Best of the Week
Most Popular
1.Gold Price Target of USD 2,300 - GoldCore
2.Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - Nadeem_Walayat
3.Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - Nadeem_Walayat
4.Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - Nadeem_Walayat
5.Extreme Gold/Silver Shorting - Zeal_LLC
6.European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - Nadeem_Walayat
7.Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - Michael_Noonan
8.Gold and Silver Price Headed for Breakdown - Jordan_Roy_Byrne
9.Greece Crisis OXI - Raul_I_Meijer
10.Flatline Investing and Dead End Debt Schemes - Doug_Wakefield
Last 5 days
Dow Stocks Bear Market Underway - 6th July 15
Marc Faber Warns of Greece Crisis Contagion Very High Risk - 6th July 15
Greece to Print Counterfeit Euros or IOUs, Hyper-Inflation Beckons - 6th July 15
Stock Market, Investing Big Picture - 6th July 15
“Oxi!” - Greeks Defy EU As Varoufakis Resigns To Ease Tensions With “Partners” - 6th July 15
Stock Market Rally in a Downtrend? - 6th July 15
Silver Price Consolidating Ahead of Another Sharp Drop - 6th July 15
Gold Price Gravitating Lower Towards $1000 - 6th July 15
Syriza Convinces Greece to Commit Suicide, GrExit Beckons, Market Reaction - 6th July 15
Financial and Commodity Markets Become Scary: Crash Point Or Turning Point - 5th July 15
A Revolutionary Pope Calls for Rethinking the Outdated Criteria That Rule the World - 5th July 15
Forget 'Haircut', Instead Syriza Plans Beheading of Greek Bank Depositors, Theft of Deposits - 5th July 15
The Pentagon’s 2015 Strategy For Ruling the World Through Endless War - 5th July 15
United States Celebrates the Disastrous Secession From Great Britain - 5th July 15
Greece Referendum Vote Result Forecast Yes Win, But Depression Will Continue - 5th July 15
The Great Greek Economic Depression - 4th July 15
Happy 4th of July Stock Market Analysis - 4th July 15
The Most Pressing Reason Yet You Want to Avoid Investing in Retail Stocks - 4th July 15
Fed’s Full Normalization and the Stock Market - 3rd July 15
The U.S. Dollar's 2014-2015 Rally: Wave 3 in Action - 3rd July 15
Stock Market Where are we? And where are we Going? - 3rd July 15
Xi’s Anti-Corruption Campaign Is Key to China’s Prospects - 3rd July 15
How the New Iranian Nuclear Deal Will Impact Crude Oil - 3rd July 15
China's Stock Market Rollercoaster Ride Continues - 3rd July 15
Gold Stocks Cheap to Buy but Not for Long - 3rd July 15
Capital Controls and a Bank Holiday in Greece… Here’s How You Can Profit - 3rd July 15
Greece's Varoufakis: I will Resign if there's a 'Yes' Vote - 2nd July 15
The Student Loan Bubble: Gambling with America’s Future - 2nd July 15
Inflation Is Lurking, but This Asset Can Protect You - 2nd July 15
Three Total Wealth Stock Investor Tactics You’ll Need Because Greece Isn’t Over - 2nd July 15
Why This $5.6 Trillion Investor Profit Boom Is Set To Take Off - 2nd July 15
Greek Debt Crisis: "Too late to prepare now" - Video - 2nd July 15
Guaranteed US Dollar Death Dynamics - 2nd July 15
The Greek Stress Test & The Reality Of Incremental Changes - 2nd July 15
Forget Drachmas Greece Syriza Government Could Instruct Central Bank to Print Euros! - 2nd July 15
Greece Debt Crisis Trigger for Stock Market Crash or Bull Rally? Video - 1st July 15
Gold Stocks Break Below 2008 Low - 1st July 15
SPX Stock Market Retracement May be Over - 1st July 15
Silver Tunnel Vision 'Experts' - 1st July 15
Gold And Silver - Monthly, Quarterly Ending Analysis - 1st July 15
Europe’s Controlled Demolition - 1st July 15
The End of Dow 18,000; Bailouts No Longer Extended  - 1st July 15
Athens Mayor: Greek Government Should Resign - 1st July 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

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

© 2005-2015 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

Biggest Debt Bomb in History