June 17, 2023 - 2:24pm

Former governor of the Bank of England Mark Carney has a phenomenal brass neck. After years of ruling over the Bank as it engaged in highly experimental monetary policies that are now seriously threatening the financial stability of the country, Carney tells The Telegraph that inflation in Britain is being caused by Brexit.

Carney’s case is so vague that it is difficult to discern. He acknowledges that we are experiencing the biggest energy shock since the 1970s due to the war in Ukraine, but he asserts that Brexit has triggered a “unique” adjustment for the country. How has it done this? What is the mechanism? Carney does not say.

The former governor refers to a report that he published in 2018 which he claims is now being vindicated by events. But Carney did not possess the clairvoyance in 2018 to foresee the Russian invasion of Ukraine and the energy crisis that resulted from it. And so, his predictions mean nothing. In finance we say that it is better to be wrong for the right reasons, than right for the wrong reasons. Somebody should tell Carney.

The real cause that the Canadian banker fails to acknowledge was the monetary policies he promoted during his time as governor that bear the most responsibility. There is a severe mortgage crisis now taking place in Britain, which can be directly tied to the experimental QE programme pursued by the Bank of England during Carney’s tenure. This programme drove borrowing rates down to rock bottom levels and sent property prices skyward. People borrowed at the extremely low rates to buy overvalued property, but now as interest rates rise, they are getting crushed.

This raises a further question. If Carney was so confident in 2018 that inflation was coming to Britain and higher interest rates would be required, why did his continue to maintain interest rates so low? If he took his crystal ball seriously, then the correct policy would have been to raise rates gradually and allow the economy to adjust to the higher rates. So the best guess is that Carney didn’t believe in his prognostications and the 2018 report was all show-and-tell.

The world has changed enormously since the war in Ukraine started last year. These geopolitical changes were not factored into the vision many had for a post-Brexit Britain. There is an interesting discussion to be had about whether Britain should go its own way in a world forming into large blocs. If Carney wants to contribute to the debate, maybe he should start there.

Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics