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The problem with Mark Carney

14 March 2013

In Washington last week, I encountered amazement that the Bank of England is about to be run by a foreigner. This was not because of any contempt for Mark Carney, the Governor of the Bank of Canada, who will soon succeed Sir Mervyn King, but because Americans could not imagine how a job so pivotal in the national psyche could be bestowed on someone with a different allegiance.

The Fed, though far from popular in a country constitutionally suspicious of central power, does have a mythic, incorruptible status. As a result, the chairman, Ben Bernanke, has a tiny (by banking standards) salary. Last year, he was paid $199,700. This is markedly less than the housing allowance of £250,000 a year that will be paid to Mr Carney, let alone the more than £600,000 a year which he will receive in salary. Does this vast difference in pay tell us something?

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Mr Carney’s nationality is not much of a problem in Britain, since we do not regard Canadians as full-blooded foreigners, but I do think there is another issue. It is that, because of the ‘independence’ of central banks nowadays and the introduction of quantitative easing, they have become huge political players. The very fact that they are at arm’s length means that they can conduct economic policies which governments want without the markets taking fright. QE is the Chancellor’s biggest single weapon, yet one which he can claim he does not control.

The trend, both here and in America, is for the central bank to get more and more involved in economic management. In the eurozone, the ECB virtually dictates to errant countries.

When he arrives in London, Mr Carney will be expected by the government to invest in private sector assets to get the economy moving, but the decision will be his, not its. There will then, rightly, be demands to make the Governor more politically accountable. And here the high salary and housing allowance give a clue to the problem. Mr Carney is contracted to be with us for only five years, so he is taking more money now, and no pension. People who know him say he wants to be the Liberal Prime Minister of Canada. If that is true, is it right that he should use the British economy as the guinea-pig for his policies and the springboard for the culmination of his career? Now that even a Pope can step down, virtually every job in the world has become something that the holder can put on his CV for the next one. Mervyn King is often criticised, but he has preserved a high reputation for the Bank by clearly acting without a political motive. If that reputation does not survive him, what will markets do then?

This is an extract from Charles Moore’s Notes from this week’s Spectator. Click here to read the full article. You can subscribe to the Spectator here.

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  • cowtownian

    I would not listen to American opinion of posting a Canadian to such an important role. Americans, first of all, generally dislike anything Canadian. Americans would not say the same if you posted an American to a similar position.

    Mark Carney is not responsible for the success of the Canadian system. However, he is a product of it. In 1929, not one Canadian bank was lost while American institutions failed massively. In the recent crisis, not one Canadian bank was lost. Americans scoff at our conservative policies towards regulation of the financial sector when times are good. However, stability is the goal, and Canadians are very happy that we forge our own path. Particularly, when times are bad.

    I lived in England (on a UK Ancestry Visa) in 2008. I was very surprised, as a Canadian, at the level of attention that the British media gives to American opinion and leadership. In my view, the UK needs to stop listening to American opinion and direction. Canadians have learned to distance themselves from American policy, and it has proven to be wise (financial crisis, Iraq war, Vietnam). I feel British society needs to do the same.

  • The Republic Lives!

    H.R. 129 Glass-Steagall in the US, and Glass-Steagall for the World. More at

  • Jules

    Another ‘genius’ Osborne decision………..not.

    • Daniel Maris

      Yep – no doubt he’s a clever guy but does he really understand the UK? Canada is a resources rich country with extremely cheap land, long coastlines on both the Pacific and Atlantic and huge agricultural production per person. Very different from the UK.

  • Jebediah

    Helpful. Having a go before the man starts. Also USA country the size of a continent 300 million people, and the world’s reserve currency. The UK will be a tad different.

    • Tom Tom

      Yes it will. He will need to spend his time with Draghi

  • Makroon

    The geniuses in Washington are obviously unaware of “The Problem” with the likes of King, Tucker, Bean and Haldane, not to mention Turner, O’Donnell and sundry other public sinecure junkies.

    I expect that they are disappointed that Krugman or Blanchflower wasn’t offered the job.

    • Tom Tom

      The Americans are well aware of these idiots but they have a problem and Geithner is the core of a deliberate attempt to create monopoly Mega-Banks and massive fraud in 2007 onwards. He needed these idiots as accomplices

  • Daniel Maris

    “Mr Carney will be expected by the government to invest in private sector assets to get the economy moving” What does this mean?

    Unless we put in place some investment institutions ,I am not sure what this is about – more funding via the existing banks?

    There was a business person from a medium sized firm on TV last night, talking about his engineering firm. He pointed to the problem that banks expect business people to put up their family homes as collateral.

    We need a national investment fund that can get back into the business of picking winners and making sure investment goes directly into making things and providing services that improve national productivity.

    • Makroon

      Which of course, the Sir Humphreys and random PPE grads in parliament, are eminently qualified to do, eh Daniel ?

      • Daniel Maris

        They don’t have to be civil servants doing the picking. You can employing business consultants and perhaps pay them through performance related pay e.g. if they pick the winners they get rich rewards down the line.

      • Tom Tom

        Why not ? We had Investors In Industry after 1945; Germans had Kreditanstalt fuer Wiederaufbau. Koreans and Japanese didn’t build industrial dominance on the kind of amateurism so prevalent in Britain

    • Tom Tom

      Personal Guarantees using houses should be outlawed as in Texas. It undermines Limited Liability Laws and no Bank Director has put his house on the line

  • 700islands

    As a Canadian Carney’s allegiance is to the Queen. Also, you can come from anywhere and become an American. You can also come from anywhere and become a Brit. Is this really a serious point to be making about the new head banker?

  • ScaryBiscuits

    Mervyn King has preserved a high reputation for the Bank by clearly acting without a political motive
    King – it should be remembered – was one of the 365 economists who infamously wrote to The Times predicting that the anti-inflation, sound-money policies of Mrs Thatcher were wrong. King has stuck to that same political opinion ever since and, in the opposite of the monetarism practised by Thatcher and Howe, presided over the loosest, most extravagant money-creation scheme ever practised by a major country.
    Facts don’t seem to bother Mervin. Neither the success of Maggie’s policies not the failure of QE seem to have dislodged him from the view that debasing the currency, effectively stealing from our creditors, is the path to growth. The only sense that he is not ‘political’ is that he is at one and indeed part of the same political class that has ruled this country through the entire period of its decline and to whom Mrs Thatcher was merely a populist intermission, with hopelessly unsophisticated ideas such as living within one’s means.

  • Vrai Telemachus

    Canada is already far advanced on the progressive pathway. Much more so than the UK. He will be a necessary actor in the development of a non-British or a new-British dominant class. I am sure he is a nice guy. But he does not represent and cannot represent the values of old-Britain. But that is why he has been chosen.

  • CraigStrachan

    He’s not a foreigner. He’s a Commonwealth nationsl.

    • HookesLaw

      This is alluded to in the article but otherwise the whole screed is a load of twaddle.

    • Tom Tom

      So a Pakistani Citizen could be chosen or perhaps a Nigerian ? It is however strange that Mark Carny is taking a 5-year punt on a basket-case economy where even today’s Die Welt has a headline wondering if Britain is going to go bankrupt before Italy and how rapidly CDS prices had risen since November. It is however a clear sign that NO UK Banker was deemed untainted by scandal to be put in such a position. Carney is there because he was the last man standing

      • Vrai Telemachus

        He has been chosen because it is always much easier for an outsider to implement painful decisions that will be required to continue our transition to a progressive state. When he makes these decisions, or is told to make these decisions, then it will be easier to just complain that he is a foreigner who doesn’t understand, and everyone can nod their head in agreement. But the painful decisions will still be made.

      • Carlazi

        there are plenty of capable bankers from nigeria, they arent all internet fraudsters. Carney is here because he the best available, simple.

      • CraigStrachan

        Maybe, but my point is that Commonwealth nationals are not foreigners in U.K. law.

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