Forward into a Brave New World With Mark Carney

It’s been an exciting few weeks here in Britain.  With a sizzling heat-wave giving us our first real summer weather in seven years,  a British Wimbledon Champion, a British winner in the Tour de France for the second year in a row, success in the Ashes, and a brand new royal baby boy, things seem to be going remarkably well.  Good grief, if things keep going like this, we may even win the Eurovision song contest next year! Well, maybe that is asking too much, but at the moment there are even whispers that the economy may be starting to pick up.

After the departure of Mervyn (now Lord) King, Mark Carney is currently settling in as the new Governor of the Bank of England. His previous role was as Governor of the Bank of Canada; he is good-looking, glamorous, and right now his star is high.  British hopes and expectations are high too, as under Mr Carney’s stewardship Canada managed to avoid the worst of the global recession.

Mark Carney

His responsibilities in his new post are many and heavy. The Bank of England is the UK’s Central Bank, which, these days, has the additional responsibility for setting the national interest rate. As Governor of the Bank of England, Mr Carney is also chair of the Monetary Policy Committee.  From 2013 onward the Bank of England acquires even greater powers, including setting the baseline for bank capital requirements. 

When you consider that  he is also member of the BIS Committee for the Global Financial System, a maker of global financial policy, and that since 2011 he has held the post of Chairman of the Financial Stability Board, it all adds up to make him one of the most important and influential players in the global economy today.

What can we expect from the glamorous Mr Carney? How will he be different from his predecessor, Sir Mervyn King?  Well, during his tenure as Governor of the Bank of Canada his monetary strategy was based on the philosophy of ‘Forward Guidance’.  Expect a shift away from radical ploys such as Quantitative Easing, and more reliance on boring old values like careful husbandry and financial prudence.

We all know that interest rates in the UK are at an historically all-time low. So is there any more that Mark Carney can realistically do to foster economic growth?  A couple of things that financial analysts are talking about:-

·          The Bank of England has direct control over the short-term interest rate to High Street bank.  He could consider a strategy of reducing longer-term interest rates.

·        Using Forward Guidance principles he will probably adopt a ‘wait and see’ approach to the short-term interest rate, maintaining the rock-bottom 0.5% rate at least until the economy achieves certain conditions, such as a fall in unemployment or a rise in GDP.

The appointment of the new Governor has come at a time of relative optimism in the UK, when, apart from the long-awaited achievements in the world of sport, there are finally some signs of a recovery in the ailing economy.  For Mr Carney, hopes and expectations that he will be our financial saviour are sky-high, and many are looking to him for innovation as well as leadership.  Only time will tell if he can succeed in the UK as he did in Canada. Maybe the time is right for more British prosperity and achievement.  We have a Wimbledon champ and a Tour de France winner, so why not aim higher now? Since he is so handsome, talented, popular and versatile, why don’t we get Mark Carney to represent us in the European Song Contest next year?  We may just stand half a chance of getting more than our usual ‘nul points’!