June 17, 2023 - 2:24pm
Former governor of the Bank of England Mark Carney has a phenomenal brass neck. After years of ruling over the Bank as it engaged in highly experimental monetary policies that are now seriously threatening the financial stability of the country, Carney tells The Telegraph that inflation in Britain is being caused by Brexit.
Carney’s case is so vague that it is difficult to discern. He acknowledges that we are experiencing the biggest energy shock since the 1970s due to the war in Ukraine, but he asserts that Brexit has triggered a “unique” adjustment for the country. How has it done this? What is the mechanism? Carney does not say.
The former governor refers to a report that he published in 2018 which he claims is now being vindicated by events. But Carney did not possess the clairvoyance in 2018 to foresee the Russian invasion of Ukraine and the energy crisis that resulted from it. And so, his predictions mean nothing. In finance we say that it is better to be wrong for the right reasons, than right for the wrong reasons. Somebody should tell Carney.
The real cause that the Canadian banker fails to acknowledge was the monetary policies he promoted during his time as governor that bear the most responsibility. There is a severe mortgage crisis now taking place in Britain, which can be directly tied to the experimental QE programme pursued by the Bank of England during Carney’s tenure. This programme drove borrowing rates down to rock bottom levels and sent property prices skyward. People borrowed at the extremely low rates to buy overvalued property, but now as interest rates rise, they are getting crushed.
This raises a further question. If Carney was so confident in 2018 that inflation was coming to Britain and higher interest rates would be required, why did his continue to maintain interest rates so low? If he took his crystal ball seriously, then the correct policy would have been to raise rates gradually and allow the economy to adjust to the higher rates. So the best guess is that Carney didn’t believe in his prognostications and the 2018 report was all show-and-tell.
The world has changed enormously since the war in Ukraine started last year. These geopolitical changes were not factored into the vision many had for a post-Brexit Britain. There is an interesting discussion to be had about whether Britain should go its own way in a world forming into large blocs. If Carney wants to contribute to the debate, maybe he should start there.
Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics
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SubscribeExcellent. The Bank of England has failed miserably to create stable normal conditions for the UK economy. Mr QE Zero Interest Net Zero ESG BS Carney as much as the hapless one eyed Nelsonian present Governor (I see no inflation risk…in an economy shutdown for 2 years!!!!!) Is responsible for the impending inevitable crash. For him to blame Brexit paperwork for the cost of lockdown inflation shows he is more interested in spouting Remainiac derangement groupthink than the truth.
Excellent. The Bank of England has failed miserably to create stable normal conditions for the UK economy. Mr QE Zero Interest Net Zero ESG BS Carney as much as the hapless one eyed Nelsonian present Governor (I see no inflation risk…in an economy shutdown for 2 years!!!!!) Is responsible for the impending inevitable crash. For him to blame Brexit paperwork for the cost of lockdown inflation shows he is more interested in spouting Remainiac derangement groupthink than the truth.
Why do people still listen to Carney? He epitomizes the incompetence of the ruling elite driving the west into oblivion. He has all the check marks, all the letters behind his name, all the right connections to very important people, but he lacks the analytical tools and vision to see the consequences of his policies. His hysterical ramblings about climate change have helped entrench net zero policies, which are the root cause of the energy crisis in Europe today.
Why do people still listen to Carney? He epitomizes the incompetence of the ruling elite driving the west into oblivion. He has all the check marks, all the letters behind his name, all the right connections to very important people, but he lacks the analytical tools and vision to see the consequences of his policies. His hysterical ramblings about climate change have helped entrench net zero policies, which are the root cause of the energy crisis in Europe today.
The Bank of England was given independence and a mandate to keep inflation at around 2% p.a. on the basis that monetary policy could control inflation and deliver that target. Yet when inflation surges over the target for a period of (at least) several years, the BoE and its apologists blame everything other than their monetary policy for that inflation – supply chain bottlenecks, war in Ukraine, pay claims by greedy workers, too little immigration, Brexit, and so on. Either the BoE can control inflation over the medium term – through interest rates, Quantitative Easing and Quantitative Tightening – or it cannot. If it can’t, it should hand responsibility, and accountability, for interest rate policy and inflation control back to the elected government. As it is, the BoE has power without responsibility – pursuing a low interest rate and very loose monetary policy with profound political and social justice consequences, but shirking accountability for the inflation which they were warned – but denied – would result.
The Bank of England was given independence and a mandate to keep inflation at around 2% p.a. on the basis that monetary policy could control inflation and deliver that target. Yet when inflation surges over the target for a period of (at least) several years, the BoE and its apologists blame everything other than their monetary policy for that inflation – supply chain bottlenecks, war in Ukraine, pay claims by greedy workers, too little immigration, Brexit, and so on. Either the BoE can control inflation over the medium term – through interest rates, Quantitative Easing and Quantitative Tightening – or it cannot. If it can’t, it should hand responsibility, and accountability, for interest rate policy and inflation control back to the elected government. As it is, the BoE has power without responsibility – pursuing a low interest rate and very loose monetary policy with profound political and social justice consequences, but shirking accountability for the inflation which they were warned – but denied – would result.
This man is quite frankly a moron.
You’d think he’d never heard of Milton Friedman: “Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output”.
Guess who was in charge of the quantity of money.
Guess who consistently failed to meet their 2% inflation target (“you only had one job …”).
Or is he yet another of those people who will claim that they were “present, but not involved” ?
MIlton Friedman overstated things with this. While most inflation is caused by monetary policy, i.e. things now cost more because the value of your money has declined, because I’ve been increasing the money supply, it is possible to have inflation where things cost more because there is a shortage of the raw materials, etc. you need to make them. Until somebody comes along with a new supply at a reasonable price. prices will remain high. No amount of futzing around with the interest rates, money suppy, etc will help matters. Now, usually this sort of inflation hits one sector of the economy but all the rest continue on their merry way. If there is a big copper shortage then many things will get more expensive, but most things will not, and people will just do without the copper-needed things until the supply improves. But energy is the real exception. If things are getting more expensive because the energy it takes to make things is more expensive, then this will crush all sectors of the economy because everybody needs energy.
Build nukes.
If money supply is maintained in equilibrium, if the cost of some things increase because of a shortage of raw materials etc, then demand for other things will decline (because there will be less money available to spend on them) and prices for those things should also decline, reducing inflationary pressures. If there has been a massive increase in money supply, and an increase in the savings ratio because people were locked up, then those offsetting reductions will not occur.
It’s remarkable how stuck the prices of those ‘other things in decline’ often are. Reduced demand should make the sellers lower their prices, but some of them are already pricing things as low as they can. So instead they _raise_ prices, by a whole lot, hoping that there are a very, very few buyers who have to have what they are selling at any price, and that this tiny section of their former mass market can pay for them to survive the storm. Sometimes this works. Mostly it doesn’t, and the firm goes bankrupt. But neither of these outcomes has a positive effect on inflation.
It’s remarkable how stuck the prices of those ‘other things in decline’ often are. Reduced demand should make the sellers lower their prices, but some of them are already pricing things as low as they can. So instead they _raise_ prices, by a whole lot, hoping that there are a very, very few buyers who have to have what they are selling at any price, and that this tiny section of their former mass market can pay for them to survive the storm. Sometimes this works. Mostly it doesn’t, and the firm goes bankrupt. But neither of these outcomes has a positive effect on inflation.
I agree there are other factors. But money supply – and the price of money (interest rates) was the thing directly under Carney’s control.
You’re correct that he also lobbied for higher energy prices. And continues to do so. Utter madness.
Assume you mean build nuclear power stations. Fully on board with that. Though I’d rather we come up with our own designs and industry here (as we used to – we invented them after all) and stopped the idiotic policy of buying one off reactors from the French or Chinese.
Carney’s clearly part of the problem and not part of the solution.
Yes, I meant building more power stations. 🙂 Energy self-sufficiency is the only way to isolate yourself from the sort of inflation caused by the price of energy.
You would think that there would be one ambitious politician able to make this argument, and campaign on ‘Never again will we be subject to this sort of inflation! Here is the plan and I will make this one work!’
In Sweden, as well, there was much talk of the 85% of us who want more nuclear plants vs the government who won’t give us them, but while the new government claims to be working on a new plan we still haven’t seen it. But this time Swedish industry is unlikely to give them a break. you see there is this new Swedish way to make steel. https://www.theguardian.com/science/2021/aug/19/green-steel-swedish-company-ships-first-batch-made-without-using-coal
But it needs lots of energy. When a commission last winter asked the question ‘but who would use the energy we would produce with a new nuclear plant’ they expected ‘we will sell it to the Germans and Danes.’ Instead they got _all_ the big industries — and Sweden hasn’t de-industrialised — and the military saying ‘me, me, I want some!’
Yes, I meant building more power stations. 🙂 Energy self-sufficiency is the only way to isolate yourself from the sort of inflation caused by the price of energy.
You would think that there would be one ambitious politician able to make this argument, and campaign on ‘Never again will we be subject to this sort of inflation! Here is the plan and I will make this one work!’
In Sweden, as well, there was much talk of the 85% of us who want more nuclear plants vs the government who won’t give us them, but while the new government claims to be working on a new plan we still haven’t seen it. But this time Swedish industry is unlikely to give them a break. you see there is this new Swedish way to make steel. https://www.theguardian.com/science/2021/aug/19/green-steel-swedish-company-ships-first-batch-made-without-using-coal
But it needs lots of energy. When a commission last winter asked the question ‘but who would use the energy we would produce with a new nuclear plant’ they expected ‘we will sell it to the Germans and Danes.’ Instead they got _all_ the big industries — and Sweden hasn’t de-industrialised — and the military saying ‘me, me, I want some!’
If money supply is maintained in equilibrium, if the cost of some things increase because of a shortage of raw materials etc, then demand for other things will decline (because there will be less money available to spend on them) and prices for those things should also decline, reducing inflationary pressures. If there has been a massive increase in money supply, and an increase in the savings ratio because people were locked up, then those offsetting reductions will not occur.
I agree there are other factors. But money supply – and the price of money (interest rates) was the thing directly under Carney’s control.
You’re correct that he also lobbied for higher energy prices. And continues to do so. Utter madness.
Assume you mean build nuclear power stations. Fully on board with that. Though I’d rather we come up with our own designs and industry here (as we used to – we invented them after all) and stopped the idiotic policy of buying one off reactors from the French or Chinese.
Carney’s clearly part of the problem and not part of the solution.
MIlton Friedman overstated things with this. While most inflation is caused by monetary policy, i.e. things now cost more because the value of your money has declined, because I’ve been increasing the money supply, it is possible to have inflation where things cost more because there is a shortage of the raw materials, etc. you need to make them. Until somebody comes along with a new supply at a reasonable price. prices will remain high. No amount of futzing around with the interest rates, money suppy, etc will help matters. Now, usually this sort of inflation hits one sector of the economy but all the rest continue on their merry way. If there is a big copper shortage then many things will get more expensive, but most things will not, and people will just do without the copper-needed things until the supply improves. But energy is the real exception. If things are getting more expensive because the energy it takes to make things is more expensive, then this will crush all sectors of the economy because everybody needs energy.
Build nukes.
This man is quite frankly a moron.
You’d think he’d never heard of Milton Friedman: “Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output”.
Guess who was in charge of the quantity of money.
Guess who consistently failed to meet their 2% inflation target (“you only had one job …”).
Or is he yet another of those people who will claim that they were “present, but not involved” ?
A carnie, or carny, is a term for a worker at a travelling amusement show. They were suspected of lacking in certain character traits. It is also, apparently, British slang for coax or cajole.
Why the English would import ( the eponymous? ) Mark Carney to run their monetary policy is beyond me, though we Canadians ought to have been grateful, since he was no longer running ours. I had his measure when he began muttering about the large cash balances Canadian corporations were holding their balance sheets in 2010, as if they preferred to earn bupkis on those balances rather than invest it, and as if it were any of his business.
Rumour has it that he might be in line to succeed His High Wokeness, the Dauphin of Sunny Ways ( that would be Trudeau ), so that he could do to us with fiscal policy what he has already done with monetary policy.
Anything you can do there to keep his show on the road and us out of harm’s way would be appreciated.
A carnie, or carny, is a term for a worker at a travelling amusement show. They were suspected of lacking in certain character traits. It is also, apparently, British slang for coax or cajole.
Why the English would import ( the eponymous? ) Mark Carney to run their monetary policy is beyond me, though we Canadians ought to have been grateful, since he was no longer running ours. I had his measure when he began muttering about the large cash balances Canadian corporations were holding their balance sheets in 2010, as if they preferred to earn bupkis on those balances rather than invest it, and as if it were any of his business.
Rumour has it that he might be in line to succeed His High Wokeness, the Dauphin of Sunny Ways ( that would be Trudeau ), so that he could do to us with fiscal policy what he has already done with monetary policy.
Anything you can do there to keep his show on the road and us out of harm’s way would be appreciated.
Good post. Carney exemplifies the bizarre combination of extreme arrogance and utter incompetence that seems increasingly to characterise the self-selected global apparatchiki. It’s an affront that his opinions are still sought by the media after the damage he has done.
On that basis would you concur we’d be blessed to now hear nought too from Bojo or Farage?
What damage has Farage done?
What damage has Farage done?
On that basis would you concur we’d be blessed to now hear nought too from Bojo or Farage?
Good post. Carney exemplifies the bizarre combination of extreme arrogance and utter incompetence that seems increasingly to characterise the self-selected global apparatchiki. It’s an affront that his opinions are still sought by the media after the damage he has done.
He was either caught asleep at the wheel… or knowingly allowed our country to suffer…
He was either caught asleep at the wheel… or knowingly allowed our country to suffer…
We can expect an increasing amount of this. With Labour leading in the polls and Starmer expected to enter No, 10, the Europhiles are on manoeuvres.
It’s entirely predictable that the dishonest Europhile obsessives, still smarting from not getting their way, are going to be building up the dishonest narrative that it is Brexit rather than the disastrous response to Covid and the war in Ukraine that are the cause of all our economic ills, with the intention that it will set Europhile Starmer up to tie Britain back into EU institutions, such as the Internal Market and Customs Union, with a view to taking us back to full membership.
No doubt Carney was asked to make this absurd statement. The man who pursued years of ultra-loose monetary policy that has left us with massive public and private sector debt piles and enormous asset price bubbles ripe to burst, has perhaps the greatest responsibility for the mess we are in now. He should be being eviscerated by economists, politicians and the MSM now for the recklessness and incompetence as Governor, not quoted as some economic sage.
Those who fought for Britain’s independence need to get back in to the fight. The Europhiles are being allowed to get away with their lies because there is little countering of their narrative, The big push by the Europhiles will be if/when Labour win the next GE. Those who wish to preserve our freedom need to be vociferously countering the Europhiles’ lies in the media now and getting themselves organised and prepared for the battle that will ensue if Starmer becomes PM.
Exactly as you said.
They own the media so you can present as much fact as you like it won’t matter.
Carny couldn’t pass GCSE high school economics exams without a C “could do better” – who knows what nonsense he’s speaking to the press for his remainder pals. Best he shuffle off to Canada and pick up the baton from Trudeau, another walking disaster. Apologies to any Canadians reading this, I am sincerely sorry for your Trudeau generated woes.
They ‘own’ the media? One has to chuckle at such twaddle. So they ‘own’ the Mail and Murdoch do they?
Carney overplays his argument but irrefutable Brexit added major difficulties to UK economy. The man reason comments here pile into the ex Governor is deflection.
They ‘own’ the media? One has to chuckle at such twaddle. So they ‘own’ the Mail and Murdoch do they?
Carney overplays his argument but irrefutable Brexit added major difficulties to UK economy. The man reason comments here pile into the ex Governor is deflection.
Exactly as you said.
They own the media so you can present as much fact as you like it won’t matter.
Carny couldn’t pass GCSE high school economics exams without a C “could do better” – who knows what nonsense he’s speaking to the press for his remainder pals. Best he shuffle off to Canada and pick up the baton from Trudeau, another walking disaster. Apologies to any Canadians reading this, I am sincerely sorry for your Trudeau generated woes.
We can expect an increasing amount of this. With Labour leading in the polls and Starmer expected to enter No, 10, the Europhiles are on manoeuvres.
It’s entirely predictable that the dishonest Europhile obsessives, still smarting from not getting their way, are going to be building up the dishonest narrative that it is Brexit rather than the disastrous response to Covid and the war in Ukraine that are the cause of all our economic ills, with the intention that it will set Europhile Starmer up to tie Britain back into EU institutions, such as the Internal Market and Customs Union, with a view to taking us back to full membership.
No doubt Carney was asked to make this absurd statement. The man who pursued years of ultra-loose monetary policy that has left us with massive public and private sector debt piles and enormous asset price bubbles ripe to burst, has perhaps the greatest responsibility for the mess we are in now. He should be being eviscerated by economists, politicians and the MSM now for the recklessness and incompetence as Governor, not quoted as some economic sage.
Those who fought for Britain’s independence need to get back in to the fight. The Europhiles are being allowed to get away with their lies because there is little countering of their narrative, The big push by the Europhiles will be if/when Labour win the next GE. Those who wish to preserve our freedom need to be vociferously countering the Europhiles’ lies in the media now and getting themselves organised and prepared for the battle that will ensue if Starmer becomes PM.
Or rather, like may economists, his case may be ‘vindicated’ when things go wrong or things go right. You might argue that his case is so vague because it is intended to retrospectively justify anything.
Exactly. Economics is not a science.
Exactly. Economics is not a science.
Or rather, like may economists, his case may be ‘vindicated’ when things go wrong or things go right. You might argue that his case is so vague because it is intended to retrospectively justify anything.
What about the money the government just printed over Covid and the $5bn wealth transfer to the richest of society, more billionaires created than any other time. The crash in 2018 and the printing of money whilst crashing asset base and global companies buying up all the assets Pennie’s on the dollar. Whatabout every major listed company linked to Blackrock, WEF, Un, WHO all these NGOs, and ESG work programmes which are systematically all charging well above the inflationary rate for goods and services whilst systematically crashing stocks on well established global markets due to their societal impact through Pride pieces, not educating just pushing propaganda to divide people like they have done on race and religion forever. This “Firesale” of crashing markets, taking out property ownership, creating proxy wars with unlimited funds, creating crisis on migration so they print more money, and then creating high interest rates which benefit the very rich and decimate the middle classes! All this is coincidental even though it is highlighted as the blueprint by the WEF to move to One World Government, and all governments changing laws to enact the same policies at the same time, whilst abusing positions of power. There is no nuisance in these arguments, it’s all done at the global level and put in plan. Like the next cyber crash on banking! These globalists are so smart but it’s so easy to see when you stop looking at the micro details and focus on macro trends. Critical thinking has been lost and so easy to get people to focus and distract them with small issues, keep you in fighting while the big systematic changes are happening. I wish I had been born to the elites sometimes, because people do not unite and are so thick and believe because of piece of paper they got a university makes them intelligent. Majority of are thick and easily programmable! Fact!
What about the money the government just printed over Covid and the $5bn wealth transfer to the richest of society, more billionaires created than any other time. The crash in 2018 and the printing of money whilst crashing asset base and global companies buying up all the assets Pennie’s on the dollar. Whatabout every major listed company linked to Blackrock, WEF, Un, WHO all these NGOs, and ESG work programmes which are systematically all charging well above the inflationary rate for goods and services whilst systematically crashing stocks on well established global markets due to their societal impact through Pride pieces, not educating just pushing propaganda to divide people like they have done on race and religion forever. This “Firesale” of crashing markets, taking out property ownership, creating proxy wars with unlimited funds, creating crisis on migration so they print more money, and then creating high interest rates which benefit the very rich and decimate the middle classes! All this is coincidental even though it is highlighted as the blueprint by the WEF to move to One World Government, and all governments changing laws to enact the same policies at the same time, whilst abusing positions of power. There is no nuisance in these arguments, it’s all done at the global level and put in plan. Like the next cyber crash on banking! These globalists are so smart but it’s so easy to see when you stop looking at the micro details and focus on macro trends. Critical thinking has been lost and so easy to get people to focus and distract them with small issues, keep you in fighting while the big systematic changes are happening. I wish I had been born to the elites sometimes, because people do not unite and are so thick and believe because of piece of paper they got a university makes them intelligent. Majority of are thick and easily programmable! Fact!
Why stop there?
I’m rather surprised that no one seems to be calling into question the merits of operationally independent central banks. Right now it’s hard to see what the independence adds. It may be, of course, that politically set interest rates would have been zero and there would have been QE.
One could very reasonably argue after all that it is not Rishi Sunak’s job to somehow fix the mortgage market or, for that matter, bail out mortgage holders. I am quite sure that calls to subsidise mortages are on the way.
The more general problem though is giving the establishment new toys like 0% (or negative) interest rates or QE – the toys have a habit of never going back in the box.
Funny thing is that I remember in about 1990 my Auntie paid to get out of a fixed rate mortgage. Times change!
Why stop there?
I’m rather surprised that no one seems to be calling into question the merits of operationally independent central banks. Right now it’s hard to see what the independence adds. It may be, of course, that politically set interest rates would have been zero and there would have been QE.
One could very reasonably argue after all that it is not Rishi Sunak’s job to somehow fix the mortgage market or, for that matter, bail out mortgage holders. I am quite sure that calls to subsidise mortages are on the way.
The more general problem though is giving the establishment new toys like 0% (or negative) interest rates or QE – the toys have a habit of never going back in the box.
Funny thing is that I remember in about 1990 my Auntie paid to get out of a fixed rate mortgage. Times change!
I thought it was agreed that Mr Biden’s sanctions on Russia were a major cause of Western inflation.
Ukraine conflict is undoubtedly a major cause. the question is why is inflation in the UK more stubborn than elsewhere? The Bond markets signalled that when last inflation figures showed an underlying resistance to reducing peculiar to the UK. That’s what’s triggered things now.
So what is unique? Labour shortages a significant factor. Oh and of course Brexit – what a total shambles.
This country only has one really major economic problem – and it has little to do with Brexit.
What’s that HB? Certainly intrigued now.
What’s that HB? Certainly intrigued now.
This country only has one really major economic problem – and it has little to do with Brexit.
Ukraine conflict is undoubtedly a major cause. the question is why is inflation in the UK more stubborn than elsewhere? The Bond markets signalled that when last inflation figures showed an underlying resistance to reducing peculiar to the UK. That’s what’s triggered things now.
So what is unique? Labour shortages a significant factor. Oh and of course Brexit – what a total shambles.
I thought it was agreed that Mr Biden’s sanctions on Russia were a major cause of Western inflation.
Carney just saw the opportunity to pronounce that his predictions of Brexit doom and gloom were correct. I always expected him to do this.
Carney just saw the opportunity to pronounce that his predictions of Brexit doom and gloom were correct. I always expected him to do this.
It’s not one thing is it. QE had a role, albeit more a suppressant on Interest rates and mortgages thus doubling the shock impact now. But House prices aren’t currently driving the jump in inflation. Quite the reverse for the time being.
Energy crisis and supply chain adjustment post pandemic big factors. But irrefutable Brexit added an additional adverse dynamic to the UK. Weakened Pound clearly resulting from Brexit = higher import cost. Labour shortages clearly exacerbated by Brexit, albeit not the main driver for those but nonetheless hasn’t helped. Additional Brexit bureaucracy added costs too.
Carney overplays the blame, but at same time you’d have a heck of a job finding an economic benefit to Brexit and it just may be a part explanation for why we are doing worse on inflation than others. Uncomfortable for supporters, but they may argue Brexit wasn’t about economic benefits but more opaque contentions about sovereignty
It’s not one thing is it. QE had a role, albeit more a suppressant on Interest rates and mortgages thus doubling the shock impact now. But House prices aren’t currently driving the jump in inflation. Quite the reverse for the time being.
Energy crisis and supply chain adjustment post pandemic big factors. But irrefutable Brexit added an additional adverse dynamic to the UK. Weakened Pound clearly resulting from Brexit = higher import cost. Labour shortages clearly exacerbated by Brexit, albeit not the main driver for those but nonetheless hasn’t helped. Additional Brexit bureaucracy added costs too.
Carney overplays the blame, but at same time you’d have a heck of a job finding an economic benefit to Brexit and it just may be a part explanation for why we are doing worse on inflation than others. Uncomfortable for supporters, but they may argue Brexit wasn’t about economic benefits but more opaque contentions about sovereignty