I
have long been a huge critic of the Bank of England, writing many posts
in the bubble demanding interest rates rises and then watching them
pump the bubble with no idea on how to close it. Worse, the BOE have
popped the cork on Quantitative Easing and it seems they will not stop
anytime soon despite the lack of impact it has had on the real economy.
So George Osborne, a highly conservative chancellor, who in effect is not much different to Alistair Darling,
the previous incumbent has gone for a big change. This has been celebrated around the City as a bold choice.
Carney
has a reputation as a hawk and this, given the above mistakes, has been
viewed as a good thing. But is a hawkish BOE Governor what we need now
as we enter a 5th year of potential recession post the 2008 financial
crash.
Raising rates has its attractions but the Main UK lending banks will suffer as their bad loan books are still quite large - £80 billion for RBS and over £100 billion for Lloyds. With all of the banks hugely scaling back their investment banking operations the possibility of large profits has gone the way of the fairies. Higher rates also risk moves on the mortgage book impairments as the leveraged UK borrowers have grown used to low rates and low repayments.
Carney
too has to take over a the macro prudential part of the FSA which will
be distracting in the first instance as the integration of staff and the
systems of the
rather pushy FSA into the sleepy and Ivory tower types of the Bank of
England.
The
current BOE committee is quite dovish and this might save Carney as he
fails to get backing. Yes to stopping QE but not to raising rates. But
the UK economy is on life support and has been for sometime, with few
signs of anything changing in the near future. Government spending is
too high, austerity will have to continue for years to come and there is
no support from the Eurozone of elsewhere. It's high risk to tighten
policy too much from here.
With
all this in mind, I don't think Carney will prove a big success, much
like Sven Goran Eriksson a promising start and good wishes will not
prove enough in the long-term....
This post is sponsored by site sponsor Spreadbetmagazine.com
8 comments:
Just one more Goldman stooge. Quoi de neuf?
Have a look chez Old Holborn to see how the noose is slowly tightening. Expect nothing outside the magical box from this man.
Apparently his missus let slip in some Canadian comic that the only reason he took the gig (other than a 50% rise from Merv's salary, relocation & better pension, 5 years instead of the 8 Oik wanted) was that Canadian electoral maths has changed and his avenue has closed for a few years. Huzzah!
I guess taking over at this time of complete perdition does allow Carney to pull the Osborne defence - 'look, it was all the other guys' fault' - which, if he is only gonna do 5 years, seems fair play really. I think the lad's treating the Old Lady as a finishing school and a bit of a jolly for his wife & 4 daughters! Hmm...yeah, if he's ever in the office at 5pm on a Friday i'll be a monkey's uncle. As Roy Castle said, 'deligation's what you need'.
He seems to be a fan of the big banks, given they have over £40 billion in hidden losses, it is no surprise they might like him.
Wife is an ardent greenie and he appears to be in favour of world government. Frankly, I am a bit cautious in coming to an opinion.
Mr Carney seems to be getting credit for something he did not control, viz. the fiscal continence of Canadian government since the early 90s. I doubt he'll pull off the same trick here - no matter what colour rosette they wear they all spend money we haven't got, pissing it away like drunken sailors.
I daresay he wasn't appointed to put a stop to money printing.
Now what Common Purpose seminar did mr Carney attend, or is it "Objectifs Communs" over there?
Carney
It must be nice being head of the central bank in a country with enormous commodity wealth. Did you know Canada is the biggest lentil producer in the world ? And all that wheat, and all that dirty oil in Alberta, and gas, and minerals... you'd really have to be incompetent to mess the economy up.
Whereas the UK has a deficit in pretty much everything ... you name it, we import more of it than we produce, cheese and whisky excepted.
And maybe not even cheese ...
http://www.swiftandbored.com/mcintyre/
"The ancient poets ne'er did dream
That Canada was land of cream,
They ne'er imagined it could flow
In this cold land of ice and snow,
Where everything did solid freeze,
They ne'er hoped or looked for cheese."
Laban
Post a Comment