A Carney’s life is not an easy one December 16, 2011 at 7:43 am

A Carney (but not the Governor of the Bank of Canada, probably)

Mark Carney is not a shill: he gives it to us straight. Sadly, what he says is pretty depressing:

The market cannot be solely relied upon to discipline leverage.

It is not just the stock of debt that matters, but rather, who holds it. Heavy reliance on cross-border flows, particularly when they fund consumption, usually proves unsustainable.

As a consequence of these errors, advanced economies are entering a prolonged period of deleveraging.

Central bank policy should be guided by a symmetric commitment to the inflation target. Central banks can only bridge real adjustments; they can’t make the adjustments themselves.

Rebalancing global growth is the best option to smooth deleveraging, but its prospects seem distant.

Like Carney (and the IMF), I am pretty negative about the prospects for advanced economies in 2012. Still, at least we have Christmas before we have to worry about that, and you can always go long vol at a relatively attractive level.

Best wishes all.

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