In a shock move, the Bank of Canada has raised the cost of living for all Canadians, hiking the interest rate by a full percentage point to 2.5%.
Don’t blame the bank. Blame the Liberal government of Prime Minister Justin Trudeau.
The BOC controls monetary policy. The government controls fiscal policy.
What BOC Governor Tiff Macklem is doing is using monetary policy to clean up the mess Trudeau and his Finance Minister Chrystia Freeland have made of this country’s fiscal policy.
You’re paying for the cleanup.
It’s an insult to drunken sailors to say that Trudeau and the Liberals have spent like them, but they have. Pre-COVID, during COVID and post-COVID they’ve fuelled inflation with lavish programs such as CERB.
The debts incurred by every other government before this one are peanuts compared to the fiscal hole this government has dug us into. Trudeau famously told reporters during the last election that he “doesn’t think about monetary policy” and pushed ahead with record spending. The BOC simply prints more money to lend to our government.
We have soaring prices at the grocery store, skyrocketing gas prices and this rate hike will push mortgage and other borrowing costs to the stratosphere. The banks are happy. The little guy gets squeezed.
This will leave many Canadians in a perilous position as the cost of mortgage borrowing increases. Some who bought at the height of the market may find their homes have lost value when they come to refinance at higher interest rates.
This is back to the future economics. Another Trudeau — Justin’s dad, Pierre — tried to rein in inflation with wage and price controls in 1975. It didn’t work then and we have zero faith his son will do so now.
Just as household debt will drag down average Canadians, the cost of borrowing will have huge implications for government debt.
If you thought renegotiating a $1-million mortgage would be costly, try refinancing our national debt. This country’s debt interest alone will cost taxpayers close to $27 billion this year. Think of how much health care that money could buy.
Trudeau may not like thinking about monetary policy, but he must pay attention. Because nothing hurts Canadians more than soaring interest rates and out-of-control prices.
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