Wealth, debt and the financial crisis
Lord Adair Turner delivers his annual address at Cass Business School
In his annual address at Cass Business School, part of City University London, Lord Adair Turner delivered an overarching analysis of the economic trends of the last half of the 20th Century.
However, his speech was much more than an historical summary. Instead Lord Turner used the economic patterns of the past to deliver a warning for the future.
As reported in The Telegraph and featured on the Today programme, Turner fears 'Britain's property obsession has left the country at risk of another financial shock.'
Turner argued that real estate was in limited supply, but as demand continued to grow the "only thing that can give is the price." Soaring prices encourage greater borrowing, increasing the debt to income ratio to dangerous levels (it was around the 170% mark at the time of the 2008 financial crash and is slowly rising back towards that mark).
Turner warned that the pursuit of wealth and growth via the credit route is a dangerous path to take. Whilst he applauded the financial reforms that had been introduced in the wake of the crash, he suggests these reforms will only be effective against a backdrop of a more stable economy.
He said, "Whilst new financial reforms are valuable, they will be insufficient to ensure a more stable financial system and economy over the long term. We must look at increasing the supply of housing to ease the tension between supply and demand in order to prevent rising debt levels as a result of high housing prices."
Watch the lecture: