Carney Throws a Grenade

CARNEY THROWS A GRENADE

A VERY POLITICAL GOVERNOR
Mark Carney, the Governor of the Bank of England, lobbed a hand grenade into the Scottish independence debate. An independent Scotland that sought to keep the pound (as Alex Salmond’s SNP current advocates) would not actually be very independent, he suggested, since the new currency union would only be “durable” if Edinburgh agreed to considerable fiscal coordination with London. That would mean “some ceding of national sovereignty”.

In the Scottish debate, the Governor’s analysis raises a very sharp question for Mr Salmond: would there be any point in independence?

South of the Border, it raises another thought, about Mr Carney himself. Despite his eloquent protestations to the contrary, he is turning out to be a rather political governor.

His entry into the Scottish fray comes not long after he made remarks that were widely seen as critical of Ed Miliband’s plans for banking reform, remarks that left Labour people privately irate.

As Governor, Mr Carney is going to be taking some even more politically sensitive decisions in the next year or so, especially ones that affect the housing market. Will he let rising prices fuel the recovery, and thus Tory hopes of re-election? Or will he burst the Osborne bubble, as Vince Cable has repeatedly suggested?

Already, there is muttering at Westminster (and not just among Labour types) about Mr Carney’s willingness to do things that could significantly inconvenience the Chancellor who invested so much in his appointment.

Mr Carney’s remarks on Scotland and banking were both quite acceptable to many Conservatives, as was his recent guidance that Bank rates are still some way from rising. That’s surely a coincidence, and he’d insist he’s simply doing his job as a politically neutral central banker should. But suspicions about his motives are starting to seep into political conversations, and they will not easily be allayed.

Given the environment in which he’s operating, it’s probably just as well that Mr Carney is evidently comfortable with politics as well as economics. But he should prepare himself for much more scrutiny from Westminster than his predecessors faced

I don't know what powers Carney has, but he certainly is going to upset a few MP's. He is right about House Prices, the root cause of inflation. If the price of Houses were to only rise at the rate of inflation it would stop all these repossessions because people can now borrow 95% of the Mortgage. It would also stabilise prices and make many properties more affordable.