Now he has the job, the new Governor in waiting for the Bank of England is letting it be known that there are limits to what a solitary Central Banker can achieve.
Mr Carney comes from the global establishment. Doubtless some of the new IMF fashion for more deficit stimulus is rubbing off on him. Doubtless the realisation that the UK is getting closer to an election will mean he wants a bit of room for political movement. After all, no-one wants this Coalition government to survive 2015.
The position he will inherit is not all bad, as some bloggers here suggest. It is interesting that when the UK suffered its first rating downgrade from AAA the cost of ten year borrowing was 2.1%. This week-end, with another agency downgrade just announced, the cost of ten year borrowing is under 1.7%.
There are three likely reasosn for this further fall in UK borrowing costs. The first is the UK authorities stand ready to buy more of their own debt. The second is they already own a large quantity. If they eventually decide to simply cancel the debt they now own, the UK state would have a relatively low outstanding debt. Many market participants are sceptical that the UK authorities will get around to selling this debt they own back to the private sector. The third is there are several Euro countries in a far worse plight than the UK, so the Uk is still to some a “safe haven” at a time of Euro trouble.
Any government would, however, be unwise to think there are no limits on how much it can borrow and print. The UK economy is being held back by a public sector that is both too large for the tax capacity of the current economy, and by a public sector that has not matched the best of the private sector in delivering quality and efficiency. Government does need to work away at bringing tax capacity and spending more into line. It also needs to relieve the 5 year squeeze on the private sector. Next week I will look again at ways to do just that. Some tax rates are too high, the state banks are wrongly structured and regulated, energy prices are too high, and infrastructure investment is too slow and too dependent on state finance.