The Bank of Canada has a lot of power. It controls the value of your money and the interest you pay on your debt. As such, it should be ruthlessly and dispassionately scrutinized.
While great power may come with great responsibility, it does not always come with accountability. The government-subsidized media in Canada have decided that the Bank’s officials should be taken at their word.
Consider last week, when the Bank took to Twitter to deny the link between its money creation, Trudeau’s deficits, and the inflation crisis we are all suffering through. The Bank claimed it did not flood the system with newly created money to finance the government’s record deficits.
Actually, it did. As the Trudeau government started issuing bonds to pay for his deficits, the Bank of Canada started buying those bonds.
Government bonds are IOUs. They are issued when the government needs to borrow money. The Bank’s purchase of those bonds helps bankroll the government’s operations.
In fact, the Bank stated in an April 2020 press release that it would purchase these bonds “to maintain proper functioning of the government bond market.” Who is the primary beneficiary of a properly functioning government bond market? Well, obviously the government.
In the spring of 2020, the Bank of Canada started buying $5 billion of government bonds a week, right at the same time as Trudeau’s deficits soared.
As the quantity of government bonds on the Bank of Canada’s balance sheet grew from $78 billion at end of March 2020 to $435 billion at the end of 2021 (a more than 400% increase), the monetary base, consisting of currency plus bank reserves, increased from $89 billion to $385 billion at the end of 2021 (an approximate 330% increase).
The Bank created hundreds of billions of dollars of new money to purchase government bonds, facilitating the government’s borrowing to finance its spending. That is not an opinion, it is a fact. It is backed up by the Bank’s own charts on its website showing a massive increase in its holdings of government bonds, and in the dramatic increase in the amount of money in the Canadian economy.
Yet the Bank’s obvious twisting of facts was dutifully reported by the media with virtually no objective analysis. The CBC, Canada’s state broadcaster, even referred to the critique of the Bank as “misinformation” in its headline, simply because the Bank said so.
Many economists and elected representatives have called out the Bank’s disastrous monetary policies. Yet none of those voices were included in the articles that covered the Bank’s tweet thread to offer an opposing view.
So we have a situation where the government-subsidized media dutifully and uncritically reports the state bank’s version of events in defending the state. Where is the accountability?
Are we supposed to accept that the Bank did not create new money and did not bankroll the Trudeau deficits, just because they said so? And anyone who asks tough questions or points out the connection between the Bank’s money creation and current inflation levels is attacked for undermining the credibility of the Bank?
Of course not. Especially since this isn’t the only thing that the Bank has been so wrong about. Over two years ago when Pierre Poilievre started raising the alarm on the inevitable inflation that would follow the Bank’s money creation, senior Bank officials said that inflation was nothing to worry about.
In fact, they were predicting Canada would be hit by deflation. Consider Bank Governor Tiff Macklem’s statement on April 27, 2021 when he said: “Our biggest fear was deflation, which would have been very damaging.”
We know how wrong this was. Inflation has been running rampant, with the cost of every day goods soaring and now the Bank is hiking interest rates to correct their mistakes.
Credibility in any institution must be earned. Day in and day out. It cannot be created by attacking those who ask tough questions. Both the Bank of Canada, and the Canadian media, would be wise to learn this.
Instead of attacking those who criticize, they should be honest and objective. That would do much more to restore credibility than running around shouting “misinformation” at anyone who points out their mistakes.
Andrew Scheer is the Conservative Member of Parliament for Regina—Qu’Appelle and House Leader of the Official Opposition.
Post a Comment