Mark Carney Named New Bank of England Governor

“Mark Carney named new Bank of England governor”Guardian, 26 Nov 2012, 16.28 GMT [Hat-tip Aldous Huxtable and proteus]

Interesting, but not something that should affect the predicament of the Vancouver RE market.*
Carney is clearly very smart and very competent, so congratulations to him for the promotion, and we and most other Canadians would wish him well with the new job.
At the same time, the appointment is likely the result of larger, arguably ironic, forces: Canada’s accounts have appeared stronger because our debt spending (and closely related housing bubble) has not yet reached its inevitable crisis point. This delay is not Carney’s doing directly, there are too many forces at play to believe that, but he has been part of it. Canada and Carney haven’t by any means actually solved the problem, and have yet to deal with the unwinding. Household debt is at nosebleed levels, and there are clear speculative manias in housing in all major centres. The delay in reconciliation has given the false appearance of strength in Canadian fiscal governance. The UK has quite simply chosen a new BOE governor who looks strong because he’s from a place where the debt bubble hasn’t yet burst.
– vreaa

* – There is a possibility that this will effect sentiment. The BOC will obviously now rush to assure us it has firm hands on the tiller. It also may, interestingly enough, end up as another erroneous ’cause’ for the coming housing collapse, as in “Mark Carney leaving caused the housing market to crash”.

[vreaa comment on Guardian discussion thread 26 Nov 2012 5:16pm]

51 responses to “Mark Carney Named New Bank of England Governor

  1. Mr Carney saw the writing on the wall. Better to jump ship now than to be blamed for the crash.

    • This thought is going to have occurred to many of us ‘debt/RE bears’ on hearing the news.

    • If someone offers you the chance to rip out the weeds in the centre of the financial world — England — you take it. There is no conspiracy here, Carney is arguably the right man for the job. I doubt City bankers are amused; Carney knows most if not all of their tricks.

      • Nobody here has (yet) implied conspiracy (but the Guardian site already has a few comments re Goldman Sachs/cabal/etc).
        Agreed, no central banker anywhere would turn down this honour.
        I think the point David and I are making is that it doesn’t hurt for Carney to know he’s also leaving a coming challenging situation, that could possibly have been partly pinned on him.

      • “Rip Out The Weeds”… You’re such a Wag, Dr. J!

        [NoteToEd: My wager’s on TheWeeds.]

      • “Carney is arguably the right man for the job”

        Can you elaborate on that? What greatness has he accomplished as the head of BoC? I keep hearing how competent he was, how great he was, etc, but nobody has explained why so…

        While he can’t be made entirely accountable for the household debt level in Canada, he’s certainly some responsibility there… The timing of his nomination at the BoE couldn’t be more “fortunate”.

        “I doubt City bankers are amused”
        Apparently, they don’t seem to be so sad or worried either, by reading the latest statement from GS…

      • Cyril Tourneur

        Right man for the job if you mean executing what the bankers want. However, after having sold Canadians down the river (of debt), Carney has proved he is definitely not the right man for the people.

      • I don’t have visibility into what the Bank of Canada has done behind the scenes with the government but the regulations coming into place in Canada regarding Basel III, the recent changes to mortgage underwriting and and insurance under OSFI, as well as recent retrenchments of government-backed mortgage insurance, all seem to have been given the blessing by the Bank of Canada.

        Not everyone thinks Carney’s on the banks’ side. The undertones are that he’s somehow strategically manipulating the financial system in preference for banks. That is speculation at best. Canadians took on debt all by themselves; I have a hard time pointing the finger at anyone else.

        BTW arguably Carney’s appointment means the adoption of Basel III in the US will not be driven as hard because I think he will have to relinquish his chairmanship of the FSB.

      • Cyril Tourneur

        “It is a logical and empirical fact that artificially lowering interest rates will wreck an economy. There is nothing inherently flawed with the free market. The problems arise when central banks like the Bank of Canada expand credit via inflation via artificially low interest rates. Without a central bank, low interest rates indicate a high savings rate, thus sufficient capital to finance long-term projects. By injecting this new money into the system banks are partaking in capital consumption. Thus, long term projects are financed while consumers are spending in the here and now. Eventually the lack of sufficient resources becomes apparent and the boom becomes a bust.”
        http://mises.ca/posts/blog/cognitive-dissonance-at-the-bank-of-canada-2/

      • Well, I guess we should be glad that he closed the doors (mortgage lending tightening) after the horses left the barn (one of the largest real estate bubble in the world…).

        ” Canadians took on debt all by themselves; I have a hard time pointing the finger at anyone else.”
        That’s where I beg to differ… All these reckless lending would have never been possible without powerful forces. The blame should be shared between:
        – The borrowers (obviously)
        – The government for loosening lending standards and authorizing CMHC to insure $600b mortgages (remember 0% down, 40y am, interest only payment for 10 years? it was only 6 years ago…)
        – The banks, for pushing they mortgage on people as hard as they could, while not taking any risk with them (lending $700K on a $100K/year income? no problem!)
        – The Real Estate professionals, for being who they are, a bunch of lying and deceiving … (put the appropriate word here)
        – To a lesser extent the media, for being in the pocket of the RE industry and/or not looking hard enough at what has been going on during the speculative mania.

        Anyway, the finger pointing game has already started, which clearly shows that this bubble if finally bursting. While painful for the next 10 years, the situation will get better and this country will hopefully grow on stronger foundations.

      • The other likely candidate next to Carney was Jim O’Neill, chairman of Goldman Sachs Asset Management.

      • Makaya, that is a fair point. I wouldn’t be surprised if you got Carney alone in a room to spill his guts out he would say that refusing to rein in land price increases was the biggest mistake the government made while he was governor.

        It should be obvious, now, that the government reaizes, too late, that house prices are unsustainably high and they had the opportunity to quench it with more effective lending practices in place before and during the GFC. The barn door is being closed after the horses have left.

        On balance, though, I think Carney has advocated for changes, albeit too late, that wouldn’t have as aggressively been implemented if another was at the tiller. For that I think he deserves some commendation.

      • dr.y, why make excuses for him? … it’s very simple … people surprisingly responsive to reward-good punish-bad … and if this much power is to be entrusted individuals or executive bureau, it only works if they can recognize bad and have resolve to punish … for all the insanity that has passed, i don’t see much of that … in fact, i don’t see any at all and quite the opposite …ergo epic fail and epic reckoning tbd … when someone says “see you in hell”, i now consider it could just mean “see you later”

      • Doctor rod, after tonight’s experience, there is no doubt in my mind there are a great many people who HATE Mark Carney, and that means he was doing something good.

      • hey, i don’t hate the guy … and could even be persuaded to think he actually believes he is doing good things … otoh, things are really that simple imo and the biggest lies are propagated in plain sight … for a sample preview of the reckoning, recommend the sunny southern european expt … already quite messy and yet none of the root causes are even acknowledged – so far, they only got as far as understanding what they have in place won’t work … wonder how far down must go before a turn is reached

    • promotion for job well-done – hardly jumping ship … recall there was some concern about the possibility of nascent lib-fascismo … and ceding all monetary authority to a banking cartel with no direct accountability isn’t? … let’s see how the cat secessionists are dealt with?

  2. I think Carney’s done a good job. It is not rocket science. You watch unemployment, inflation and long interest rates, you set short interest rates, and you jawbone both the public and the Finance department.

    Yes, he sees a housing bubble. But with unemployment numbers not near capacity, he can’t raise rates and punish the broad economy just to squeeze out one bubble — that should be the job of other government departments, and I’m sure he’s said so, ad nauseum.

    We’ve had a stable dollar and low long term rates which, for a trading country with a commodity basis, is about as good as you can ask for.

    • ” he can’t raise rates and punish the broad economy just to squeeze out one bubble ”

      You’re getting it backwards. If the economy has hold steady after the GFC in 2008, that’s because of the huge increase of debt in the country. I can appreciate that he’s had his hands tied, but the fact is, he’s done nothing with the tools he had at his disposal to limit the excessive borrowing. Again, the disease is the excessive debt and the cure will be the burst of the bubbles created by excess liquidity, which will have massive consequences on the economy, of the scale of what’s been witnessed in the US and UK.

      • Are you actually saying that Carney should have been setting budget guidelines, modifying lending rules, formulating social policy and you know, doing all the other shit a a prime minister and his cabinet and parliament are supposed to be doing? No wonder all you fuckwits want to return to the gold standard because you all literally think the governor of the bank of canada is a monarch with boundless power to govern the country.

      • matt – “No wonder all you fuckwits want to return to the gold standard because…”
        I think you’re getting your blogs confused.

      • 4SlicesofCheese

        @matt

        I think the general public did think he did all those things you said.
        If he can get praised for them, then why can we not criticize those claims.

        We will never know what his intentions were or what he actually did day to day.
        But what is he getting praised for specifically?

  3. This is great news. I could not be happier. Mark has shown tremendous skill combined with down to earth common sense in his position as head of the Bank of Canada but this promotion is absolutely stellar and he has earned it. This is a great loss for Canada but let us keep in mind that he now moves to one of the most influential positions in the financial world. It is a feather in our cap that a Canadian was chosen above all others. Lets feel just a little pride that one of our own has risen to such high stature. The head of the bank of England no less. Very satisfying news.

  4. Another page ripped from the Greenspan playbook. Leave interest rates at 1% for years. Blow a big bubble. Skip town before it goes down.

  5. @YVR Housing Analyst

    I don’t have visibility into what the Bank of Canada has done behind the scenes with the government but the regulations coming into place in Canada regarding Basel III, the recent changes to mortgage underwriting and and insurance under OSFI, as well as recent retrenchments of government-backed mortgage insurance, all seem to have been given the blessing by the Bank of Canada.

    All of these recent actions are a pony show distraction from a hidden expansion of Canadian banks’ derivatives trading books. I’ll bet Basel III ‘guidelines’ (not rules) will be revoked or not met in short time.

    If there’s no accountability to taxpayers by laws with major fines and prosecutable offenses (with jail terms), nothing will change and banks will continue to lever-up their books until something eventually happens.

  6. At the time when other countries pile up national debt very fast, Carney accomplished transferring this problem to the citizens and off the government balance books, i.e. national books look better than the average and the personal books look worse than the average. It took some skills and guts but he accomplished what he wanted to – sacrifice some of the people in order to hold the economy for now providing the temporary construction jobs in a hope that the worldwide economy will recover in the meantime.
    Just do not assume that our housing bubble and the record personal debt are unintended consequences – the educated and smart economist as he is was perfectly aware of what he was doing – lowering the mortgage standards and rate (providing the means to buy) and opening the door for the investor immigration class that started to buy the homes and ignited the market (providing the motive to buy hoping to resell it later). His comments that people were not forced to participate speaks a lot here.
    This is exactly the type of the cold bloody killing economist that is being looked for to try to manage the UK economy now.

  7. Ok, you don’t like the gold standard, how about Canadian Tire money? Do we really need, and are we best served by, the Bank of Canada’s monopoly control of our currency?
    “These Canadian experiences with coupons issued by merchants demonstrate how privately issued currency can be created and come to be widely used They lend some support to the view that, given the chance, the public would accept backed, privately issued currency as a perfect substitute for government currency.”
    http://www.minneapolisfed.org/research/qr/qr911.pdf
    😉

  8. MarkTheCarney – a recent, albeit ‘somewhat’ underemployed, ArtInstitute Graduate – was both jubilant and astonished upon viewing his local CableAffiliate’s coverage of the BankOfEngland’s latest senior appointment… Initially bemused by TheOldLady’s failure to employ his proper name in the announcement – it quickly and savagely dawned upon him that he was not, after all, destined to become the next Governor of TheBankOfEngland… Naturally, the bitter after-taste of defeat more than affected MarkTheCarney’s performance at work that day… Even worse, the ‘mark’ he had chosen to cheat was, DarkMan…

    [NoteToEd: Think of it as a parable. In other news, I am reliably informed by EncryptedTransAtlanticCable that MarkTheCarney’s ‘package’ will be Sterling denominated and considerably better than his KnightedPredecessor’s more modest ‘PayPacket’… apparently owing to the fact that, as MarkTheCarney had declined to participate in TheOldLady’s PensionScheme, it was felt that a more generous stipend was necessitated. More to the point… if MarkTheCarney want’s all his Gilts UpFront, as it were, how does that reflect upon his actual, vs. declared, confidence in the enterprise better known to ExpatWarriors as, “Blighty”? Regardless, whatever we may think of him or his policies… the PoorChap is now obliged to ‘socialize’ with Canada’s HighCommissioner to Britain… Yes. He who shall not be named… but still has a MugShot on file in Maui. TeeHee!]

    [PS, ED – students of the assorted ArtInstitute’s are also, casually speaking, GoldMan Alumni – by virtue of their AlmaMaters’ inclusion in Education Management Corporation’s portfolio of guaranteed ‘earners’.]

  9. the_hundredaire

    You will be missed, Mr. Carney.In particular, your stern but loving lectures warning of amassing too much debt. But, alas, there are tushies to be paddled across the pond. Godspeed, young man.

  10. G&M has many of the same concerns we all do:
    “Mark Carney is leaving the Bank of Canada with a groomed successor in place, a slate of worthy outside candidates and a long list of thorny problems for whoever takes the job. …
    Whoever gets the job inherits an economy that has shifted rapidly to slower growth.
    A correction is under way in the housing market, household debt is at record levels, and businesses and consumers alike are feeling the strains of the global slowdown.”

    – from ‘New Bank of Canada head to inherit a thorny situation’, G&M, 26 Nov 2012

  11. You have to be able to lie very well to be a Central Banker. (Or a General, I suppose.. part of the job.) –

    This video clip from August shows a BBC interview with Mark Carney in August 2012.

    Scroll forward to 19.45 to see Carney asked whether he is interested in the Bank of England job. He grins, and replies

    “I’m interested in who they pick…. No… It’s an extremely important post. I’m very focused on my post at the Bank of Canada… and I look forwards to working with the next governor of the Bank of England…”

    Pressed on whether this is “a no or a never”, Carney said:

    “It’s both.”

    [pasted from Guardian thread]

    • You can fool some of the ‘peasants’ some of the time, IllustriousED – but you can never fool the Satirists and Lampooners…

      Just in, DearReaders! Steve Bell of the UK Guardian – arguably the world’s leading political cartoonist – has passed judgement on MarkTheCarney… [beverage alert – swallow thoroughly before viewing]…

      “GO MOOSE!… QUADRUPLE DIP HERE WE COME!…”

      http://tinyurl.com/blompxm

      • hahaha
        bizarre image

      • It’s get better… [#you can’t make this s**t up]

        [UK Telegraph] – New Bank of England Governor’s wife is ‘British by birth and Canadian by choice’

        ….”Mrs Carney urges readers of her website to live frugally. Describing herself as a “farmer’s daughter” she wears recycled vegan shoes, describes environmentally–friendly ways to tackle head lice and recommends “gardening with cow poo”.”…

        http://tinyurl.com/bpryfjr

        [NoteToEd: “Canadian by choice”, as, where else could a CentralBanker’s spouse possibly enjoy a surfeit of CowPoo and HeadLice than Rockcliffe Park, Ottawa?]

      • Note how the British press can always be relied upon to take the (gardening?) gloves off in ways we don’t here in Canada (by choice).

    • I’ve been known to defend lying as part of a central banker’s (any banker’s, really) job description.

      But c’mon, vreaa. Even most pro athletes are economical with the truth when asked about where they’d like to be working next — it’s just a common courtesy to your current employer, if nothing else.

      • Agreed, part of the job.
        But still arguably fascinating, isn’t it?
        That citizens put people in positions of power, and then expect them to lie to those very same citizens (ie themselves).
        Like politicians and campaign promises. How about holding them to the same standards we expect from 8 yr olds? (but it’d likely be argued that learning when and how to lie is part of growing up). It has been argued that lying well offers biological advantage.
        One of our ‘last frontiers’ clearly. Another is tribalism. But I digress…

      • Ralph Cramdown

        My Serbian friend’s take on it: “The academics debate and debate about the best course of action, then somebody stands up on a chair and promises free bread for everyone, and he gets all the votes.”

    • I have to say, vreaa, that clip exemplifies some concerns. His response was obviously not a medium term projection.

  12. Mark Carnage
    “But in reality he (Carmey) is just another Greenspan — a bubble-maker and reinflationist happy to pump the banking sector full of loose money and call it “prosperity” before the irrational exuberance runs dry, and the bubble inevitably bursts.”
    http://azizonomics.com/2012/12/01/mark-carnage/

  13. Pingback: Financial Times – “The lack of buyers is sobering evidence that Canada’s housing boom, which began in 2000 and bounced back to life after the financial crisis of 2008-09, is now over.” | Vancouver Real Estate Anecdote Archive

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