The eye of the storm is the calmest place. That can be the only explanation for Mark Carney’s zen-like visage, his matter of fact, monotone delivery, which somehow conveyed the severity of post-Brexit UK without tipping everyone into panic, while allaying fears with his plan, using words such as “seize new opportunity” and throwing in £150bn capital “easing”, but not so much that we all went straight off to book a holiday in Corsica.
Another explanation is that he is actually a Jedi, with a sideline in governing the Bank of England.
Whatever the truth about why Mark Carney is such a walking god, it must be acknowledged that in the absence of leadership in any form, his common sense, grasp of monetary policy and behavioural economics are all we have to cling to – a life raft of sanity in a sea of collective madness (plus, he looks like George Clooney – OK? I SAID IT).
When the world looked agog a fortnight ago at the Brexit result, it was Carney, and not Osborne or Cameron, who held our hands and said “there there”. And yesterday, he again stepped in where no other politician is able to go right now and, like hot honey and lemon, made things seem ok.
So now what?
Apart from a strengthening of UK-Canada relations when no one else likes us, another good thing about Mark Carney is: he has pulled some rabbits out of the hat. £150bn and the promise of a rate cut. Good news for borrowers, whether that’s individuals or business, not good news for savers, who will see lower returns and higher inflation, raising the spectre of negative returns.
The bad thing is: that’s all he’s got. He’s shown his cards. He was pretty clear about the limitations of the Bank of England to stimulate the economy and to what even Mark Carney can do. People: Brexit is testing those limits.
Will his plan work?
Opinion is divided but there is a view that the economy is much better protected from shocks than it was when the credit crunch hit, because of rules on capital adequacy (EU rules, by the way), stress testing, etc. That means the risk of a banking failure is not considered high this time around.
But it doesn’t mean that we will avoid recession – that is mostly to do with confidence and our ability to spend and invest, and there are some large boulders of hard reality associated with a post-Brexit world that even the most wily optimist would find difficult to navigate (and Good With Money has done its level best to remain positive).
The uncertainty over trade negotiations, the legal costs, time and effort in reorganising a new look relationship with the continent, the long term impact of a weak pound on domestic consumption (higher prices). Some big boulders right there. Quite apart from the impact of the political uncertainty we will have to endure for the next few months.
Carney can do a lot, but he can’t stop property funds closing (six as of this afternoon). He can’t force us to get down to the shops, and he can’t stop businesses laying off workers.
Summer is not the time to judge it.
Summer is always a rubbish time to gauge what is going on. As Michelle Pearce, chief investment officer at Wealthify, the investment platform, puts it: “We are going to see more shocks, news headlines spook markets, especially over summer, when people are on holiday. Markets tend to over react because there is less liquidity.”
So until September then, get used to a feeling of sleepwalking, of zombie-like confusion, of surreality and a vague awareness of too much adrenalin and cortisol but for no obvious reason, like when you are watching a thriller, and know that something is about to happen, but you do not know what, when or to whom.
In this thriller, rather than a bleak Blair Witch-style ending, because we have a Carney, we’re hoping for more of an Independence Day finale. With Carney played by George Clooney, of course. But for now, we’re stuck in Act 1, Scene 2. And they haven’t finished writing the script.