He said: “Over several decades prior to 2008, private credit grew faster than gross domestic product in most advanced economies and leverage therefore grew. That was a major cause of the crisis and the main reason why the post-crisis recession was so deep and the recovery so slow and weak.”
Lord Turner also spoke of “secular stagnation”, saying: “In advanced economies we observed, even before the crisis, very low real interest rates and falling investment rates, but big increases in wealth-to-output ratios.”
He said this may be explained by the reduced role traditional investment plays in wealth accumulation.
Lord Turner pointed to the “huge accumulations of wealth by business on the basis of very little ‘investment’ and wealth accumulation as a result of real estate and land price increases”.
Adviser view
Andrew Merricks, principal of Hove-based Skerrits, said: “There is no doubt the credit bubble grew and grew. But everyone with any sense was saying that what is borrowed has to be paid back at some point. There was a feeding frenzy of debt for which we are still paying.
“We are only six years into fixing decades of overindulgence, so it should take at least a decade to resolve.”
