Another Monetary Authority Oversteps Its Bounds

Mark Carney is Canadian by birth. He’s also Irish, at least by citizenship. He went to college at Harvard, then joined Goldman Sachs. He worked in the Canadian Department of Finance, eventually becoming the Governor of the Bank of Canada. That’s a pretty good career by itself, but he didn’t stop there.

He’s since jumped the pond and is now the Governor of the Bank of England as well as the President of the G20’s Financial Stability Board.

From all this I presume the guy knows a thing or two about finance and central banks. Which is what makes the topic of his recent speech so interesting.

Mr. Carney took the stage at a Lloyd’s of London event and told them that a major threat to their business was climate change.

Whether or not someone agrees with his assessment is beside the point. The real question is: Why in the world was Mark Carney, the Governor of the Bank of England, talking about climate change?

When asked why Mr. Carney chose this topic, his spokesman pointed out that the Bank of England has responsibility for price stability. Anything that might disrupt that stability falls under the authority of the central bank.

Hmmm.

On that basis, Mr. Carney could claim that he has authority over Parliament, David Cameron, or even the Queen! Don’t those institutions and people regularly create instability in the markets with what they say and do?

If Parliament decided to raise taxes, or cut social payments, things might get dicey.

If David Cameron announced greater involvement in Syria, the markets might not take to it kindly.

If the Queen chose to take up skydiving, who knows what would happen!

In each instance, Mr. Carney could claim jurisdiction. Prices might wobble, and darn it, that’s his area!  Oh, and don’t be fooled by what his stamp of approval would mean. It’s almost certain to include lower standards of living through higher taxes or regulations, meant to curb whatever behavior is causing turmoil.