Carney sees 'delicate equilibrium' as economies slow

  • Carney sees 'delicate equilibrium' as economies slow

Carney sees 'delicate equilibrium' as economies slow

An escalation of America's trade war would wipe out much of Britain's growth over the next three years, Mark Carney said yesterday as he warned that "deglobalisation" and China posed the biggest threats to the world economy.

Britain's departure from the European Union could be the "acid test" for a new global order, Mark Carney said today as he urged politicians to find a Brexit solution in the coming weeks.

"In many respects, Brexit is the first test of a new global order and could prove the acid test of whether a way can be found to broaden the benefits of openness while enhancing democratic accountability", he said.

Brexiteer and Chairman of the European Research Group (ERG) Jacob Rees-Mogg criticised Mr Carney in November after the governor claimed that a clean, no deal, Brexit would result in the United Kingdom experiencing a massive fall in GDP and a sharp rise in unemployment, despite leaked Bank of England staff minutes revealing that such predictions could be "misleading" and "against public interest".

But a no-deal Brexit would hit living standards in Britain, at least in the short term, and a fall in the value of the pound would not solve the economy's problems as suggested by some Brexit supporters. "It is a hit to income", Carney said.

"People are exhausted of Carney's gloomy, inaccurate, anti-Brexit predictions", said Richard Tice, co-chairman of campaign group Leave Means Leave. "It's time he resigned and went home".

Most of Carney's speech focused on the outlook for the global economy. "The world is in a delicate equilibrium".

Carney focused particular attention on the huge growth of debt in the country, noting that ballooning debt loads in China were similar to what happened in the USA ahead of the credit crisis and financial meltdown. But the most likely outcome was that the world economy would not slow much further, he said. He was mainly talking about the outlook for trade and the global economy and the risks that we are about to see a worldwide slowdown triggered by the financial cycle (with a reversion to some of the debt-raising practices seen in the run-up to the Great Recession), a slowdown in China (he said a 3 per cent drop in Chinese GDP would take 1 per cent off global GDP including half a percent off UK GDP), or either a failure or rejection of globalisation.

He also took a swipe at the new, more protectionist policies of the United States, saying "it isn't easy to win a trade war" - a reference to remarks made by US President Donald Trump a year ago that trade wars were "good, and easy to win".