last seven years we've been around that it's a worthwhile conversation to have so there's a lot of questions that I don't understand at the moment so I would like to say about the financial crisis we believe that the failure of the financial crisis is a symptomatic level wider crisis in the economic community that's part of the truth because this is significant but regrettable though it translates regrettable actually the regrettable asset crisis and regrettable economic consequences are like a demand that's at a disadvantage and these issues are all symptomatic of a company that isn't serving the needs of a society and is in need of a radical reason here and obviously centre banks don't have all the answers to how to transform our economy in terms of what's been prepared but we think it's the most powerful economic institution that we have and basically is where we need to prove to me a conversation about the policies that are carried out and the factors that we have as a society so to briefly talk about the crisis that centre banking are options there are and as I've already explained to one of them I think if we bring the crisis centre bank into focus when you ask the question more what banking are going to do if there is a financial crisis tomorrow interest rates can't go any lower and quantity of fees is limited despite that banking have been created after nothing £445 billion and in fact more because of the maturity of funds each year this hasn't led to an increase in spending more borrowing or investment if you've visited it hasn't included any kind of investment and despite the fact that the private sector is essentially paying the government to borrow the government is still committed to the schools currently where limited increases in business revenue and at the same time we know that QE has increased wealth of equity and as I said that the health day the Bank of England's research has shown that that has led to the top 5% of capital and which has led to 5% of capital and which has led to 8% of capital and since QE has expanded its investment 16 up to Brexit corporate QE has been added to the net so this is where banking can hit corporations in which to buy the bond then which is of course controversial and it's a serious question about how much we can support to work together former energy member David Blant, who I've called it and mandated to support it so if I can tell you you can touch by buying or choosing which companies to buy the bond then Connie's spell explanation for this was that he was going to choose companies which made a material difference to be paid on you so I'm sure you were also shocked by the amount of the list of corporations including Apple, AT&T and others I wouldn't say on the material difference but there's clearly a limit to having children that have to be with the bank because it's called this is a real long time time and those include in fact that we've grown up on a company on consumer debt and borrowing and that's a great solution both of which are key factors in what that's about and the biggest risk is the unsustainable levels from the pirates of the bank so even when asset prices keeping prices sorry, even with QE keeping asset prices pushed up is a serious doubt over how much it's going to last and not to mention the desirable effects of that risk asset alongside this we've had seven years of fiscal austerity which has obviously been a huge role in the demand for wages and that sort of meant to the lives of living however even with potential ends of austerity although that doesn't actually look too lightly this isn't any more than the bank and others in the bank would be doing yes and technically there are some energies of parliamentarians in this room and you need to recognise that the tools being used by the bank and the military is a traditional fact and not on effects for the range of social and environmental issues for example ESA has an inflating house crisis which has exacerbated the housing crisis and Mark Carney recently rendered his decision to buy one dip was a few companies despite the fact that he's been signalling to the financial markets in the versus of climate change so two of the things we've found in our politicians really think that the financial policy for the bank has been developed outside of their market and gave it to worry markets as an example where the QE is being deployed and it really never seems raised to questions perhaps that compares to over a hundred raised questions on the deficit a deficit could have been covered by QE about three times over so it's a serious it's a serious amount of money to worry about there's been a lot of less and cross-party consensus around financial policy that we should just let the bank get on with it but that consensus is clearly breaking and we really need to see some important evidence working out to this issue we were thrilled when the Treasury was looking to see a massive inquiry into the financial policy in the beginning of the year and we really hope that the leadership of Nithi Morgan will make up that inquiry we also think it's time for the Bank of England to be taking leadership in this conversation about its mandates and plans so because of the money lots of debt there have been actively bequilling for new tools to be considered money to worry markets this is a bank that will be creating money not dissimilar to QE but spending it through the government directing and contributing to increasing the demand for jobs and wages now there was a pretty impressive and substantial review done by the Treasury to present an investment in our financial policy programme which gave out clear reasoning for the continued consideration of a conventional financial policy tools and actually included financial financing in that they were preference to speech that they were getting from the government but so we have in fact been commissioned by the Government to be looking into this policy and there's been a report laying out the justification for such a financial policy committee which gets into macro financial policy a really important step in the rise of this crash they understand now that the biggest risk in financial stability is the system you can't look at the individual bank that I say but we now have four years on from that that would be an arguably in a much worse economic situation that has led with Brexit sailing broses at the lowest level in the UK for example to the GAN and private public sector in the GAN I think it's time to be investigating the designing of all ways over a managed financing tool private public that's rising it does seem that a form of managed financing is inevitable somewhere in the world in every 90 years but that doesn't mean that we're carried out in a much more transparent way or even in the best way in the society when QE was conceived it was not really scrutinised it was a very little public debate it just kind of happened and I think that we need to have these ideas discussed now before we need to consider these tools in an amenity currently a central bank well at least the bank of England is getting a central bank unfair so we really don't want to be seen as a political we want to be seen as useful technocratic institutions but I just don't think that's possible in any role in the paradigm well, doing nothing else where it's not the same as saying it's just as if you're considered a political citizen as taking course and whether they like it or not they're making decisions which are inherently political like increasing the wealth of the top 10% in the UK by hundreds of thousands of pounds or deciding to select a few companies including what's on your companies that are better fit for the cheaper world possibly corporate viewing that's political but if the bank of England is going to create hundreds of billions of pounds of money it's a political question of where that money should go and it's a question that should be decided by the Treasury over the wider environment and that means money to be fired so in response to the 2008 crisis it's at least at least the wealth of the top 10% assets and to hope that that will increase spending and will trickle down to the rest of us but our response to the next crisis must be to direct money to the things that we need infrastructure, green technology and social housing are many more things and just to end with a rise of the note because that's my job to be radical I think essentially the bank of England was founded to bring issuants of money and credit to public control and in 1964 that was essentially to fund a war it would think about the challenges we face over the next few decades the challenges in my generation that's declining productivity gains and the unprecedented intergenerational wealth in Berthys high and change rising future economic prospects and I agree with the politicians central bankers and everyone that's involved in thinking about the big questions when it starts to realise what the conversation has to find out is a brand of another asset Questions, I want to make three points the first is yes central banks are in trouble second a lot of the problem we have in this country is that finance is a problem might be too large and the third is that ultimately neoliberal economics has run its course and it will or should be better so I can sit down now I could try to say essentially the point about welcoming the demise of central banks essentially the deal on the model we have is that growth is roughly 4.5% the old central banks would be to grow the stocks it would lean against the stocks to keep the growth rate on chance and it lent against the stocks essentially by adjusting the interest rate and it would change consumption patterns if things were bad it would sort to, with all interest rates the thing tomorrow's spending forward to today and if things were overheating it would try to delay spending by putting upgrades and delay spending to tomorrow and that's all that we see there I'm at risk of the parties on this idea of how to put these things but that's essentially what matters now the problem that we have is that this works in the short term but it doesn't work in the long term and what we have in the world is a fundamental structural problem which is the only ability of central bank tools to resolve and the central problem that we have in this world the reason it has as well dislocated has been utilised in China because in the past the world has been able to accommodate small growing economies expanding and joining the rich nations albeit very few have managed to go all the way through but when something of the scale and size of China comes along and becomes rich or certainly wealthy in the time it did it has dislocated the entire financial system the world is too small and life goes to which we were has got too crowded and we become extremely unstable I'm not saying this should not happen and essentially we have a world to become destabilised by the imbalances that go up in huge Chinese services and huge German services and these imbalances in other words my resources accumulate as reserves and not to be absorbed by investors for various reasons these imbalances have caused the deficiency of demand and this deficiency of demand is why is why the world is not working properly and asking central banks to cope with or to overcome with their limited tools demand and deficiency on the scale in which we look at this is asking too much it is not that they lack the willingness of their ability but they have been asked to do too much and because they have had to overcome it we now have all the side effects of which you know we are concerned with the level of the Dutch market the inequalities all those other bad things but it is now to blame the central banks for this because we are asking of course for the job and it seems to me that the only way if this can be resolved at all is on a global level by the politicians getting together and fundamentally trying to address all the imbalances in Germany in Japan and in the United States elsewhere and this is obviously way beyond the competence or the ability of the mandate of any central bank which is a critical issue of central bank independence and leaving it to the central banks to solve these things out here is giving the politicians an escape card it is allowing them not to focus on what is ultimately an issue of our time but they value the central banks and so we are continuing in this in this world pool of activity which is actually not I am not saying that the politicians could solve the problem but I am saying that the only hope of the problem being solved is in the hands of politicians not in the hands of or actually in the states in fact more than in the politicians it is not something central banks or central bank before the crisis because it is all on its own I fear that in the absence of political action we will get to the environmental crash at some point I don't want to let that get to go the human cost of all will with things ultimately move forward one would hope to avoid that but that may be the case I think the second one I want to make is that France is or the natural world is probably not part of the solution and we have this conversation about the central banks largely because of the overall mighty that is the financial sector I mean finance is essentially about moving money for where it is to where it is really and that's what the financial system is for and supposedly there is a servant of the economy and the economy of this country and that's where the finance has become an entity of itself you make money by moving money not by what that money does and somebody not a million miles from there who wrote a good book he did once a part not socially useful and he had a good point Paul Wolley who runs the centre for this study of capital markets function a fully entitled we don't actually need to know what we do at the London School of Economics has made the one but he thinks finance could be one third of its size in the UK and there would be no economic loss that all the duties of the house should be probably fulfilled and my own simple example is that 30 or 40 years ago when I first met Paul Wolley I went to the London Society opened a scene as a kind of phone access by later on after a mortgage and it was a one on one reaction when my son 40 years on goes to get a mortgage he goes to an IRA who goes to a phone car who goes to the market who finds someone and eventually after several more weeks in the chain the money comes to it but as I was 25 years old he gets 103 years and he goes on with that now the argument is that on that intermediation is not actually delivered the person is getting a mortgage a singular benefit there are many more balance fed in that chain but one could perhaps condense it back to where we were before where we were in the first place although a lot of people would have the time to look at jobs but my point in this is not to attack the city my point is that because finance is so powerful in this country honestly has to be taken for what the markets want not for what society or the country wants and you see it with all the talk with all the possible mistakes and fear and we seem to have got the carbon massively before the course because the point of the markets ultimately is to have the economy not to actually dictate the policy and so I think until we've actually some funding way to reduce the power of my acts then we are going to go on to this panel and my final point is that essentially again we're having this point or this belief in monetary policy is ultimately a pledge that the other group of economic settlement that came in with the facture that was done 20 years ago and I'm not saying that is a good or a bad thing but I would say that and this was done by George Vist's school under the introduction of others that was done 20 years ago and if you actually look at the new basic economic reforms for the 30 years before the facture and the 30 years since the 30 years to the form a massively better on any metric you've learned to imagine that it would go to this past where employment was higher, income was through the past and investment was bigger and the return on assets would go to this past. Now it's not to say you can't keep the facture so I don't know how bad it would have been if we hadn't had this decision but it wasn't as bad before as conventional wisdom would have to have that and it may well be that perhaps a better time for me perhaps a better time for me perhaps a better time for me to think perhaps a better time for us perhaps a better time that we did decide that there are other ways of the money in the economy there are broader approaches which plays sort of what I think set the marry of money and fiscal policy or the need for both not the need for what's not impossible for people orioedd o'r gweithio cymaint o'r amser ac yn ystod y byd yma? Felly byddai'n ddif yn ei gyd yn ymweld o'r ffordd o'r cyfnod o'r cyfriddol o gyfweld a'r ffordd, o'r gweithio'r cyffredin, o'r ffordd, o'r 50 yr ymolod yw. Dwi'n ei wneud o'r limit, o'r cyffredin o'r cyfriddol ar gyfer y gyrfaith yma, o'r cyfrifio cyfrifio o'r economi o'r pethau yn ogylcheddol yn y blyneddau ar ei safyn yn eich ddweud o'r gynhyrch fod y Maen nhw'n dnu'n un ffwrdd chi i ddim yn ychydig, a mae'r ddechrau ei gweld yn gynghwm yma i'w leidio ar hyn. Yn mynd o'r tri gwrs, mae'n ddweud o'i sgwpeth yn yma y cwmhiddiam, oherwydd eich ddweud i'r pwg dda i chi'n cymdeithasol yma. Yn y bydd yma, mae'n ddweud i'n cymdeithasol yma eich ddweud, yma'n gweithio chi'n ddweudio gynghwm a dechrau i rhaeg yma, Mae'r cymysgau o'r cymryd yn adolygu, o'r rhan o'u masfodol, yn ysgol, ar ymweld, yn ymweld, ond y cyfryd y cefnogi, o'r crediwch, o'r cyfryd, yn llun o'r cyfryd. Mae'r gwerth ffas, oherwydd, o'r crediwch, o'r cyfryd, o'r cyfryd, o'r cyfryd, o'r cyfryd. Felly, mae'r casigau cyfnod mewn ei ddod y bydd dweud rydw i'r bobl yn ei hunain ddim yn y bach yn gwirio sy'n. Felly, mae'r bobl yn ei ddod a bobl wedi am wg honno. Felly, mae'r bobl yn ei ddod y bobl yn roi'r gwirio er mwyn o'r cerddwyr eisiau'r ffrôl 만든 gyda banyddolol. Felly, mae'r bobl yn ffrôl yn eich gwaeth eich hwn beth sy'n lliwydden nhw. I think Britain is in a very interesting interview. I think we're not as big as the US. We don't have big talk with privilege, but we're not as small as Thailand. We are quite a big thong. I think the extent to which we are somewhat aligned on the debt, which is funded over the serious risk of being cut off or our current trend deficit, would reach some of that. I think you've got to address two things simultaneously. One, when you go into an S, what do you do about it? And I think you should include tools monetising debt. Let me get absolutely explicit how I would do that. I would not give the control of debt to the Treasury. I would give the control of the Treasury how to spend it. I would give precisely what's then the 19 proposed in a book that exists in a new blog in April last year, which is the Parcel Law, which gives to the central bank, the Bank of England, the right to decide that a particular planted time of best way to stimulate nominal demand would be to run a defined amount of unfunded money-financed physical deficit. And my personal thing, that if we had that law in place, it would be in a better position for the monetary policy to get it back in, say, 2009 to authorise, let's say, a 50 billion slice of unfunded additional physical deficit rather than 400 billion of apparently supposedly reversible QE. So that's specifically how I would address the political risk. To your point about, yes, but is that just beauty? You have to deal with problems once you're in it. I didn't go by that. Is there a fundamental problem of inequality as something that we do have to play seriously? I think there are some fundamental features of modern economy of information, of communication technology in particular, which are probably creating an inherent underlying trend to increasing inequality. I think we've made that worse by, in the face of trends of going that way anyway, rather than leaning a bit the other way through our progressive income tax system, we've brought this meeting to dismantle the productivity of the income tax system, but much more dramatically than the US down here. And I think it then does play into the monetary policy of a matter-of-mark situation. And I think this is much dramatically true in the US, so I think it may be partly true here. I think in the US so much wealth has not concentrated into the hands of the top 5% and top 1% a group of people who have a high marginal capacity to save, essentially because they've already got everything they need in life, so where wouldn't they save it for? And you end up with a system which only balances if having to save things of an increasingly rich hierarchy of the top are picked up by the financial system and led to middling low-income earners who are attempting to make up, I get, for the fact that they will wait as a sacrifice. And I think that is part of the problem that happened in the US. It's well-described by Raghurajan, for many of you who come to see the 5F, then you preserve that government in India, who is very fine for the full tax, has a great chapter on this with a fantastic title, Let It Be Credit. And I think fundamentally what happened in America was an explosion in inequality where the American political system produced no answer, that would be incredible, and it blew up. So yes, I do think we have to take it seriously, the issue of rights, obviously, and find ways to offset it. Thank you. Adira, at the beginning you separated out the supply side and the demand side. But from the discussion I've heard, there are, I mean, doing things on the demand side is essentially at the fringes. And it's the real solution on the supply side. I mean, have we pumped it, as it were, for the third country? It's the end, if you like, of the third industrial revolution. And I don't know if you can demand that, and stimulate it, which means a real commitment now to the fourth industrial revolution, as a mechanism to go. And in the UK, so in the very practical sense, the blockage of house prices, just simply biting the bullet and investing in a major house-building programme, for affordable housing, just as we did on for the second model. My name is William Kelly, and I'm a consultant in my critical school panel. Why is, and why has, house prices being excluded from the official figures? You've got a good thing. Okay, two questions. I will go by myself. I don't know if you can get rid of the problem that you can see on my presentation, but I think it's one of most people who has been converted, especially in London. So, I think that, you know, there was, even though we've gone there and been seen, and currently the bank is down there, they need to be worried about the numbers. I think there's still a big bit of a misconversation that's happening around here. I think there are really two, at least two, very big favourites of the model and fixation that is issued by the experts of the state, that there is a failure to understand the nature of the model. But there is also a failure to pay enough attention to housing and property, and we teach the farmers what's called a two-factor model, which is a group of cattle, and we teach them the cattle in the same areas, how to look first, you know, actually, if you look at the figures at the great data based on this, as Tom has said, the last majority of cattle in model models, and then all of the increase in the well-to-do operation which we can see, is due to land, and land, which was essential to the economics of David Condo, at the beginning, disappeared from our economics about 40 years ago. So what happens to land prices, unless you realise it, it's all planned, you know, of the urban housing, it's all planned. I'm very lucky now, because this has gone on in value since I bought it in 1994, about five times. There's nothing to do when you put in some double glazing, a new corner. It's all a little bit smaller in the hand on which it sits. There's some more to it. So, this issue of land is fundamental. It's also fundamental to some natural issues. Rent in GDP and rent has gone from that. But if rent goes up, since it was landed, and had your rent stopped off, there's no extra pot of goods and services that you can do to it. It's even huge. So there are some really big issues about that. You'll find that you should be having a housewife when you should certainly look at housewife's inflation. On the whole, I would tend to think it still makes sense to look separately at inflation of other housewives and that housewife's inflation per se. And I think the predominant tool that should be used to control booms and busts in housing I think should be quantitative rather on price. I think it's a delusion to believe that we can offset these property credit and asset prices by the interest rate. On the issue of the supply side, but also if I don't know quite well, I think there's some the crucial thing obviously is I think there's people out there and by the way, one of the problems is that you can't entirely separate them if you don't have a demand on the economy you have a group of people who are on point for a period of time and then they're stills and then you have a supply side problem for the social theory of all these reasons. But I think there is some very strange things on productivity. We fundamentally don't understand and I think we might be inherent in something about modern economies which proliferate to achieve... We had this extraordinary product of power 30 years ago when a lot of solar computers were everywhere except for the product that it is because it is. And it's even more there to them where we talked about automation, robots and the threat to jobs but we have no product of power that we can do in the macro economy level. I think what's going on is that we are fundamentally automating manufacturing and I think we are on the verge of a radical automation of retailing but for some reason when the people drop and you can think up from that they are simply moving to a setting of low wage no product 50 drops which is literally driest. It's very deep and bluntly we hope for the other side. Thank you. Although it has been a good observation and it's overpowered that there is some work done that gives you earned 17,000 pounds of Liverpool you needed to earn 40,000 pounds of concrete all my stuff and this was a section of housing and the social security process. We have time for two very brief questions that are provided to us again so it's very brief. My name is Colin Bex. I'm the President of the Westeros Green List of the Government of the Port of Westeros. As the City of London is a speaker of city worlds money numbers, lottery of choice for criminals around the world what measures would the speaker propose to root his fundamental toys in Liverpool? Could we have one more one more question? To our subscribers regarding city alliance what could the panel suggest how we get the land question right so that we do a small number of organisations of land what would be the idea this is investment banks merger banks and building societies or what is the idea? Great, one more question? Yes. Hi, I'm a friend of the Westeros Green talks so it might be a random question but has there been a discussion to know about negative interest rates negative central operates and how that might impact on those three questions? Negative interest rates essentially makes it easier to fund government debt I did mention that I think the sort of secret report is not for monetary it's just for the citizens that are facilitated by I think negative interest rates and very low interest rates in their pure monetary mechanism may actually have had some diverse effects that are very good taken out by Mark Strunamart and Princeton we get a very low interest rate as it can make people poorer but it also means that people at bank deposits they're in competition and they feel less poor as the less interest rates are I spend less there are some interesting ways that are on a certain level but the monetary mechanism can be affected even more facilitated by that I'm afraid I'm not going to answer a three-tool question on that there's a month-less monetary that goes on in Winchester sorry there's a high lending because well, there's three people that need it but I wouldn't be allowed to go on a too large scale I would have high capital lending against real estate or sometimes incredibly lowly weighted within what's called the past to this weighting aspect seeing it from a bank it always works as if the easiest thing to do is lending against real estate so you have automatic buy it's not your fault but automatic buy it's pulling you in that direction and I think we can do more to shift it in the other way by higher capital rates that's definitely really not an idea I guess it is more of the same so it's a kind of approach if your computer isn't working then you're going to fix it with a hammer then you're going to get a sledgehammer and do that with anybody so if you're thinking about how 100% of works are not just kind of we need to get rid of perhaps a good negative and there's other lots of time because that's a good point definitely agree we need to like one of the issues with this is it whisking to lend to that means that real estate is going to find a place to set that up so we can incentivise to lend it to more people and then finally on the city of London we really need to have them all have it scrutiny and find out how it works and some of the issues are there and there's a conversation about the fact that it gets a to come and remember the remembrance that you sit behind the house and the speaker of the house and it's an official person from the city of London the way the city of London has put power over the immigration policy is going back to 100 years and obviously we need to service that conversation and how it works and how we need to take it so yeah Thank you I think it almost ought to sound because very quickly we're on the city and we're all doing it on the dark where we would come so you know money normally in the city I believe is much less at the bottom but the demand is there Very good to you On top of that is part of the work being done to reduce the formula which stops the escalation of landlords and the movement we learn more and more by creating a new value of things that are a bit like a cake and taking advantages rather than a mortgage worth rather than new prices is a way of strengthening the leverage so there is some this is we can't even put it down for praise because it's not