Best of the Week
Most Popular
1.London House Prices Bubble, Debt Slavery, Crimea 2.0 - Russia Ukraine Annexation - Nadeem_Walayat
2. Gold And Silver – 2014 Coud Be A Yawner; Be Prepared For A Surprise - Michael_Noonan
3.Sheffield, Rotherham Roma Benefits Plague, Ch5 Documentary Gypsies on Benefits & Proud - Nadeem_Walayat
4.Glaring Q.E. Failure Spotted - Money Velocity Is Falling Rapidly - Jim_Willie_CB
5.Don't Miss the Boat on Big Biotech Catalysts: Keith Markey - Keith Markey
6.Gold Prices 2014: Do What Goldman Does, Not What It Says - David Zeiler
7.Bitcoin Price Strong Appreciation to Be Followed by Declines? - Mike_McAra
8.Gold Preparing to Launch as U.S. Dollar Drops to Key Support - Jason_Hamlin
9.Doctor Doom on the Fiat Money Empire Coming Financial Crisis - Andrew_McKillop
10.The Real Purpose Of QE - It’s Not Employment - Darryl_R_Schoon
Last 72 Hrs
The Big, Bad Market: A French Psychosis? - 25th Apr 14
The Great American Giveaway - 25th Apr 14
Has the Stock Market S&P Topped At Exactly The Same Price As Gold? - 25th Apr 14
Bond Market Investing - Not All Debt Is Created Equal - 25th Apr 14
This is the Next “Big Thing” in Energy - 24th Apr 14
Rome Wasn't Burnt In A Day - 24th Apr 14
When Does Government Policy Become Criminal Behavior? - 24th Apr 14
The Great Recession Grinds On - Measuring Misery around the World - 24th Apr 14
Apple, Facebook Beat Expectations - Stock Markets Long-term Recap - 24th Apr 14
Broad Stock Market Situation on the Remains Tense as Companies Release Quarterly Earnings - 24th Apr 14
How High-Frequency Traders Use Dark Pools to Cheat Investors - 24th Apr 14
Stock Market Bears Wrong Again, Apple to Push Dow to New All time High - 24th Apr 14
Gold Prepared for the Attack of the Short Sellers - 24th Apr 14
Weak U.S. Housing Data Supports Euro - 24th Apr 14
Killing the Maximum-Wage Myth - 23rd Apr 14
U.S. Quarterly Economic Review - Optimism at the Fed - 23rd Apr 14
Why Mohamed El-Erian Left Pimco - Video - 23rd Apr 14
QE Is A Fraud Perpetrated By Made Men - 23rd Apr 14
Gold and Miners Outperform Once Again - 23rd Apr 14
G-20 and the US Tell the Bank of Japan to End Quantitative Easing - 23rd Apr 14
How to Get in the Trading Game and Profit - 23rd Apr 14
Fed Follies, U.S. Housing Market Fiasco - 23rd Apr 14
What Will December 31, 2014 Financial Headlines Look Like? - 23rd Apr 14
Why Gasoline Prices are Surging Again - 22nd Apr 14
Cold War 2.0 - 22nd Apr 14
The JIS – Junk Ideology Syndrome - 22nd Apr 14
How to Avoid Losing All Your Money - 22nd Apr 14
Silver Up, Stocks S&P Down - 22nd Apr 14
U.S. Mainstream Media Propaganda Setting the Stage for War With Pakistan - 22nd Apr 14
U.S. Interest Rates are NOT Rising! - 22nd Apr 14
A Crisis vs. the REAL Crisis: Keep Your Eye on the Debt Ball - 22nd Apr 14
Bitcoin Implications of Lack of Price Action - 22nd Apr 14
Japan - The Twilight Of The Rising Sun - 22nd Apr 14
Is This What a Credit Bubble Looks Like? - 22nd Apr 14
The Dark Side Of The Silver Mining Industry - 21st Apr 14
Strong U.S. Dollar Rally Could Pull Rug From Under Gold and Silver - 21st Apr 14
Silver Feeble Rally Fails to Hold Breakout, Falling Back Towards Support - 21st Apr 14
Stock Market Smart Money – All Out or More to Go? - 21st Apr 14
Fast Rising Pump Prices Counterattack - 21st Apr 14
Extreme Climate Change And Life On This Planet - 21st Apr 14
Gold and Silver Stocks Sitting Tight - 21st Apr 14
Stock Market Minor Correction Imminent - 21st Apr 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why Loose Money Bernanke Could Learn a Thing or Two From Shrewd Mark Carney

Politics / Central Banks Nov 30, 2012 - 09:19 AM GMT

By: Money_Morning

Politics

Martin Hutchinson writes: Now that President Barack Obama has been reelected, Federal Reserve Chairman Ben Bernanke's easy money policies may well be with us for the next four years.

And even if Obama replaces Bernanke when his term ends in January 2014, he's likely to choose another soft-money acolyte like Fed Vice-chairman Janet Yellen to lead the Fed.


For believers in sound money like me, that's something of a gloomy prospect.

As for the rest of the world, the prospects for higher interest rates don't look too good, either.

However, on Monday I did catch a glimmer of light when it was announced the Bank of England's new Governor is going to be Mark Carney, the former head of the Bank of Canada.

Now I'll be the first to admit that, at first glance, Carney doesn't look too promising.

He did, after all, spend 13 years at Goldman Sachs (NYSE: GS). And we all know the track record of Goldman Sachs has been nothing short of appalling.

The bank itself made a bundle by shorting the housing market on the way down and persuaded its alumnus Hank Paulson to bail out its dodgy AIG credit default swaps with $13 billion of taxpayer money.

However, the truth is Carney has been out of Goldman since 2004, and his track record at the Bank of Canada has been very good indeed.

To Carney's credit, he didn't cut interest rates as far as the Fed and has actually raised them part of the way back. What's more, Carney only did $20 billion of "quantitative easing" bond purchases in 2009, at the height of the crisis, and has since sold the extra bonds back to the market.

In the aftermath, Canada's economy has notably outperformed the U.S. economy over the last five years, and continues to do so even though house prices there are currently looking wobbly.

Ben Bernanke could learn a thing or two here.

A Shrewd Central Banker
At the Bank of Canada, Carney has not been responsible for detailed bank regulation, but there's a considerable "nod and a wink" responsibility for the Canadian banking system, which was notably free of the 2008 disasters that afflicted U.S. banks.

Indeed, the Canadian banking system remains much less likely than the U.S. system to take the global economy down with it, since the largest Canadian bank, Royal Bank of Canada (NYSE: RY) has only $757 billion in assets. Compare that with JP Morgan Chase's (NYSE: JPM) $2.3 trillion.

Carney should thus be an improvement on other current central bankers in two respects; he will keep the banking system better under control, and he will follow a less extreme monetary policy.

Current Bank of England Governor Mervyn King has been worse than Bernanke in some respects, funding almost the entire British government's borrowing requirement, even though British inflation has touched 5% and even at today's 2.7% is well above the Bank's nominal target.

For Americans, this may not seem to matter.

After all, Britain's economy is not much bigger than Canada's and only one-sixth the size of the U.S. economic behemoth. As investors, most of us probably have more investments in Canada, which has a very interesting range of mining and energy companies, than we do in the slow-growth economy of Britain.

The difference is not in the pink knee-breeches worn by the Bank of England's doormen, but in the City of London, which remains on some measures the world's largest financial center.

When the world's central bankers meet, the Bank of England Governor is given a place at the top table, along with the President of the European Central Bank and Ben Bernanke.

Is There A Reality Check Ahead?
That gives Carney an outsize influence in his new job.

When Ben Bernanke and Mario Draghi begin to rave about all the exciting bond purchase programs they are inventing, he can remind them of their dangers, and suggest that interest rates above the level of inflation will work better to preserve economic stability.

And when the big banks explain that their new derivatives businesses require them to leverage 1000-to-1 and park the proceeds in the Cayman Islands, he can explain from his Goldman Sachs experience why that isn't a good idea.

At the same time, he can bash any feeble EU attempts to drive the City of London's business to Frankfurt by pointing out that the German banks haven't been so frightfully well managed, either.

So will Bernanke put his head in his hands when confronted by Carney and moan "Oh my God, this has all been a ghastly mistake!" Probably not, but a little injection of reality can't do his policy any harm.

And if even a little of Carney's prudence rubs off on his central banking colleagues (yes, that includes you, Mr. Zero-interest-rate Masaaki Shirakawa, governor of the Bank of Japan) , we should get a modest slowdown in the global tide of funny money - which will benefit us all.

Source :http://moneymorning.com/2012/11/30/why-ben-bernanke-could-learn-a-thing-or-two-from-mark-carney/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2014 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

Free Report - Financial Markets 2014