Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Report on Business

Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Economy Lab has moved

Only Globe Unlimited members will now have access to a wide range of insightful commentary
and analysis on the economy and markets previously offered on this page.


Globe Unlimited subscribers will be able to read these columns,
written by some of Canada’s most deeply respected economists,
such as Christopher Ragan, Sheryl King, Andrew Jackson, and Clement Gignac,
as part of our ROB INSIGHT section.


All of our readers will still be able to browse the Economy Lab archives and read our
broader coverage of economic data and news by accessing their 10 free articles a month.


Learn more about Globe Unlimited and how to subscribe.

Bank of Canada Governor Mark Carney speaks during a press conference at the National Press Theatre in Ottawa, Jan. 23, 2013. (Sean Kilpatrick/The Canadian Press)
Bank of Canada Governor Mark Carney speaks during a press conference at the National Press Theatre in Ottawa, Jan. 23, 2013. (Sean Kilpatrick/The Canadian Press)

Five answers to extract from incoming Bank of England governor Carney Add to ...

Mark Carney is in a good position to answer some hard questions. Central bank governors usually have to worry about policies here and now, but Mr. Carney is effectively between jobs – leaving the Bank of Canada and not yet installed as governor at the Bank of England. When the U.K. Treasury Committee hear Mr. Carney on Thursday, they should think big. Here are five suggestions:

More Related to this Story

1. What did Mervyn King do wrong? Mr. Carney’s predecessor must have made some mistakes, since the U.K. went through bubble and bust, while the central bank often looked slow or out of touch. Mr. Carney is in a good position to draw some lessons.

2. Are central banks impotent or stupid? Central bankers are pushing unprecedented quantities of ultra-cheap and newly created money into the financial system, but the real economy is not responding. Perhaps Mr. Carney should explain what, if anything, he thinks such policies can accomplish, and whether they really are as risk-free as proponents claim. To start, he may want to justify the years of punishment meted out on savers.

3. How many policy targets should central banks have? The Bank of England has a single target, an inflation rate of 2 to 3 per cent. Mr. Carney has suggested that a nominal GNP target might work better. In any case, the crisis hit when inflation was under control. Perhaps the central bank’s mandate should be expanded to include leverage levels, financial asset prices – or protection of savers.

4. Is a large financial sector a good thing? It certainly looks like large and ambitious financial institutions bring structural risks. The issue did not arise in Canada for Mr. Carney, a former Goldman Sachs banker. It is crucial in the U.K., where finance is a leading export industry.

5. Can central banks really be politically independent? The notion that central banks could stand above the political fray looks, well, frayed after five years of making decisions that most people would think of as political. Mr. Carney has no British political connections, but that might not be an advantage.

As for Mr. Carney, this is a chance for him to tell politicians and investors just what to expect. He would be wise to make one request: Don’t expect monetary policy to work miracles.

Follow us on Twitter: @GlobeBusiness

In the know

Most popular videos »

Highlights

More from The Globe and Mail

Most popular