Adair Lord Turner, former Chairman of Great Britain’s Financial Services Authority and current Senior Fellow at the Institute for New Economic Thinking, argued in a keynote address to the Federal Reserve Bank of Chicago on Thursday that central banks must be equipped in future to address the dangers of excessive private sector leverage, using both pre-emptive interest rate policy and macro-prudential policy tools.
Speaking at the sixteenth annual International Banking Conference sponsored by the Federal Reserve Bank of Chicago and the International Monetary Fund, Lord Turner also explored the central role that credit cycles and high leverage have played in advanced economies.
He reiterated his belief, set out earlier this year in a lecture at the Cass Business School in London, that in some economies the deflationary impact of debt overhang is so great that the full range of available policies, including previously taboo options, need to be considered.
