While Mark Carney is being feted around the world as the wise Central banker who 'saved' the Canadian financial system and has now been chosen to run an international financial regulatory agency...we may want to look a little closely at his achievements.1) Today we have consumer inflation running at 2.9%. What would a reasonable interest rate be in such a scenario? 3%? 4%? Not 1%. This is theft from savers.
2) Due partly to his Zero interest rate policy and lax lending, Canadians are the most indebted EVER! He may keep saying he wants people to pay down debt and save, but folks are not stupid. Why save, when you LOSE money every year?
3) He proclaims that he is against bail-outs and TBTF (too big to fail). yet our monolithic banks have a built in bail-out in the form of the potentially-ruinous CMHC, who's liabilities could bring the house down.
A recent report stated that while Canadian government debts were not as bad as many other countries, the high level of consumer debt, RE bubble and liability transfer to the Fed government..meant that we were actually at the same over-all debt level as any one of the PIIGS.
There was another Central banker who was lauded as a great genius and has now been shown to be a complete and utter fool, blowing up bubble after bubble..Alan Greenspan.
Lets hope that Carney ( and us ) do not end up in the same mess.
The fundamental problem is that Central bankers surround themselves with bankers, traders, investment bankers and sepculators. They go to their dinners, they come from that back-ground, they leave office and go back to big paying money-moving jobs. So when times are good, they hear the phrase..'Don't do anything' and when it finally hits the fan, 'help us, do something'. The result is the huge imbalances we have now.
The fact that one unelected official can have so much power over a country's fate is the biggest problem.
Totally agree Fish. When I first heard of his appointment I thought I was reading some satirical new piece a la The Onion.
ReplyDeleteWhat worries me is that this might put additional public pressure on MC when things do come unraveled to come up with creative ways to prop up RE.
Of course given the 'say no to TBTF' stance he will have to be creative but most out of country annalists have fully fallen for the CMHC head fake. So I guess it doesn't have to be all that inventive.
Thoughts on what to look for?
The naked yet still arrogant emperor under the baldequin is priceless, and your post is spot-on. Thank you for your blog - an oasis of sound commentary in a desert of lies, perpetrated on the innocent and foolish by those who wish to gain at their expense. You do the public a service.
ReplyDeleteRealist