The [UK] Treasury opened the door to a more aggressive monetary policy on Wednesday, as aides to the chancellor welcomed the next Bank of England governor’s radical views on stimulus measure for flagging economies.
In a speech on Monday, Mark Carney suggested setting targets for the overall size of the economy, or nominal gross domestic product, rather than inflation. While Treasury officials said there were currently “no plans” to ditch the BoE’s 2 per cent inflation target, a spokesman for George Osborne added that “there’s quite a lot of interest in what he has to say … It reaffirms the fact that he is the central banker of his generation.”
You’re probably thinking I’m going to snicker at the “central banker of his generation” line. Nope, I’m still in shock that they equated NGDP with “the overall size of the economy.” But it gets worse. Scott quotes from another FT article:
In an August interview for the BBC, Mark Carney was definitive about the Bank of England governorship. “So is that a ‘no’ or a ‘never’”? he was asked. The reply came: “It’s both”.
Public denials of interest were reinforced in private by Mr Carney and his aides. Such was the certainty that the question on Monday was how did “never” become “yes”.
That affirmative took Westminster and the City of London by surprise when Mr Osborne announced that the Canadian would take over from Sir Mervyn King at the British central bank, in preference to an array of domestic candidates, with a mission to shake up the bank as it assumes sweeping new powers.
Announcing the appointment of the first foreigner to the post in the BoE’s 318-year history, Mr Osborne told the House of Commons that the ex-Goldman Sachs banker was “quite simply the best, most experienced and most qualified person in the world to do the job.”
. . .
But come the summer, Mr Osborne was a disappointed man. The Financial Times story in April, saying Mr Carney had been approached for the governor’s job, had forced the Canadian to issue ever more vehement denials. The Treasury believed them and was told “no” definitively, so officials believed.
They insist Mr Carney was not lying because his denials were true at the time.
Oh wait, I know the answer to this one: When they asked Carney before, and he said he would “never” take the job, that was simply his forecast of his future actions. And heck, if you looked at him right that second, he was right on target. That’s all you can ask of a central banker. To wait and see if his policy “works” is to ignore the insights of Market Monetarism.
Let’s put the economics aside. Does it worry anyone besides me just a teensy bit that this guy hasn’t even figured out where the BoE coffee pot is, and his people are already lying for him? Far be it from me to distrust an ex-Goldman Sachs banker, but still…