Monday, November 26, 2012

On Carney

Not sure how shocking it was beneath the surface but Osborne's courting of Mark Carney has to count as a bold move. After all, this is a central bank that has been in existence since 1694 and is under immense pressure just like the Fed in a world where conventional monetary policy has long since faded. The appointment of a Canadian ex-GS alum with an encouraging blend of banking experience says a lot about the situation. It's an unconventional, if not obvious appointment, for an unconventional era in central banking. 

Dr. Carney is known more recently for a relatively unscathed stewardship of Canada's central bank, a bust-up with the outspoken JP Morgan head Jamie Dimon, and attacks on fellow regulators (among them Andy Haldane, the leader of the simpler-regulation brigade) among other things.

The bottom line is - he has a huge task at hand. 

The overall reaction has been positive but that's also an outcome of the general empathy to change when the status quo doesn't seem to cut it. Martin Wolf lists three immediate issues - namely, the political (that a central bank in a fiat world makes decisions which have a huge impact on society), the organizational (enabling the consolidation of the various sub-authorities) and lastly (and most obviously!), the intellectual - that with a non-existent consensus on fiscal issues, there needs to be a complete re-think on long-term sources of growth etc. 

The devil's normally in the details and Osborne was determined (or desperate!) enough to tweak the details in his candidate's favor - a 60% salary hike, an eight to five year reduction in term and relocation expenses taken care of. 

All this for the man, who had this to say in response to Dimon's tirade, "If some institutions feel pressure today, it is because they have done too little for too long, rather than because they are being asked to do too much, too soon," and this of Haldane and his call for simpler regulation, "(Haldane’s) conclusion is not supported by the proper understanding of the facts."

Good times at the BoE.

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