John Redwood's Diary
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Welcome to Mr Carney at the Bank of England
July 1, 2013 23 Comments
My views on Mr Carney’s first day in the office are in this morning’s Times.
July 1, 2013 23 Comments
23 Comments
Jerry July 1, 2013
“My views on Mr Carney’s first day in the office are in this morning’s Times.”
Were, I suspect for the many (non Times readers/subscribers), they will remain unread…
Are you contracted to The Times for this item, if not then perhaps you could at least give us a synopsis here?
Reply I will write about it here soon. I was asked to do a piece for the Times last week and agreed to do so. There are various articles here setting out my views on the future conduct of economic and monetary policy for those interested.
lifelogic July 1, 2013
JR takes the usual sensible line in the Times article, but rather understated as usual given his position, he fails to point out clearly that without this dreadful government changing to a sensible, smaller state, direction there is little he can achieve.
Jerry July 1, 2013
@Lifelogic: Never mind changing direction to a smaller state, it would be nice if the Chancellor would accept the need to change direction, John might well suggest that Mr Carney has access to the Chancellor, he can have all the goodwill in the world but if the many at the top -the man than Mr Carney has to answer to- is to stubborn to to listen. John is quite correct, Mr Carney most certainly will need the lock of Goldilocks, if he isn’t going to be some “Bear markets” breakfast…
lifelogic July 1, 2013
Indeed but the major problem is with government direction without a sensible direction from Cameron and the EU. Carney is just an expensive person who can do very little.
RBS/Natwest, as you say, has has slimmed its balance sheet by ÂŁ900 billion since the crunch by sucking back capital and liquidity from, mainly solid, businesses who have then put their expansion or building projects on hold. Just in my small businesses this has delayed at least 6 new jobs, a new build and some expansion. Why on earth can Cameron and Osborne not even sort out the banks they own? The capital requirement of the Banks need relaxing and adjusting a little, the government are dealing with yesterday’s problem not today’s as usual. Barclay’s bank are quite right on this issue.
Above all Carney should tell Cameron he wants him to cancel all the daft capital projects like HS2, go for cheaper energy, have fewer planning controls and regulations, easy hire and fire, less augmenting of the feckless, escape the EU and its banking controls, get banks finally to lend sensibly to industry, reduce the pay, pensions and numbers in the largely parasitic state sector and finally set a low tax, small state vision.
He could also tell him to get rid of inheritance tax, they sensibly have non in Canada. Or at lease keep his ÂŁ1M threshold promise, his married allowance promise and EU referendum promise. I see Canada has a state sector some 10% lower than the UK’s relative to GDP – still too high but far better than the UK’s.
He should ask for this, and publicly say that, without these, he can do very little to help. He should also point out the huge and easily avoidable mistakes made by Mervyn King and Eddy George, and state that he will never repeat them. He should say he will govern the bank in the interest of the voters, jobs and growth not those of the state sector.
He could, if he is honourable and brave, perhaps even question why ex governors, the state sector and MPs get such huge and richly undeserved pensions relative to the private sector, who pay the price of them (and often can afford no pensions at all as a direct result).
Denis Cooper July 1, 2013
As I’m too “parsimonious” to pay the Times subscription, JR, I’m afraid I’ll have to forego the pleasure of reading your no doubt excellent article.
I’ve thought for some years that publishers who don’t want to offer free access should get together and adopt a pay-per-article system using a common unit of credit, so that I could buy say 100 credits and use them reading odd articles in different publications.
In fact I find that in 2009 the FT was mooting whether to go to pay-per-article:
Will Mr Carney be let into the building? No NI number yet? No P45? Left his passport and three tons of work permit paperwork at home? No chance!
Did Mrs May let him in? Another (new arrival-ed)
Reply: UK migration policy allows recruitment to senior posts from anywhere in the world, as you need to do if you wish to act as host to multinaitonal companies, world ranking universities etc.
Denis Cooper July 1, 2013
Of course it’s all nonsense, and we should just let anybody come here if they want without these unnecessary and bothersome restrictions.
That would be anything up to 7.1 billion people at the moment, rising by about 75 million a year, but, hey, if we run out of housing that will be our own fault for not building enough new houses to meet the demand.
And if anybody dares to suggest making a distinction between the 60-odd million people who are British citizens, and the 7,000-odd million other people around the world who are not British citizens, then clearly they are a racist.
Jerry July 1, 2013
@Denis Cooper: How many British nationals would leave the UK if there was true free movement of nationals between countries though, even if it was just within the EU (never mind worldwide), this side of the same coin is never mentioned by those who complain about migration… Auf Wiedersehen, Pet!
Denis Cooper July 2, 2013
Jerry, you still haven’t answered my question – How many of those 7.1 billion foreign citizens would be enough to satisfy your appetite for mass immigration into our homeland?
Jerry July 2, 2013
@Denis Cooper: “you still haven’t answered my question”
Because it is totally irrelevant if 8 billion British nationals leave! As I said, xenophobes like you never ever want to look at the wider picture.
Also your 7.1 billion figure for foreign citizens wanting to enter the UK [1] isn’t even laughable, it’s cringe-worthy of serious debate. But if you actually want to have such a serious debate about migration then fine, but start looking at both side of the same coin, and start using sensible figures, not something more often found within the propaganda of the far-right.
[1] as if the UK would be the sole destination of any such displaced people, even 7.1m economic migrants would likely not all come to the UK. Spain is more likely to be over whelmed than the UK , considering its proxsimity to North Africa
Denis Cooper July 2, 2013
There aren’t 8 billion British citizens to either stay or leave.
You do know the difference between a million and a billion?
I haven’t said there are 7.1 billion foreign citizens wanting to enter the UK; I’ve said there are 7.1 billion foreign citizens, rising by 75 million a year, and asked you how many of those 7.1 billion foreign citizens would be enough to satisfy your appetite for mass immigration into our homeland; you refuse to answer, preferring to retreat into accusations of “racism” and now “xenophobia”, and now also constructing a frankly idiotic scenario whereby 8 billion British citizens decided to leave despite 7.94 billion of them not even existing.
Just come clean and answer my question.
Jerry July 3, 2013
Denis Cooper: You have not asked a question yet, you have had a (words left out) rant.
Denis Cooper July 4, 2013
A pathetic response, Jerry, absolutely pathetic.
“You have not asked a question yet”
Yes, I have, it’s in one of the boxes above, it’s a series of words that ends with “?”, which is what we term “a question mark”.
You’d better think of an answer, because I’ll probably be asking you again in the future.
Jerry July 4, 2013
@Dennis Cooper: There ar4e not going to be 7 m people trying to enter the UK, never mind your absurd suggestion of 7 bn figure, so until you come up with a more realistic suggestion you ARE ranting rather than asking serious questions, and you still have not told us how many British poeple you expect to emigrate from the UK. As I suggested, if 1 m arrive but 1.5m leave the UK’s population has actually reduced in number…
Oh and sorry if my original sarcasm, re your plucked out of the air 7.1bn figure, pasted over your head!
Denis Cooper July 5, 2013
You should stop misrepresenting what I say and just answer the question. It’s a perfectly straightforward question and if you don’t have at least some kind of answer then you should refrain from commenting on these matters let alone throwing around personal accusations. However I suspect that you do already have an answer, but not one that you would wish to see published. No doubt this will come up again in the future.
Jerry July 6, 2013
Denis Cooper: “You should stop misrepresenting what I say and just answer the question.”
Talk about the frying pan trying to complain the kettle is dirty!
I have not miss represented you at all, nor have you asked any questions, as all you have done is have a rant (using utterly unrealistic numbers).
But on the subject of asking questions, I HAVE now asked you this three times now; How many UK nationals would you expect to leave the UK should there be true open boarders? Without that side of the equatio0n complaining about how many people might enter the UK is pointless (and it is this lack of data that is making your argument into a one-sided rant). As I said, if 1 million people enter a country but 1.5 million leave there will have actually been a net reduction in the population. That is also why I suggest that your rant is more about the racial make up of the UK than about total population figures (what the landmass can support).
Denis Cooper July 1, 2013
I hope Mr Carney’s staff will make sure that the very first thing he sees on his desk will be a copy of the latest MPC remit letter from George Osborne to Mervyn King, dated March 20th 2013:
“The Bank of England Act (1998) requires that I specify what price stability is taken to consist of and the Government’s economic policy objectives at least once in every period of 12 months beginning on the anniversary of the day the Act came into force.
I hereby re-confirm the inflation target as 2 per cent as measured by the 12-month increase in the Consumer Prices Index (CPI). The inflation target of 2 per cent applies at all times. This reflects the primacy of price stability and the inflation target in the UK monetary policy framework.”
Then they could tell him not to take it too seriously, because the Chancellor is usually pretty easy going about any failure to meet his inflation target, despite “the primacy of price stability and the inflation target in the UK monetary policy framework”.
It’s just a matter of writing an occasional Open Letter of explanation like this last one:
Anybody want to bet me 50p that the money printing will be as fast and furious as ever and it will be a long time before we even see a paltry 0.25% rise in the base rate?
Denis Cooper July 1, 2013
There will be no money printing unless the Chancellor authorises it, which on past form he would do without first seeking the approval of MPs.
The letters exchanged between the Governor and the Chancellor are here:
So for example King’s letter to Osborne dated July 5th 2012 ended with him requesting the authority to increase asset purchases to ÂŁ375 billion, and in his reply Osborne agreed to King’s proposal:
“I am therefore writing to authorise … ”
But as the inflationary effect of the creation of large sums of new money is akin to taxation, shouldn’t MPs insist that the Chancellor must get prior approval through a Commons vote before sending any such letter?
That would be simple enough procedurally, it would just require the Chancellor to lay a draft of his letter before the House and propose a motion to approve it.
Lindsay McDougall July 1, 2013
My open letter to Mr Carney is short: “End inflation; end it soon’.
To return to public expenditure, the following in this morning’s ‘i’ should not go without comment:
“HS2 rail link seeks power to borrow
The team behind the ÂŁ43bn High Speed 2 rail link wants new powers to borrow in debt markets and hedge against the cost of rising commodity prices. HS2’s commercial director, Beth West, is in talks with ministers over legislation to enshrine the new powers. She said raising debt would ‘bring in financial discipline’.”
Truly, people have such capacity for unintentional self lampooning that satire is impossible in the modern world. Anyone believing this nonsense is a swivel eyed loony.
Acorn July 1, 2013
It is going to be interesting to see how Mr Carney plays the game. It has transpired that he did all the correct things to Canadian Banks before the 2007 Crisis hit the US/UK casino banks. He realised they would cause rapid contagion around the planet. He had his commercial banks capitalised higher than they wanted to be and has kept them on a lead since. Mind you, he did have the advantage of a Finance Ministry staff that understood what he was doing, and he had been an Associate Minister in it before hand.
His non-standard monetary tool: the “conditional commitment” in April 2009 to hold the policy rate for at least one year, in a boost to domestic credit conditions and market confidence. Output and employment began to recover from mid-2009, in part thanks to monetary stimulus. The Canadian economy outperformed those of its G7 peers during the crisis, and Canada was the first G7 nation to have both its GDP and employment recover to pre-crisis levels. (HT: WIKI)
July 1, 2013
“My views on Mr Carney’s first day in the office are in this morning’s Times.”
Were, I suspect for the many (non Times readers/subscribers), they will remain unread…
Are you contracted to The Times for this item, if not then perhaps you could at least give us a synopsis here?
Reply I will write about it here soon. I was asked to do a piece for the Times last week and agreed to do so. There are various articles here setting out my views on the future conduct of economic and monetary policy for those interested.
July 1, 2013
JR takes the usual sensible line in the Times article, but rather understated as usual given his position, he fails to point out clearly that without this dreadful government changing to a sensible, smaller state, direction there is little he can achieve.
July 1, 2013
@Lifelogic: Never mind changing direction to a smaller state, it would be nice if the Chancellor would accept the need to change direction, John might well suggest that Mr Carney has access to the Chancellor, he can have all the goodwill in the world but if the many at the top -the man than Mr Carney has to answer to- is to stubborn to to listen. John is quite correct, Mr Carney most certainly will need the lock of Goldilocks, if he isn’t going to be some “Bear markets” breakfast…
July 1, 2013
Indeed but the major problem is with government direction without a sensible direction from Cameron and the EU. Carney is just an expensive person who can do very little.
RBS/Natwest, as you say, has has slimmed its balance sheet by ÂŁ900 billion since the crunch by sucking back capital and liquidity from, mainly solid, businesses who have then put their expansion or building projects on hold. Just in my small businesses this has delayed at least 6 new jobs, a new build and some expansion. Why on earth can Cameron and Osborne not even sort out the banks they own? The capital requirement of the Banks need relaxing and adjusting a little, the government are dealing with yesterday’s problem not today’s as usual. Barclay’s bank are quite right on this issue.
Above all Carney should tell Cameron he wants him to cancel all the daft capital projects like HS2, go for cheaper energy, have fewer planning controls and regulations, easy hire and fire, less augmenting of the feckless, escape the EU and its banking controls, get banks finally to lend sensibly to industry, reduce the pay, pensions and numbers in the largely parasitic state sector and finally set a low tax, small state vision.
He could also tell him to get rid of inheritance tax, they sensibly have non in Canada. Or at lease keep his ÂŁ1M threshold promise, his married allowance promise and EU referendum promise. I see Canada has a state sector some 10% lower than the UK’s relative to GDP – still too high but far better than the UK’s.
He should ask for this, and publicly say that, without these, he can do very little to help. He should also point out the huge and easily avoidable mistakes made by Mervyn King and Eddy George, and state that he will never repeat them. He should say he will govern the bank in the interest of the voters, jobs and growth not those of the state sector.
He could, if he is honourable and brave, perhaps even question why ex governors, the state sector and MPs get such huge and richly undeserved pensions relative to the private sector, who pay the price of them (and often can afford no pensions at all as a direct result).
July 1, 2013
As I’m too “parsimonious” to pay the Times subscription, JR, I’m afraid I’ll have to forego the pleasure of reading your no doubt excellent article.
I’ve thought for some years that publishers who don’t want to offer free access should get together and adopt a pay-per-article system using a common unit of credit, so that I could buy say 100 credits and use them reading odd articles in different publications.
In fact I find that in 2009 the FT was mooting whether to go to pay-per-article:
http://www.guardian.co.uk/media/2009/aug/07/ft-com-financial-times-pay-per-view-content-charging
but evidently decided against it.
July 1, 2013
Will Mr Carney be let into the building? No NI number yet? No P45? Left his passport and three tons of work permit paperwork at home? No chance!
Did Mrs May let him in? Another (new arrival-ed)
Reply: UK migration policy allows recruitment to senior posts from anywhere in the world, as you need to do if you wish to act as host to multinaitonal companies, world ranking universities etc.
July 1, 2013
Of course it’s all nonsense, and we should just let anybody come here if they want without these unnecessary and bothersome restrictions.
That would be anything up to 7.1 billion people at the moment, rising by about 75 million a year, but, hey, if we run out of housing that will be our own fault for not building enough new houses to meet the demand.
And if anybody dares to suggest making a distinction between the 60-odd million people who are British citizens, and the 7,000-odd million other people around the world who are not British citizens, then clearly they are a racist.
July 1, 2013
@Denis Cooper: How many British nationals would leave the UK if there was true free movement of nationals between countries though, even if it was just within the EU (never mind worldwide), this side of the same coin is never mentioned by those who complain about migration… Auf Wiedersehen, Pet!
July 2, 2013
Jerry, you still haven’t answered my question – How many of those 7.1 billion foreign citizens would be enough to satisfy your appetite for mass immigration into our homeland?
July 2, 2013
@Denis Cooper: “you still haven’t answered my question”
Because it is totally irrelevant if 8 billion British nationals leave! As I said, xenophobes like you never ever want to look at the wider picture.
Also your 7.1 billion figure for foreign citizens wanting to enter the UK [1] isn’t even laughable, it’s cringe-worthy of serious debate. But if you actually want to have such a serious debate about migration then fine, but start looking at both side of the same coin, and start using sensible figures, not something more often found within the propaganda of the far-right.
[1] as if the UK would be the sole destination of any such displaced people, even 7.1m economic migrants would likely not all come to the UK. Spain is more likely to be over whelmed than the UK , considering its proxsimity to North Africa
July 2, 2013
There aren’t 8 billion British citizens to either stay or leave.
You do know the difference between a million and a billion?
I haven’t said there are 7.1 billion foreign citizens wanting to enter the UK; I’ve said there are 7.1 billion foreign citizens, rising by 75 million a year, and asked you how many of those 7.1 billion foreign citizens would be enough to satisfy your appetite for mass immigration into our homeland; you refuse to answer, preferring to retreat into accusations of “racism” and now “xenophobia”, and now also constructing a frankly idiotic scenario whereby 8 billion British citizens decided to leave despite 7.94 billion of them not even existing.
Just come clean and answer my question.
July 3, 2013
Denis Cooper: You have not asked a question yet, you have had a (words left out) rant.
July 4, 2013
A pathetic response, Jerry, absolutely pathetic.
“You have not asked a question yet”
Yes, I have, it’s in one of the boxes above, it’s a series of words that ends with “?”, which is what we term “a question mark”.
You’d better think of an answer, because I’ll probably be asking you again in the future.
July 4, 2013
@Dennis Cooper: There ar4e not going to be 7 m people trying to enter the UK, never mind your absurd suggestion of 7 bn figure, so until you come up with a more realistic suggestion you ARE ranting rather than asking serious questions, and you still have not told us how many British poeple you expect to emigrate from the UK. As I suggested, if 1 m arrive but 1.5m leave the UK’s population has actually reduced in number…
Oh and sorry if my original sarcasm, re your plucked out of the air 7.1bn figure, pasted over your head!
July 5, 2013
You should stop misrepresenting what I say and just answer the question. It’s a perfectly straightforward question and if you don’t have at least some kind of answer then you should refrain from commenting on these matters let alone throwing around personal accusations. However I suspect that you do already have an answer, but not one that you would wish to see published. No doubt this will come up again in the future.
July 6, 2013
Denis Cooper: “You should stop misrepresenting what I say and just answer the question.”
Talk about the frying pan trying to complain the kettle is dirty!
I have not miss represented you at all, nor have you asked any questions, as all you have done is have a rant (using utterly unrealistic numbers).
But on the subject of asking questions, I HAVE now asked you this three times now; How many UK nationals would you expect to leave the UK should there be true open boarders? Without that side of the equatio0n complaining about how many people might enter the UK is pointless (and it is this lack of data that is making your argument into a one-sided rant). As I said, if 1 million people enter a country but 1.5 million leave there will have actually been a net reduction in the population. That is also why I suggest that your rant is more about the racial make up of the UK than about total population figures (what the landmass can support).
July 1, 2013
I hope Mr Carney’s staff will make sure that the very first thing he sees on his desk will be a copy of the latest MPC remit letter from George Osborne to Mervyn King, dated March 20th 2013:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/185552/chx_letter_to_boe_monetary_policy_framework_200313.pdf.pdf
It starts:
“The Bank of England Act (1998) requires that I specify what price stability is taken to consist of and the Government’s economic policy objectives at least once in every period of 12 months beginning on the anniversary of the day the Act came into force.
I hereby re-confirm the inflation target as 2 per cent as measured by the 12-month increase in the Consumer Prices Index (CPI). The inflation target of 2 per cent applies at all times. This reflects the primacy of price stability and the inflation target in the UK monetary policy framework.”
Then they could tell him not to take it too seriously, because the Chancellor is usually pretty easy going about any failure to meet his inflation target, despite “the primacy of price stability and the inflation target in the UK monetary policy framework”.
It’s just a matter of writing an occasional Open Letter of explanation like this last one:
http://www.bankofengland.co.uk/monetarypolicy/Documents/pdf/cpiletter120214.pdf
and he’ll send a sympathetic “OK, I agree with everything you say, just carry on” reply like this one:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/185562/chx_letter_140212.pdf.pdf
July 1, 2013
Indeed.
July 1, 2013
Anybody want to bet me 50p that the money printing will be as fast and furious as ever and it will be a long time before we even see a paltry 0.25% rise in the base rate?
July 1, 2013
There will be no money printing unless the Chancellor authorises it, which on past form he would do without first seeking the approval of MPs.
The letters exchanged between the Governor and the Chancellor are here:
http://www.bankofengland.co.uk/monetarypolicy/Pages/apfletters.aspx
So for example King’s letter to Osborne dated July 5th 2012 ended with him requesting the authority to increase asset purchases to ÂŁ375 billion, and in his reply Osborne agreed to King’s proposal:
“I am therefore writing to authorise … ”
But as the inflationary effect of the creation of large sums of new money is akin to taxation, shouldn’t MPs insist that the Chancellor must get prior approval through a Commons vote before sending any such letter?
That would be simple enough procedurally, it would just require the Chancellor to lay a draft of his letter before the House and propose a motion to approve it.
July 1, 2013
My open letter to Mr Carney is short: “End inflation; end it soon’.
To return to public expenditure, the following in this morning’s ‘i’ should not go without comment:
“HS2 rail link seeks power to borrow
The team behind the ÂŁ43bn High Speed 2 rail link wants new powers to borrow in debt markets and hedge against the cost of rising commodity prices. HS2’s commercial director, Beth West, is in talks with ministers over legislation to enshrine the new powers. She said raising debt would ‘bring in financial discipline’.”
Truly, people have such capacity for unintentional self lampooning that satire is impossible in the modern world. Anyone believing this nonsense is a swivel eyed loony.
July 1, 2013
It is going to be interesting to see how Mr Carney plays the game. It has transpired that he did all the correct things to Canadian Banks before the 2007 Crisis hit the US/UK casino banks. He realised they would cause rapid contagion around the planet. He had his commercial banks capitalised higher than they wanted to be and has kept them on a lead since. Mind you, he did have the advantage of a Finance Ministry staff that understood what he was doing, and he had been an Associate Minister in it before hand.
His non-standard monetary tool: the “conditional commitment” in April 2009 to hold the policy rate for at least one year, in a boost to domestic credit conditions and market confidence. Output and employment began to recover from mid-2009, in part thanks to monetary stimulus. The Canadian economy outperformed those of its G7 peers during the crisis, and Canada was the first G7 nation to have both its GDP and employment recover to pre-crisis levels. (HT: WIKI)
You should read this. Bankers like Mr J. Dimon , don’t like Mark Carney which makes me, Carney’s number one fan. http://www.euromoney.com/Article/3098264/Category/1/ChannelPage/0/Mark-Carney-Finances-new-statesman.html .
July 1, 2013
Well if he tries to use interest rates to control inflation – and includes house prices in the RPI then we are in for an interest rate rise.