A tale of two governors

Current Governor of the Bank of England Mark Carney and his predecessor Mervyn King have both commented on the referendum this week.

There has been substantial reporting of Mark Carney’s comments regarding the effect of a potential Brexit on the financial stability of the UK. Rather than to choose a British paper, with a Bremain leaning, I’ve chosen to look at the reporting in the Wall Street Journal. Part of the side issue is that of Central Bank independence – and Eurosceptic Jacob Rees-Mogg – a SW England Tory MP – attacked Carney’s remarks, claiming that they were an example of “political partisanship” that affected the BoE’s “Olympian detachment”.Carney is a “rockstar central banker” – particularly when compared with his predecessors, “Swerving” Mervyn King, who was Governor of the Bank of England until 2013, including of course the duration of the Great Financial Crisis, and “Steady” Eddie George, who succeeded Robin Leigh-Pemberton in 1993. RL-P was of course in charge on Black Wednesday when the United Kingdom left the Exchange Rate Mechanism.

Carney fears that banks will pull out of the City of London in the event of a Brexit, and both he and Jon Cunliffe (who previously was involved with the EU) fear that asset prices could be hit, and Sterling’s current slide not arrested. To try to assuage fears around the time of the referendum there will be extra currency auctions – a move announced by the BoE earlier in the week.

The BoE has the same financial stability remit as EU central banks, but with it being outside the Euro area, there is of course a greater importance in monetary policy terms. Whether a Brexit would lead to a similar slide as the ERM exit did in 1992 is unclear, but there is no denying that the shockwaves from a Brexit would resonate around the financial markets – even if the one potential advantage of a Brexit, the fact that the United Kingdom would be free to choose new allies, and therefore be freer to align itself with burgeoning emerging markets, although the BRICS and MINT nations are no longer the Wunderkinder that they once were.

“Swerving” Mervyn King, Carney’s predecessor has yet to make up his mind, but indicated on World at One (a news show on BBC Radio 4) criticised both the government and the Yes/No campaigns for not setting out the arguments properly. Interestingly he thought the BBC should take on a pivotal role in explaining the arguments for and against.

There are good arguments for both sides of this debate. […] I’m still waiting to hear the facts and the arguments from I hope the BBC which will enable me to make up my mind.

I’m afraid that the latter comment unsettles me slightly – I would have thought a former Governor of the Bank of England capable of making up his own mind – but then again, with many matters settled by committee votes, maybe knowing one’s own mind is not so necessary.

Sadly Leigh-Pemberton and George are no longer with us – it would be interesting to have known their opinions on the matter – particularly those of RL-P given the fact that he was at the helm during the “ERM Years”.

Author: mdgb

45 years old, came to Austria in 97/98 for nine months and then moved permanently in July 2000. At the time of starting this blog, I have been in Austria for more than half my lifetime.