Skip to Content

Some nuanced views of Mr Carney

The UK media have been gushing in their welcome.

It is right to welcome central banking’s “rock star”. But not everybody has been carried away by the euphoria…you only have to scan the Canadian press today:

Andrew Coyne at the Montreal Gazette

That our banking system was not so badly mauled by the crisis as others had, of course, less to do with Carney or any current officeholder than with the historical and policy inheritance they came into: if any single person deserves credit it’s probably Mike Wilson, author of the sweeping financial regulatory reforms carried out under the Mulroney government in the 1980s.

Terence Corcoran at the Financial Post

If one of the jobs of central bankers is to take away the punch bowl just as the party gets going, Mark Carney is shirking his responsibilities in Canada. The governor of the Bank of Canada has been summoned by Her Majesty the Queen to take over the Bank of England, to which he will depart in June, 2013, likely without having to face the challenge of raising Canadian interest rates from ground zero. Mr. Carney put them there some four years ago, and now he is leaving as a policy hero with the punch bowl still full and the party yet to get underway. We know not where Mr. Carney’s monetary policies will ultimately lead Canada.

Instead of seeing his policies through, Mr. Carney is departing for a bigger place where the uncertainties are even greater. A master of jargon, a highly skilled communicator and obviously bursting with ambition, Mr. Carney will face his first real test as a leader, policymaker and communicator. Canada is a country club by British banking standards, and Mr. Carney has already picked some enemies.

Private correspondent from Canada

Someone here said he should have been made Governor or the Central Bank of Greece, to see how he’d make out there for five years, before going to the UK once he’s turned 52. Canada’s economy is massively subsidized by a huge natural resource base. It’s relatively easy to look good when a government can ramp up resource exports to generate royaltie.

From The Guardian, report by Isabeau Doucet in Montreal, 27 October

While it is often boasted that after the 2008 financial crisis, Canadian banks didn’t need a bailout, the Canadian Centre for Policy Alternatives has argued that Canadian banks profited from a secret bailout in the form if $114bn (7% of Canada’s GDP) in emergency liquidity from the US Federal Reserve, the Bank of Canada and the Canada Mortgage and Housing Corporation, from October 2008 until well into 2010. The same thinktank has warned against excessive bragging about Canadian banks, calling it a “myth of Canadian exceptionalism” and insisting they are not “immune to the temptations and threats that compromised banks in Europe, the US and around the world”.

Private correspondent from Canada

Carney did little or nothing to ensure the economic well-being of Canada.  He inherited a good situation. Our banks are kept on a tighter regulatory leash than the UK or US based banks and China’s demand for natural resources buoyed our economy.   It has not been much mentioned in the press with this appointment that Carney’s knowledge of the private sector comes from having spent 13 years with Goldman Sachs. So Goldman Sachs now takes over the Bank of England?  Goldman Sachs has cost the American government billions of dollars.  Its power is much too pervasive and I believe that Carney’s link with Goldman should have disqualified him for the job.

Brendan Brown of Mitsubishi UFJ Securities writes in his Daily Commentary

Will the Canadian dollar, Canadian real estate, and Canadian consumer credit bubbles have burst by the time BoC Governor Carney takes up his new residence in London’s Threadneedle Street?

Euphoria about Canada’s prospects as a commodity-producing nation and the attractions of its currency and residential real estate markets to yield-hungry and safety-hungry global investors powered a fantastic rise of the Canadian dollar, which was just last week awarded “reserve currency status” (together with the Australian dollar) by Mme. Lagarde’s IMF.

Yet the warnings about how Canada’s long-day journey under the monetary leadership of Governor Carney into asset price inflation might end have been becoming shriller. In particular the focus has been on a sudden weakening in key indicators from the housing sector alongside data underlining the extent of the consumer credit bubble. Professor Shiller issued his TV warning about the Canadian housing market following the US bubble-burst from 2006-11 in slow motion. There has been the first credit-rating downgrade of leading Canadian banks.

The doctrine followed by the Bank of Canada is what Robert Pringle (author of “The Money Trap”) has described as “inflation targeting plus” – a combination of inflation targeting, “well-intended financial system regulation”, and awareness of speculative dangers – which has populated by now several journeys around the world into eventual monetary chaos. That doctrine is now the official belief of central bankers in all the “reserve centres”.

Business Insider reports that Nomura’s Philip Rush welcomes the decision but says his concern is

Specifically, how the proliferation of ex-Goldman’s bankers assuming senior policymaking positions around the world may feed popular mistrust, and how Mr Carney’s willingness to leave previous posts may reflect a lack of commitment to each job.