After watching the new video with Adair Turner from a talk he gave at the Bristol Festival of Economics in November 2014, it is clear he understands the economic situation better than Paul Krugman.
While Krugman tries to understand if inequality even leads to more financial instability (link), Turner knows that it does and the mechanisms by which it does. Turner then gives recommendations on how to lean against the economic forces creating inequality. The mechanisms work around real estate financing. In the video, Turner explains how to control lending practices for real estate.
While Krugman pushes for more accommodative monetary policy and fiscal policy, Turner recommends less accommodative policy and much more fiscal type policies that enter the income stream directly, including some form of helicopter drop. Helicopter drop options, as Turner says, are tax cuts, more welfare expenditures or infrastructure spending. Turner does not like QE accommodation because the money did not enter the income stream directly.
While Krugman recommends strong accommodative monetary policy if there is fiscal austerity, Turner does not support such strong accommodative policy. He sees it as exacerbating the causes of our economic problems. Turner sees that accommodative monetary policy needs to be unraveled and replaced with policies that allow money to directly enter the income stream within the general population. In essence, Krugman puts too much faith in monetary policy, while Turner does not.
In all, Adair Turner is ahead of Krugman in understanding macroeconomic problems and their solutions.
An essential moment in the video is Turner’s answer after the 1:01:00 point, where he explains his view of appropriate monetary policy.
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