Monday, June 29, 2009

Giving credit where credit is due

Back in January, I asked whether Carney had lost it.

He had stated the following in his outlook:

magically, in July, the economy is going to grow 2.0% and immediately stabilize. Then, it will grow by 3.5% in Q4. Oh, and then it gets better: 4.7% in the first half of 2010 and 4.9% in the second half of 2010.
He recanted his view in April.

If he lost in January, he may have found it. He has finally understood that what happened here is no garden variety recession. Listen to him:

From Bloomberg:

Bank of Canada Governor Mark Carney said Canadian households are facing rising “stresses” that could lead to losses for banks, while repeating concern about the effect of a strengthening currency on the economy.

“Sharp increases in unemployment are raising the incidence of financial stress among households,” said Carney, 44, in the prepared text of a speech he gave today in Regina, Saskatchewan. An unemployment rate exceeding 10 percent “would lead to significant increases in losses for financial institutions,” he said.

From the Globe:

In recent speeches in Montreal and Regina, the bank governor was almost dismissive of indicators of economic improvement, warning that whatever good news existed was caused artificially by massive government and central bank stimulus. The private sector “is not there yet,” he cautioned.

And in a report from an off-the-record speech Tuesday at the Woodrow Wilson International Centre for Scholars in Washington, Mr. Carney broke with official Ottawa dogma in declaring Canada's recession to be as deep as that in the U.S.

All this is getting the Bank establishment angry. They are probably talking their books and probably don't appreciate the comment about "significant increase in losses for financial institutions".

“Nobody expects policy makers to be cheerleaders, but do they have to be naysayers?” asked Douglas Porter, deputy chief economist with the Bank of Montreal, who is among several who wonder at Mr. Carney's transformation from Mr. Sunshine to Dr. Gloom in four months.

I think Carney may have found it after a winter in fantasyland.

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