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November 27, 2012



But according tohttp://baselinescenario.com/2010/03/25/the-canadian-banking-fallacy/ Canadian banks were highly leveraged

Nick Rowe

What Paul Ormerod said is a total non-sequitur.

Under inflation forecast targeting, if the Bank is responding correctly to new information, deviations of inflation from target at the *must* be unforecastable at the targeting horizon. His assertion that inflation is unforecastable is exactly what you would expect if the central bank was controlling it to a fixed target. This is an immediate implication of the orthogonality of forecast errors with respect to the information set if the Bank has rational expectations.

I've done a few posts on this. E.g. http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/06/no-you-cant-test-whether-core-is-useful-that-way.html

Nick Rowe

I tend to agree with the rest of what you said though. Mark Carney is good, AFAIK, but there's far too much personality cult here.

(But man, what Paul Ormerod said in that quote is so totally wrong! Jeez!)

Nick Rowe

Maybe he's never heard of Milton Friedman's thermostat? http://worthwhile.typepad.com/worthwhile_canadian_initi/2012/07/why-are-almost-all-economists-unaware-of-milton-friedmans-thermostat.html

Chris Purnell

I think that a Governor can make a negative impact by having disastrous policies cf. the early 1930's with Montague Norman. Whether he can have a similar positive result I'd have thought was doubtful at best. Using indicators from non- comparable economies is ludicrous as the management of stresses are likewise non- comparable. Thus I think that the analogy with football managers going onto be National coaches is apposite.


But if Chris has made a correct case, and I think he has, then the markets and political class should be quite happy for any one to be chosen off the street as the Governor. By extension of the argument the character and qualifications of most people are irrelevant to economic efficiency. Most people can do most jobs and most of the time the structure of society determine the results not the characteristics of the person doing the job. The Governor can only control some aspects of the economy and if they are not the effective parts he will make no impact.

BT London

Carney is Goldman Sachs and doesn't care about TBTF universal banks. He thinks Basel III is the cure.



Slightly off topic, but does the appointment of a (perfectly competent) Canadian suggest a tendency to think there's some magic solution? Nothing to do with any structural problems, all to do with a few people cocking up, let's get in a new broom and all will be well.

I have my doubts.

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