Mark Carney’s Scandals: Negative Interest Rates Controversy (2020)… “Voodoo Economist proposed to Steal Savings, punish Prudent Britons, damaged public trust in central bank policies”

Mark Carney was roasted as an ‘Ivory Tower Economist ‘ whose unhinged recommendation for Bank of England to Steal Savings from Prudent Britons renders him an ‘Out of Touch Imbecile’… Although the policy was never implemented, the scars remain – with Carney’s reputation as a “people’s central banker” permanently tarnished in the UK:-

The “Negative Interest Rates” Controversy (2020)

Background: Carney’s Role in the Debate

Though no longer Bank of England Governor in 2020, Mark Carney became embroiled in the negative interest rates controversy due to:

1. His 2019 comments preparing markets for possible negative rates
2. His post-BoE role at the UN continuing to advocate unconventional monetary policies
3. The policy being seen as a legacy issue from his governorship

In 2020, Mark Carney’s successor as Bank of England Governor, Andrew Bailey, floated the idea of implementing negative interest rates to combat the economic fallout from COVID-19. However, the controversy became linked to Carney due to his role in laying the groundwork for this unconventional policy during his tenure (2013-2020), and his public comments supporting the concept after leaving office.

1. Origins of the Controversy

Carney’s Early Advocacy

• As early as 2016, Carney suggested negative rates could be a potential tool
• In 2019, he stated the BoE’s policy framework could accommodate rates below zero
• This positioned the UK to follow the ECB and Bank of Japan, which had already implemented negative rates

Carney’s Involvement:

• Gave private advice to Bailey about ECB’s negative rate experience
• Publicly stated negative rates could be “effective if needed” in media interviews

The 2020 COVID-19 Crisis

• Pandemic lockdowns caused worst economic contraction in 300 years
• BoE cut rates to historic low of 0.1% in March 2020
• In May 2020, MPC members began actively discussing negative rates

2. The Public and Political Backlash

A. Savers and Pensioners Outraged

• Retirees feared erosion of savings income
• Pension funds warned of £250bn black hole
• Banks threatened to pass costs to customers

B. Media Firestorm

• Daily Mail: “Bank’s Crazy Plan to Charge YOU to Save”
• Telegraph: “Negative Rates Would Be Economic Madness”
• Sun: “Bank of England to Steal Your Savings?”

C. Political Opposition

• Conservative MPs called it a “war on savers”
• Labour warned it would hurt ordinary families
• House of Lords launched inquiry into consequences

3. Economic Concerns Raised

Criticism	Explanation
Bank Profit Squeeze	Could reduce lending capacity
Pension Fund Crisis	Would worsen defined benefit deficits
Cash Hoarding	Might trigger physical cash stockpiling
No Guaranteed Stimulus	Japan/EU experience showed mixed results

4. Carney’s Continued Defense

Even after leaving office, Carney tried but failed as below:

1. Argued negative rates could boost lending
2. Cited European examples where they worked
3. Claimed critics overstated the risks

His comments in 2021 interviews reignited the debate, with critics accusing him of being out of touch with ordinary savers.

5. Outcome & Lasting Damage

1. Policy Abandoned:
   • BoE quietly shelved plans in 2021
   • Kept as “theoretical option” only
2. Reputation Impact:
   • Carney seen as “ivory tower economist”
   • Damaged his public communicator image
   • Revealed generational divide (young borrowers vs older savers)
3. Institutional Fallout:
   • MPs launched Treasury Committee review
   • Forced BoE to be more transparent about policy options
   • Ex-Governor Influence: Carney’s continued advocacy crossed boundaries

Key Critics:

1. Pension Industry
   • Estimated £250 billion hit to defined benefit schemes
   • Would force higher contributions from employers/employees
2. Banking Sector
   • HSBC, Lloyds warned of “operational challenges”
   • Risked making mortgage lending unprofitable
3. Political Opposition
   • Conservative MPs: “War on Savers“
   • Labour: “Dangerous experiment“

Media Frenzy:

• Daily Mail: “Bank to CHARGE you for saving!”
• Telegraph: “Negative rates would punish prudent Britons”

6. Key Quotes That Defined the Scandal

• “We’re prepared to do whatever it takes” – Carney (2016)
• “This would be economic vandalism” – Former Pensions Minister
• “The cure worse than the disease” – Financial Times editorial

Carney’s Controversial Defense (2021)

Despite no longer being BoE Governor, Carney:

• Wrote FT op-ed defending negative rates (Jan 2021)
• Claimed in BBC interview that critics “misunderstood the economics”
• Argued at Davos that “all tools must be considered” in crises

Most Damaging Quote:
“Negative rates ultimately benefit savers by strengthening the economy”
(perceived as elitist and out-of-touch)

Conclusion: A Policy That Backfired Before Being Tried

While negative rates remained theoretical in the UK, the controversy:

• Exposed tensions in monetary policy
• Damaged Carney’s reputation as a populist central banker
• Became a cautionary tale about unconventional measures

The episode demonstrated how even discussing radical economic policies could trigger public backlash during times of crisis.

As a result,