Carney likes the look of 2010. This year, not so much.

BoC Governor: “Stimulus is going to have an impact and it’s going to start to bring the job market back.”



The sleekly confident style of Mark Carney, the Bank of Canada’s youthful governor, was the featured act this morning in Ottawa. He’s emerging as one of the most interesting new figures on the federal scene, and the political implications of what he had to say about the economy are considerable.

Carney, 43, was appointed last year by Prime Minister Stephen Harper, reportedly on the strong recommendation of Finance Minister Jim Flaherty. Given the gruesome economy the government is now coping with, getting the made-for-TV technocrat on the case turned out to be a good call.

The Harvard and Oxford educated former Goldman Sach’s prodigy left private banking and returned to Canada in 2003 to join the public service. He impressed mandarins and politicians alike during stints at the BoC and the finance department. He is now gaining profile as the reassuring face of a sober, yet surprisingly optimistic, federal reaction to the economic crisis.

The big news from Carney this week is his bold projection that after suffering through a recession this year, the Canadian economy will bounce back strongly with 3.8 per cent growth in gross domestic product in 2010. That’s a lot more upbeat than many private economic forecasts.

He had this to say, at a news conference just off Parliament Hill this morning, to pessimists who doubt the steep interest rate cuts he has overseen, combined with other measures to stabilize financial markets and stimulate growth, can have much impact in the face of a global slump: “The laws of economics have not been suspended here.”

He went on: “That stimulus is going to have an impact and it’s going to start to bring the job market back.” And he stressed that he’s not counting all that much on spending, or other measures, in Flaherty’s budget next week to do the job. Referring mainly to historically low interest rates, he said “don’t underestimate the impact of what we have done.”

Predicting that “things will start moving this later this year, into 2010,” he was nonetheless clear that 2009 will be no picnic. “People are going to lose their jobs. The unemployment rate is going to rise,” he said. “That is the unfortunate reality of the recession.”

If he’s right, the implications for political strategists are clear. The Tories will want to ride out this year’s slump, and survive somehow into 2010, to take credit for a faster-than-feared recovery. On the other hand, the Liberals, and other opposition parties, might want to force an election this year to make sure the Conservatives wear these bad times. Or they’ll want to form a coalition government soon, to preside over—and claim credit for—the quick return to prosperity that Carney forecasts.


Carney likes the look of 2010. This year, not so much.

  1. Or Carney — a Goldman Sachs hack who at one time probably had a hand in peddling or constructing those toxic financial weapons of mass destruction, CDOs and CDSs — could be wrong.

    • Before joining the public service, Carney had a thirteen-year career with Goldman Sachs in its London, Tokyo, New York and Toronto offices. His progressively senior positions included co-head of sovereign risk; executive director, emerging debt capital markets; and managing director, investment banking. He worked on South Africa’s post-apartheid venture into international bond markets, and was heavily involved in Goldman Sachs’s work with the 1998 Russian financial crisis.
      Source: Wikipedia

      Sorry to disappoint you, but it looks like Carney had no personal involvement with CDOs or mortgage securities. His area of expertise was international finance. And I’m not sure how his genuinely impressive resume makes him a “hack”.

  2. If Carney is right, then it would be interesting to know exactly how he feels about the NAmerican governments’ rush to print money in a mad rush to prevent what is merely a cyclical downturn. Whether short term or long term, tax cuts have the ability to reduce a gov’ts ability to address current or future crisisies. Of course part of Carney’s theory likely anticipates the boyance of inflation, but what of those who hold all these US dollars overseas? If the foreign money holders need to salve their own aches, how does that impact the local economies?

  3. “On the other hand, the Liberals, and other opposition parties, might want to force an election this year to make sure the Conservatives wear these bad times. ”

    Bad times? How bad is it? Do you think these bad times will bring us back to an unemployment rate of those hard, difficult, depression like times in 2004 when unemployment was at 7.8%…Gasp.
    Auto sector is having bad times for sure.Is Canada?

  4. “That stimulus is going to have an impact and it’s going to start to bring the job market back.”

    Yes, you can give everyone a B.S. job on make-work projects and fiddling around making widgets unprofitably for insolvent corporate welfare queens and then claim that you have created employment. But that’s not fixing the economy. The economy is in good shape if people are working in productive, profitable jobs which provide goods or services at a price which satisfies actual consumer demand in the free market. The economy is in bad shape if people are wasting their time digging and filling in holes at the beck and call of politicians, and being paid in money which is either borrowed against future generations’ earnings or else printed out of thin air.

    The so-called “stimulus” strategy is another form of central planning and it is a total failure for the same reasons that all central planning fails. Politicians have no idea what will satisfy consumers and therefore they have no clue about where resources should be allocated. Furthermore, they have no real motivation to wisely allocated resources even if they did know what people really want, because the monopoly power which they enjoy allows them to allocate resources according to what THEY want. That is why central planning of food production and distribution in places like Cuba and North Korea results in malnutrition and starvation, central planning of medical care results in rationing and waiting lists, and central planning of finance and monetary policy creates booms of malinvestment followed by tidal waves of bankruptcies and unemployment.

    Note well that in the examples of central planning given above, although the ordinary people suffer greatly, the elites who perform the central planning do not suffer in any way whatsoever, and in fact enjoy an extremely luxurious and privileged life in every way. So it’s easy to see why they push central planning as the answer to everything.

  5. I’d think there’s another important twist on the political ramifications. As you mention, the post probably reflects the calculations if the projection proves to be correct. But what if the projection (which seems more optimistic than anything else I’ve heard) proves to be wrong?

    If whoever sits in opposition by the end of the budget showdown plays up the report as setting the expectations for a recovery, then even modest growth in late 2009 and 2010 could come to be seen as a failure. And if we’re still stuck in a downturn by next year, then it won’t take much creativity for the opposition to point to the government as the reason for any difference between Carney’s projections and the actual outcomes.

  6. So predictable, sometime in the near future the recession(depression this time), will be declared over and millions of people in the middle class will be thrown overboard, forgotten about and their decent paying jobs will have been shipped to third world sweatshops. The greed heads who caused all this will have hardly noticed it happened and will be right back at it again. Manipulating oil and commodity prices, selling ponzi pipe dreams on the stock market, cosying up to government for sweetheart contracts and all the usual shenanigans. They are in such a lather to get back at it, they are buying into their own BS and can’t wait for the suckers to be all lined up again in 9 or 12 months. They are in for a rude awakening. They have finally killed the goose that laid the golden egg(middle class). All the people who used to have real jobs and are now working at Wal-Mart can hardly afford to buy the posionious, plastic Chinese crap sold there. They certainly don’t have anything to be swindled out of with phoney promises from stock brokers. I guess they can count on government to hand out the largesse to them in the form of massive deficits but that has it’s limits to(no middle class, no tax revenue). If anyone thinks this is going to be over by the end of next year…dream on.

  7. A lot of this economic forecasting has a massive psychological impact on the way people behave, and thus, how (or if) they invest.
    Optimism begets more optimism. The whole system is fuelled by speculation.
    This was a smart move by Carney, Harper and Flaherty. Belief in an expected outcome is the only reason I would buy any stock. Sometimes the forecast is more readily apparent than not, but if you give people a reason to believe the outcome, they’ll invest accordingly. The investment itself alone creates confidence among others, and the rest is basically auto-catalytic.