Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Mark Carney, A Streetwise Hercules at the Bank of England

Politics / Central Banks Nov 28, 2012 - 12:41 PM GMT

By: Ben_Traynor

Politics

Mark Carney's been hired to bang bankers' heads together...

WHERE have all good men gone
And where are all the gods?
Where's the streetwise Hercules
To fight the rising odds?
Isn't there a white knight upon a fiery steed?
Late at night I toss and turn and dream of what I need.
I need a hero.


We imagine Britain's chancellor George Osborne has been humming this tune to himself in recent days, judging by the comments he made earlier this week announcing the Bank of Canada's Mark Carney as the next Bank of England governor when Sir Mervyn King retires next year.

Carney is "the outstanding central banker of his generation with unparalleled expertise in financial regulation" Osborne said.

"He has got what it takes to help bring families and businesses through these incredibly challenging economic times...my responsibility was to get the best for Britain, and with Mark Carney we've got that."

But what makes Carney "the best"? 

Part of the answer seems to rest on the fact that Canada came through the financial crisis of 2007-8 relatively unscathed, thus boosting Carney's reputation. Under his governorship, the Bank of Canada cut interest rates to record lows and supplied emergency liquidity to the banking system to prevent a collapse.

That in itself hardly makes him a maverick – the Bank of England and Federal Reserve made similar moves. In addition, however, Carney has become known as something of a financial regulation tough guy. He's a strong advocate for tougher leverage ratios for banks. He picked a fight with JPMorgan CEO Jamie Dimon last year, taking issue with Dimon's view that financial crises are an inevitability. He also chairs the Financial Stability Board, which aims to coordinate financial regulation at the international level.

This is why Carney is viewed as "the best". The Bank of England is to resume its traditional role of banking oversight, as the UK authorities seek to draw a line under the discredited tripartite system of regulation that saw the Bank, the Financial Services Authority and the Treasury collectively failed to avoid the crisis. The top man therefore needs to be a full-blooded, tooth-and-claw financial stability man. Bank of England deputy governor Paul Tucker might have got the job, but he became tainted by the Libor saga.

The choice of Carney is thus a logical one: he's the right man at the right time given the Bank's new priorities. Yet there is something unnerving about George Osborne's comments. The chancellor's rhetoric is a prime example of the cult of central banking, the idea that an economy can be cajoled into producing desired outcomes (growth, jobs etc.) so long as the right people control the levers. Central bankers as superheroes.

Monetary policy is of course important, but it is a blunt instrument. Osborne talks as if his new man can somehow make everyone better off, but it is hard to see how. 

Some families are heavily in debt, some businesses desperate for credit to keep them afloat. Others have cash in the bank and are worried about it holding its value. Policies that help one group disadvantage another.

Sustained growth can make everyone better off, at least in theory. But central bankers don't produce anything themselves. The best they can do is try to create an environment in which growth might take hold. 

When you have an economy with high levels of indebtedness, creating such an environment necessitates making some people worse off. The question is who. Do you liquidate companies, bankrupt families?

Or do you, fearing a debt-deflation spiral, figure out a way to extend credit where necessary, in the hope that sustained growth will kick in later and enable debts to be paid off? And if it doesn't, do you then let people and businesses go to the wall, or do you reduce the real value of debt, thus harming creditors?

Financial stability, Carney's strong suit, is of course important, and a desirable end in itself, but it will take time to achieve. In the short-to-medium term, the policies needed to achieve it could prove deeply unpopular in many quarters. Reining in excessive lending by banks flies in the face of efforts to get more money out of the door and into the economy.

The banks won't like it if Carney puts a harness on them and tells them it's for their own good. Neither will businesses that are denied loans, meaning politicians won't like it either. Many ordinary people will be deeply suspicious of his status as an ex-Goldman Sachs man.

How long before the Canadian is made a scapegoat? Credibility is key to central banking, and Carney will have his work cut out to maintain his. There again, if everyone does end up hating him, that might suggest he's doing something right.

It'll be interesting...

By Ben Traynor
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in