Friday, 21 September 2018

On Carney's latest own goal

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Anthony Peters is not a fan of the BoE governor’s tactics.

I know it might appear that there’s only one game in town but that’s not quite the case… and I’m not necessarily thinking of England’s 344-5 on the opening day of the first Test against Sri Lanka at Lords either. My mind is more on Canada’s own Mark “The Magician” Carney who can score goals, especially own goals, with the best.

Speaking at the Mansion House last night, one of the premier set piece events in the City, Carney warned: “There’s already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced…” and went on ”…it could happen sooner than markets currently expect.” This is in stark contrast to anything he has said before and adds to his catalogue of revised statements. Forward guidance, my foot. I thought calling the economy long in advance, and nailing monetary policy along with it, to be humbug unworthy of the Old Lady already when he began with the nonsense. After less than a year in office, he has done enough to win the Tour de France in backpedalling.

The last thing (Osborne) needs now is to see the “squeezed middle” getting squeezed further by rising mortgage costs

He might care to read and quote Harold Macmillan, prime minister of this country from 1957 to 1963, who, when asked by a journalist what might throw government policy off track famously replied: “Events, my dear boy, events”. From indicating that rates would be on hold until 2016, he indicatively moved the date forward to 2015 and now he is giving hints that we might get the first tightening move before the end of 2014… as if by magic!

This was not a nice thing to say in front of the boss, the Chancellor of the Exchequer, who is the key-note speaker at the Mansion House and whose thunder he stole. Maybe it’s because Osborne, by never having worked for Goldman Sachs, is plain and simply a second-class citizen. To what extent George Osborne is the maker of the recovery by way of refusing to consider a “Plan B” during the dark days of the recession is open to debate but there is a very tangible recovery in the making and with an election in May, he’d rather like to bask in the glory. The last thing he needs now is to see the “squeezed middle” getting squeezed further by rising mortgage costs.

Incrementalism and sacrifice

Carney is of course nobody’s fool and defended himself by adding “…the effects of an excessive or of an excessively rapid tightening of monetary policy could prove damaging and difficult to undo.” In plain-speak that might mean that he might choose not to move rates in the traditional quarter-point or half-point increments but might just move by an eighth. Rather than showing the big stick, he might opt to use a small stick to point at the big stick and hope to, in doing so, bring about a slight slowing in the growth trajectory without taking the risk of crushing it.

The Bank of England is in a lonely place. It is ahead of the Federal Reserve which will no doubt be watching on as it prepares to gingerly enter the mine-field in which the tightening button is located.

Osborne is quietly pleased that the recovery is picking up but the key battle ground in the election will be for the support of what was once known as “Mondeo Man”, that aspirational element of the lower middle class which has leant out of the window in order to better itself and which struggles during every down-turn. Just when the feel-good factor is returning to this section of the electorate – it was Ed Miliband who coined the phrase of the “squeezed middle” – the last thing that is required is a rise in mortgage rates, credit card rates and rates on anything else which might have been borrowed in anticipation of better times ahead.

I would not go quite as far as to suggest that Carney is prepared to sacrifice Osborne in defence of his own reputation but from the Chancellor’s perspective it might feel that way.

My time is money too

Meanwhile, on a more practical note, I have my own issues with the mighty House of Goldman. I received a phone-call on Tuesday from one of their salesmen – not a common occurrence – asking whether I might have clients who might be interested in taking paper in one of their high-yield deals. I tracked down a possible buyer who did the credit work, placed a not insignificant order in the transaction and, we were, once again, allocated no bonds.

Would someone please be kind enough to explain to me what right Goldman has to call on my and my clients time and efforts, only to later treat them with such disdain? This was not an unsolicited order – it was encouraged by Goldies. I have now asked for a call from the head of sales to explain to me why my client’s time and money isn’t as good as other clients’ time and money. I wonder if I’ll get it…


Alas, it is that time of the week again. All that remains is for me to wish you and yours a happy and peaceful week-end. Three games of footie today and four games of footie tomorrow. Some of them are late, our time, and the Fuzz will be well aware of it. Should you ever drink and drive – which I know you don’t – now is definitely the time to desist. And please remember, in defence of domestic bliss, the fridge in the kitchen is not only here for storing beer.

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