Carney v the BIS

Governor Carney has a tough job at the Bank of England, and he knows it.

Recently he has been peddling forwards and backwards on interest rate increases. Does he still sound convincing?

He was sat in front of the Treasury Select Committee on Financial Stability (is that an oxymoron?) back in July, and was questioned on some comments made by the Bank for International Settlements regarding stability, and how it is affected by unconventional monetary policy. The BIS was sounding the warning bells, pushing for a return to normal monetary operations, and warning that investors were blind to the risks of monetary tightening. This article has some detail, as well as the usual histrionic headline:

Mr Carney was refreshingly honest in his comments about the BIS, and about the limitations he faces in his own job:

‘Mr Carney told the MPs that the BIS report was “interesting”. But he added “It’s a report that’s made in a vacuum though, the vacuum of Basel, a world where a central bank doesn’t have a mandate… a world where a central bank is not accountable to Parliament and through Parliament to the people, to achieve specific targets.”

However, that’s just half the truth from Mr Carney though.

The truthful part is that the Bank of England is as far away from independence as its possible to be. It is nothing but a poodle of government, and by implication a poodle of the democratic process in the UK. It’s fairly clear where the will of the voters will take the UK, and its currency too, as the gravy train is ridden to its inevitable final destination. Place your bets accordingly.

The important part that is omitted by Mr Carney is of huge significance. The BIS was the driving force behind the formation and design of the Euro, the Euro-system of central banks, and the Eurozone itself. Did you know that? The BIS, rather than sitting within a vacuum, sits outside of a bubble, one that has existed for over a hundred years, and one that it will burst.

How many investors in the world have spotted that the Euro is totally different from every other currency ever to have existed, including those around today? We share with our clients the background to these differences and where they will lead the world, but for readers here, please consider whether the ECB has the same mandates and accountability as the Bank of England. Consider whether the ECB’s governing council is driven by short-term political influences (voters), or whether it is operating at a higher level. Is it concerned with ‘growth’, or with the proper management of its currency?

Mr Carney knows the world is changing (being driven to change, to evolve), and he will simply play his part in the UK, doing exactly as he is told. That’s democracy for you. Monetary policy driven by the masses, for the masses.

Good luck in the months and years ahead, most will need it.

Posted in Uncategorized Tagged with: