Mark Carney and the start of Britain’s economic recovery?

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Image courtesy of CTV News Canada

Today the keys to the Old Lady of Threadneedle Street passed over to Mark Carney and Sir Mervyn King will bow out after 10 long years.

Between 2003 and 2013, the Bank of England saw this country’s financial sector rise so high and then fall further than ever before.

A week on from George Osborne’s Spending Review, which cut £11.5bn from public spending, there are more rumblings of uncertainty as Croatia joins the European Union with record unemployment and the possibility of yet another bailout. Further afield, there is speculation over the gradual end to quantitative easing in the US and concerns over a potential credit crisis in BRIC powerhouse China’s economy.

By any stretch of the imagination,  the UK economy is not out of the woods yet.

At this critical time, Mark Carney is getting some mixed reviews. Dubbed “the outstanding banker of his generation” by George Osborne, Carney was fast tracked into the role back in November and secured a massive pay packet to sweeten his departure from his previous role as Governor of the Bank of Canada.

Expectations are high for the so called ‘banking messiah’ to get Britain’s sluggish recovery going properly.

Canada was one of the only OECD countries to avoid a major banking crisis or subsequent recession which is probably why he is one of the best paid central bankers in history.

But while he has avoided the taint of the financial crisis and the subsequent Libor scandal last year his record is not entirely unblemished. His years in the toxic environment of Goldman Sachs and speculation that the calm state of Canada’s finances may be due more to its natural energy resources, its fiscal surplus and a more tightly regulated financial sector than its monetary policy, knocked his halo eschew slightly.

Indeed, according to the New Statesman, one of the other rejected candidates for the post said Carney was competent but “no messiah”.

No one should expect him to be. As exciting as it is to have someone young and glamorous (for a banker anyway) in the Governor’s chair, the hero worship which has crept up in certain corners will only set him up for a fall.

Because he has a fight on his hands. Not only did his predecessor fail to persuade the MPC to instigate more quantitative easing to keep the economy liquid, but Barclays Bank is threatening to “restrict” loans to households and businesses (£) in protest at the Bank’s new capital rule to rein in lenders.

Add to that the warnings of the outgoing Governor King, who said the economy was “nowhere near” ready to return to higher interest rates and that it could lend to younger people with large mortgages being unable to pay.

King’s warning gets to the heart of the problems in the British economy. It is a country desperately in need of cheap credit but desperately afraid of it because of what happens when it is too abundant.

Whatever people may say about the financial sector and how the country should be ‘making things’ we need credit and the necessary hot air it comes with.

Excessive risk maybe be poisonous but so is excessive caution.

There is only so far the country can recover with monetary policy alone. What the British economy needs now is a bit of faith.

So maybe, while Britain isn’t out of the woods, Carney could boost the recovery without really meaning to. Additionally, regardless of whether the Coalition’s austerity measures are the correct way to fix the finances of the country, the news that more people are coming to terms with three years of government spending cuts could precipitate a new sense of grudging confidence in the new normal.

Although borrowing and spending are still high, public perception of how the Government is managing its finances has improved. Perhaps if they feel they are through the worse of it now, they may make those tentative steps towards booking that holiday or investing in that start up.

It may be small but it is this confidence, regulated properly by the Government and a stronger financial services regulator, which can get Britain going again rather than fearfully treading water as it has been doing for several years now.

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A Review of the Year: United States and Canada in 2011

United States and Canada
Much like Europe in 2011 there seemed to be a non-stop conveyor belt of news in North America this year as political forces of all shapes and sizes in both countries went head to head over the hearts and minds of their people. The Tea Party gathered momentum in America as the Republican primaries for their 2012 presidential candidate kicked off, the debate about gun crime reached a tragic new low and much like the rest of Europe, America’s economy was again almost brought to its knees by bickering politicians.

Tucson, Arizona: Way back at the start of 2011, on 8th January when Southern Arizona Congresswoman Gabrielle Giffords was shot along with 18 others by a lone gunman outside a supermarket where she was meeting her constituents. Despite being shot in the head, Giffords survived the attack and after five months recuperation has made a limited return to the public eye however six others died including a nine-year old girl. The gunman, Jared Lee Loughner is said to have had ‘increasingly erratic’ behaviour over the few months leading up to the attack and had previously expressed misogynistic views about women in power and was apparently unsatisfied by her response to his attempts to contact her in 2007. However, in the days, weeks and months that followed the focus was once again to shifted to gun totting madwoman in chief, Sarah Palin as Giffords had already criticised her for having a map with gun crosses over her office and the offices of other Democrats prompting another debate about gun control.

Republican Party Primaries: The race for the Republican presidential nomination got into full swing this year with all candidates doing their level best to one up each other during the live debates before each being picked of by increasingly lurid scandals. First, was Michelle Bachmann, the Tea Party’s favourite when Palin isn’t available, who was ousted from the debate when tapes emerged of her husband operating a clinic offering ‘cures’ for homosexuality. She is still limping behind frontrunner Mitt Romney who it is said will ‘crush’ competition at the New Hampshire primary. Then there was Hermain Cain, a peculiar figure who was riding surprisingly high despite being a relative unknown, who was accused of sexually assaulting two women whilst head of the National Restaurant Association and mounted an even more peculiar defence. The race continues with a still rather eccentric cast of characters.

Canada Leaves The Kyoto Protocol: Canada is often seen as America’s calmer, saner and more rational cousin. Living on top it is seen as the hand on the shoulder of America that is sometimes needed to go ‘dude, just chill’. However all this changed in December when Canada pulled out of the Kyoto Protocol during the climate change conference in Durban after they said the updated agreement would no longer be in Canada’s interests. Although Canada signed up to the agreement in 1997 under a liberal government, it has done little since then to act on it and after the Conservative government has come to power they seem reluctant to do anything at all. Canadian environment minister, Peter Kent, ‘The Kyoto protocol does not cover the world’s largest two emitters, the United States and China, and therefore cannot work. It’s now clear that Kyoto is not the path forward to a global solution to climate change. If anything it’s an impediment.’ Canada is highly at risk from climate change due to deforestation and the polar ice caps melting and the North of the country’s wildlife is under threat by the ongoing exploitation of the Alberta Tar Sands. This is one of several measures the Conservative government, which won its first majority in 2011 after running as a minority government since 2006, have enacted this year which has led to one Guardian commentator asking if Canada was being run by the Daily Mail including the abolition of the gun registry and banning full face veils.

DSK: The case of the hotel maid that accused former IMF leader, Dominique Strauss Kahn of attempted rape in New York this summer soon showed the ongoing gulf between the ‘accuser’ and the ‘accused’ when it comes to the rich and powerful. Nafissatou Diallo’s suit against Mr Kahn, who has been accused previously inappropriate behaviour with his female staff, was dropped due to a ‘lack of credibility’. The forensic evidence aside, this was yet another example of the accuser being forced to prove their innocence rather than prove the accused’s guilt. As she had lied on her visa application about being raped she was assumed to be attempting to extort money from Kahn and denied her day in court. Therefore DSK may not have been proven guilty but he hasn’t been proven innocent either.

Casey Murder Trial: What Time magazine called the ‘social media trial’ of the century was oddly forgotten by the British media this summer as it was embroiled in crucifying the likes of Rupert Murdoch and hundreds of young rioters in its court of public opinion to notice arguably the most hated woman in America stand trial for the alleged murder of her two-year old child. And be found not guilty. Casey Anthony was accused of murdering her two-year old child, Caylee in 2008 after the child’s body was found taped up and decaying near her grandparents’ house six months after going missing. It was later revealed that Casey’s mother, Cindy reported the child missing four days after she disappeared whilst Casey was spotted out partying with friends. She has been described by her own defence lawyers as an exceptional liar and it was almost certain that she had some involvement in the child’s death. She first tried to accuse her nanny of stealing the child, then claimed that the child had drowned in the grandparents’ pool and she had been sexually molested by her own father since the age of eight. Because of her callous reaction and her status as a single mother the case went from a local child death story to a nationwide tabloid sensation the trial of a so-called monster. The prosecution accused Anthony, of first degree murder, aggravated child abuse and aggravated manslaughter and sought the death penalty. However she was eventually found not guilty and instead convicted of misdemeanours such as lying to police officers. With credit for time already served, she was released the following week.

The Debt Ceiling Fiasco: There is a lot of two and froing and ‘will they, won’t they’ in American politics but this year it almost brought America, and arguably the world, to its knees as another fiscal crisis lead to a seemingly endless debate between Democrats and Republicans to raise the debt ceiling. The Republicans weren’t willing to back down easily and Obama was not going to give into their demands to end some of the welfare spending so it looked for a while like America was about to default on its loans. At the eleventh hour an agreement was reached on 31st July and was ratified by Congress on 1st August, dramatically Gabrielle Giffords’, in her first return to Congress since the assassination attempt, signature on the bill was one of the few that tipped it in the majority and allowed to be passed on 2nd August.

Apple Loses Its Core: The tech industry suffered a massive blow this year as Steve Jobs, CEO of Apple, died of pancreatic cancer aged 56 in October. He was primarily known for overseeing Apple’s explosion in popularity over the past fifteen years and the creation of Ipod, Iphone and Ipad ranges which have revolutionised modern technology. He had stepped down as CEO in August 2011 prompting questions over whether the Apple brand could survive without its leader and the share price did drop on news of his death but has since recovered.