Mark Carney, the eighth and current governor of the Bank of Canada, announced in November 2012 that he would be leaving the post to head up the Bank of England starting in June of this year. He will be the first foreign Bank of England governor since the institution was created in 1694 and one of the few Canadians to reach such a high position in Britain. Carney stepped into his current position in 2007 and guided the Bank of Canada through the financial crisis that began in earnest in 2008. His exit will have an impact in both Canada and England, and it is widely lamented as Canada's loss.
Carney helmed the Bank of Canada through the last five years of economic turmoil. Under his leadership, Canada retained the strongest economy of all G-7 nations and returned to pre-recession indicators before any other G-7 country. The banking system and its conservative fiscal and lending policies allowed Canadian banks to hold firm, while other world banks were eroding market capital and net worth around them. Carney avoided the austerity measures that many European countries implemented to combat the recession.
If Canada faces a double-dip recession in the near future, Carney's departure could leave a void in fiscal leadership that may be difficult to fill. His experience in the investment banking industry, the Department of Finance, and as deputy governor of the Bank of Canada uniquely qualified him to make the important fiscal decisions in times of crisis.
Another loss for Canada after Carney's departure may be that the highly speculated federal liberal leadership bid rumors will not be realized. Although Carney has not publicly announced any political ambitions, he would have been well-qualified to make a serious run on the left. His departure leaves the leadership wide open for Justin Trudeau, the perceived current front-runner for the position.
On the other hand, the potential benefits to England are many. The U.K. economy has not fared as well as Canada's over the past five years and is facing the specter of another recession - a triple dip. Britain's gross domestic product in 2012 is thought to have shrunk by 0.1% overall, while its unemployment rate continues to rise. Chancellor of the Exchequer George Osborne chose austerity measures rather than spending growth and the injection of liquidity to handle the past two recessions (the first double dip since 1975), and the economy has not responded to the harsh treatment.
With Carney's more liberal and progressive approach, Osborne is signaling his willingness to try a new path, and Carney may be able to save Britain from an unprecedented triple dip into the recession pool. Carney will also wield expanded powers, including the ability to set bank capital requirements and guide individual institutions while maintaining responsibility for setting monetary policy.
Carney's experience could finally bring stability to Britain's battered economy, which would bring some stability to the eurozone as a whole. Although it may take many months to see the effects of a change in fiscal direction, the confidence that a solid plan will bring to the markets and to consumers may ease up private and institutional purse strings and get the economic wheels turning again.
The Bottom Line
Mark Carney's governorship of the Bank of Canada has kept the country's boat afloat for the past five years, and he now has the same opportunity to effect change in Britain. If he does a similarly outstanding job, the doors may be open to him taking a run at English politics.
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