Lars Svensson for Bank of England Governor
Lars Svensson (co-)wrote the book on the “target the forecast” methodology for inflation targeting adopted by the Bank of England.
Lars Svensson is an expert in the so-called “liquidity trap” and inventor of the “Foolproof Way“, using currency depreciation and a CPI level target. We’d like a practical demonstration, please.
Lars Svensson is a Deputy Governor at Sweden’s Riksbank. A step up to Governor of the Bank of England would be a natural career progression for such an eminent economist.
Sweden’s economy is small and doing well. Britain’s is large and doing badly. The skills of Lars Svensson have not been optimally allocated.
Lars Svensson is perpetually constrained by the Riksbank hawks who prefer low inflation over high employment. As Governor he would be less constrained.
Lars Svensson will demolish the crazy loons who keep trying to target current headline CPI and ignore the forecast.
George Osborne wants easier monetary policy to keep his fiscal plans on track, but is unwilling (or too stupid) to force the Bank of England to provide it. Svensson would provide it in spades. Sterling would depreciate if there was even a rumour of Svensson being seriously considered for Governor.
Osborne could easily be accused of appointing a Government patsy if he appointed some (ex-) Treasury economist or an Establishment insider like Gus O’Donnell. No such charge could be levelled against the appointment of an independent-minded Swede with such a strong record, both academic and professional.
Appointing an outsider to shake up the Bank would be an appropriate way to challenge the supply-side pessimism embedded in the Bank’s forecasting, which provides a key contribution to our current malaise (by restraining looser monetary policy and faster demand growth).
In an ideal world, Osborne would announce a nominal GDP level target and we wouldn’t need to rely on smart people to run monetary policy. We don’t live in that world (yet), and I can’t see us getting to that world before Mervyn King’s term as Governor expires in 2013. In the real world, Lars E.O. Svensson is the ideal choice for the next Governor of the Bank of England.