New governor, old policies
I’ve never been to Canada. I’m sure it’s a wonderful place. It has vast reserves of mineral wealth, there’s plenty of space, and it shares a border with the most powerful nation in the world (handy for all sorts of reasons). But one thing I can say for certain is that none of these considerable advantages has come about as the result of having Mark Carney head up their central bank for the past five years. So why is everyone getting so excited by the fact that he’s going to take over from Sir Mervyn King as governor of the Bank of England?
We keep hearing that it’s great to have an ‘outsider’ with a mandate to ‘shake up’ the Bank’s ‘stuffy’ culture. Frankly, I couldn’t care less about the Bank’s culture, stuffy or otherwise. I’d much rather look at its record on the economy. On that front, the Bank made two really big mistakes over the past decade. The biggest error was to watch a huge property bubble inflate right before its eyes, and do nothing about it. In fact, it aided and abetted the bubble by keeping interest rates at rock-bottom levels and even cutting them when we had a sniff of a correction in summer 2005.
Its second-biggest mistake was in failing to allow the bubble to then burst properly. Americans got lucky, in that the Federal Reserve was unable to prevent their crash. Now it looks like they will bounce back to health before we do. In Britain, we’ve been left with a semi-deflated bubble, hordes of mortgage prisoners, and a vestigial mini-bubble in London, all of which are holding back our economy.
So what interests me about Carney is: does his record suggest he’d have done anything different? Sadly not.
• Read the full editor’s letter here: New governor, old policies.