The Bank of Canada had one goal: to keep inflation close to 2%, and neither too high nor too low. (I can't remember the exact specifics, as this is similar to the other big Western central banks). It has manifestly failed at this goal. Inflation is more than 3 times what it should be. Firing the governor would be an entirely appropriate accountability measure.
The purpose of central bank independence is to prevent politicians from grabbing the control wheels (interest rates and unorthodox policy like quantitative easing) and pursuing other (ie, electoral) goals, not to protect failures.
Chris Ragan's argument against firing the governor consists of two elements: conditions have been tough so it isn't fair to fire the governor; and the Bank made an appropriate emergency response to the pandemic (ie, pursued other goals than 2% inflation).
The first is ridiculous - firing leaders for failure is actually accountability, not interference, and would encourage future governors to pursue their mandate more assiduously.
The second is contradictory - the fact that the Bank pursued something other than the low and stable inflation it was supposed to is actually evidence that it has already been politicized. The fact that this happened through ruling class groupthink rather than a prime ministerial command only makes it worse.
Poilievre's goal of firing a failed leader and returning the Bank to its focus (notice he is not trying to dictate monetary policy, only saying that Macklem has failed) is entirely correct.
I think what's missing from the criticisms of what Poilievre is doing here is the American angle. He is copying the Tea Party/MAGA approach. "Audit the Fed" is a war cry down there shouted, usually, by people who have no idea what "the Fed" is. PP knows that substance does not really matter here because it's all about riling up a certain portion of the population. The same is true with his support of trucker convoys. The cynicism comes from the fact that Poilievre knows these people are ignorant and misguided but passionate and can be easily manipulated. Just as Donald Trump would never hold a rally on the grounds of Mar-A-Lago because he wouldn't want any Trumpanzees near his home, PP is using the same energy to secure conservative leadership.
The problem is like The Sorcerer's Apprentice. Once you've got them all riled up what do you do with them? I would suggest this approach is not going well in the US right now. Their very democracy is on life support.
I guess my point is that this is the opposite of actual leadership. The people that PP is targeting need help - their (our) problems are real. They do not need to be used now and then tossed aside for the general election.
I agree with most of this. I am a little concerned though that the BOC has been pouring gas on this. I do agree that most of the inflation issue isn't CAUSED by the central bank. And I see that this is happening all over the world, but that's only because all central bankers made the same error, not because it was unavoidable.
I guess my feeling is that I think that the relationship between the central bank and the gov has been pretty cushy. With Carney now openly a liberal, it just makes it look more and more like this is a nice cozy relationship between the LPC and the BOC.
I'm not talking conspiracy theory here, I don't think there's an alliance, or that anyone is taking direction from anyone else. I just don't know if I buy that the bank has been staying as politically neutral as they're saying they need to be.
There were warning signs LONG before we started measuring high inflation and rates stayed too low, too long. Lots of people (including PP) have been saying this for some time and have been dismissed and derided as economic lightweights. Now, we have the BOC admitting that they should have/could have acted sooner and that they misunderstood the nature of this bout of inflation, and that it wasn't as transitory as they thought. So they kept pouring gas on the fire.
Now Canadians are in trouble. We've got high inflation, overleveraged households (and governments). Government and BOC have been dismissing these concerns for two years. Now it's happening and we're being told that the people raising the concerns shouldn't mess with the independence of the BOC.
Also, if the BOC's mandate is 2% inflation, and we're hitting 6-7% (and i feel like those numbers may underrepresent the problem), it's not unfair to question the policies and position of the BOC.
It's not my favorite thing that PP is doing, and I think he's overplaying the card a little. I'm just not so convinced that the BOC is this paragon of uninfluenced virtue. We know that the PMO has no problem applying any pressure they can inappropriately on officeholders should be above the political fray (SNC Lavalin).
Countries worldwide are experiencing inflation due to the reasons outlined by Mr. Ragan.Mr. Poilievre knows this and is simply using the Central Bank as a club for electoral purposes. If he actually is not aware, he is not fit to stand for Leader of the CPC.
Great article. However, Central Banks' mission creep has left them exposed to criticism. They increasingly weigh into policy areas such as climate change and inequality. They increasingly feel obligated to act to sustain what would otherwise be unsustainable government finances. Polievre is correct to implicate Central Banks as problems, but his proposed solutions are completely wrong. Instead his prescription should focus on:
-narrowing Central Bank's mandate to containing inflation. Nothing more and nothing less. An undemocratic institution like a Central Bank should have no authority or commentary on other issues
-calling some sort of commission to look at methodologies of how inflation is measured. Considerable evidence exists that Central Banks have underestimated the effects of asset price inflation for some time
-limit the amount of government bonds the Bank can purchase, so that it doesn't face the moral hazard of enabling government borrowing
Poilievre wants to fire Macklem BECAUSE he enabled the Government's deficit spending without taking into account the BoC's own inflation mandate - essentially signalling that he was in lock step with the govt and NOT INDEPENDENT of it.
The rhetoric is not from Poilievre. It is from writers such as this who reduce the entirety of his criticisms to "politicians interfering with BoC".
To suggest that the Governor of the Bank of Canada is not political and totally separated from the Government of Canada is correct in a sense that the bank is to act independently from Government. Unfortunately the Governor of the Bank of Canada answers to the Minister of Finance with in the Government of Canada. When the Government tells him what they are going to do, it prepares him to aid in the printing of billions of dollars to which has put us into the dire situation we are in. How can he possibly be independent when his actions are to aid this government in their massive spending and printing of money? If indeed he was independent and was worth a grain of the salt to which got him into his position, he would have demanded the Government of Canada stop spending. He is no more independent from the Government of Canada than he is from the Rothchild's, considering they own all the shares in the Bank of Canada. If you don't think they influence the workings of Banks then your not very astute. They influence everything, including the Government of Canada and especially the Laurentian Elites. Is it right for them to interfere in our monetary and political discourse, no, but that does not stop them, or the Government from putting their hands in where they don't belong.
The central function of the central bank, i.e. the Bank of Canada, is to protect the Canadian dollar from the depredations of inflation. It is written into the core mandate of the BOC that inflation is supposed to be in a narrow band at about two per cent per annum.
You can argue that the current inflation is due to external factors and I certainly do understand that position. But, but, but. You will recall that Mr. Macklem asserted very vigorously for quite some time that this bout of inflation was "transitory." In that analysis he was wrong and he should bear the consequences.
I would argue that the BOC creation of money by purchasing Government of Canada bonds was absolutely a large factor in creating that inflation. If the BOC had not purchased those bonds then the Government would have had to finance the extraordinary spending by way of market sale of bonds. That may, indeed, have caused interest rates to rise which, in turn, might well have assisted in keeping inflationary pressures moderated.
You have asserted that the "additional" money created is essentially meaningless as it is held on deposit with the BOC. I - again - respectfully disagree with your assertion. Deposits with the BOC are a normal course circumstance. With the "additional" money created the various regulated institutions have "additional" money with which to make those deposits. In other words, to your argument, I - respectfully - say, nuts!
I would also note that the purchase of government bonds and the resulting money creation made the BOC an accomplice to the policies of the government of the day, i.e. the current Liberal (mal)administration.
Further, you argue that the "politicization" of the BOC is a bad thing. I quite understand the argument but, I ask you, if the head of the BOC is doing a bad job, is it not the responsibility of the government of the day to discharge the individual doing that bad job. Carrying that thought further, if the Governor of the BOC is himself an accomplice in carrying out government policy, has he not himself by his actions politicized his job?
Ragan can tell us where the credit side of the unprecedented bond buying (loaning) the Bank of Canada has done with the federal government sits, but he fails to mention that accounting is double-entry that there is another ledger with that much debit to hand out as cash. The government got that money and used it to fund spending levels never seen before in Canada. Pandemic justified or not this is without a question contributing to inflation. It has nothing to do with the interest being collected on the debt on the Bank of Canada side and everything to do with the economic activity that is stimulated with government spending, especially when it gives money directly to people like it did during the pandemic. Although, that is a whole other issue in and of itself because something no one seems to be talking about is what happens when those bonds need to be repaid in the future...
This is the kind of "soapbox sword rattling" that makes Pierre unelectable. Pointing fingers and pretending that they're things that Canadian the government has any real control over is pure spin. That's not leadership.
I fully agree with Pierre Poilievre on his stance regarding inflation and replacing the current governor of the BoC. I am a retired senior who has watched the money that I saved and invested for my 40 working years decrease annually but with a much lower inflation rate. Seeing the value of my portfolio drop by 5-7%/annum, coupled with the artificially low inflation rate, is a hard pill to swallow. The higher inflation numbers increase the burn rate on my savings which I had hoped to use to keep me out of the publicly funded senior care facilities, aka covid charnel homes, and not be a burden on society in my dotage. We need the BoC to get back to keeping inflation down, and not parrot the economic ignorance of the current PM. Replacing Tiff would be a good start.
Take a deep breath and calm down, all you Laurentian elites. PP is just sewing and harvesting resentment in a time-honoured Canadian way, blaming eastern bankers for the woes of the country – especially woes in the west. Have you forgotten funny money and Social Credit? So, of course he favors Bit Coin (and I hope he has some!). And of course, he also aspires to the Trump role on The Apprentice: You’re fired!
It is all political theatre, just like Justin and his socks. And his audience loves it. It he’s “owning the Libs” too!. And being “transgressive. Isn’t that good?
Just don’t look for traditional conservative principles or even consistency, because you won’t find them – for example, a preference for free markets or respect for property rights. Remember: wheat board, bad, dairy monopoly, good? Or aboriginal interference with commercial and property rights (bad!); truckers’ interference with personal and property rights, (just “freedom”, and good for selfies too)?
We are dealing with a politician here, and a Marxist one at that. Which is to say Groucho, not Karl. Because remember Groucho’s pronouncement: “those are my principles and if you don’t like them, I have others”. That’s PP. Situational ethics.
PP sees a successful path to the leadership and maybe even to wooing People’s Party folks, back into his tent. It involves playing tunes that his audience likes. Sound public policy has nothing to do with it. That’s not what the game is about.
As for real courage: like telling people that they can’t vote themselves rich; or bringing about free trade in Canada itself; or invoking the notwithstanding clause to over-ride a real elite like the Supreme Court (see this morning’s decision, on voluntary intoxication which will make feminists and MADD mad); or holding referendums; or saying no to the US (as Chretien did over Iraq) …well…that is years away. If ever. For now it’s the Apprentice. Or maybe the WWF, fight night.
So don’t get caught up in the opera. PP is just doing his own version of virtue signaling - playing to the populist bleachers, where he thinks his success will lie. And maybe it will turn out like his bet on Bit Coin – if he actually had some.
Sir Humphrey Appleby would approve of this column. Monetary policy is far too important to be entrusted to simple people who shuffle onto trains, through malls and into the House of Commons.
The Bank of Canada had one goal: to keep inflation close to 2%, and neither too high nor too low. (I can't remember the exact specifics, as this is similar to the other big Western central banks). It has manifestly failed at this goal. Inflation is more than 3 times what it should be. Firing the governor would be an entirely appropriate accountability measure.
The purpose of central bank independence is to prevent politicians from grabbing the control wheels (interest rates and unorthodox policy like quantitative easing) and pursuing other (ie, electoral) goals, not to protect failures.
Chris Ragan's argument against firing the governor consists of two elements: conditions have been tough so it isn't fair to fire the governor; and the Bank made an appropriate emergency response to the pandemic (ie, pursued other goals than 2% inflation).
The first is ridiculous - firing leaders for failure is actually accountability, not interference, and would encourage future governors to pursue their mandate more assiduously.
The second is contradictory - the fact that the Bank pursued something other than the low and stable inflation it was supposed to is actually evidence that it has already been politicized. The fact that this happened through ruling class groupthink rather than a prime ministerial command only makes it worse.
Poilievre's goal of firing a failed leader and returning the Bank to its focus (notice he is not trying to dictate monetary policy, only saying that Macklem has failed) is entirely correct.
I think what's missing from the criticisms of what Poilievre is doing here is the American angle. He is copying the Tea Party/MAGA approach. "Audit the Fed" is a war cry down there shouted, usually, by people who have no idea what "the Fed" is. PP knows that substance does not really matter here because it's all about riling up a certain portion of the population. The same is true with his support of trucker convoys. The cynicism comes from the fact that Poilievre knows these people are ignorant and misguided but passionate and can be easily manipulated. Just as Donald Trump would never hold a rally on the grounds of Mar-A-Lago because he wouldn't want any Trumpanzees near his home, PP is using the same energy to secure conservative leadership.
The problem is like The Sorcerer's Apprentice. Once you've got them all riled up what do you do with them? I would suggest this approach is not going well in the US right now. Their very democracy is on life support.
I guess my point is that this is the opposite of actual leadership. The people that PP is targeting need help - their (our) problems are real. They do not need to be used now and then tossed aside for the general election.
I agree with most of this. I am a little concerned though that the BOC has been pouring gas on this. I do agree that most of the inflation issue isn't CAUSED by the central bank. And I see that this is happening all over the world, but that's only because all central bankers made the same error, not because it was unavoidable.
I guess my feeling is that I think that the relationship between the central bank and the gov has been pretty cushy. With Carney now openly a liberal, it just makes it look more and more like this is a nice cozy relationship between the LPC and the BOC.
I'm not talking conspiracy theory here, I don't think there's an alliance, or that anyone is taking direction from anyone else. I just don't know if I buy that the bank has been staying as politically neutral as they're saying they need to be.
There were warning signs LONG before we started measuring high inflation and rates stayed too low, too long. Lots of people (including PP) have been saying this for some time and have been dismissed and derided as economic lightweights. Now, we have the BOC admitting that they should have/could have acted sooner and that they misunderstood the nature of this bout of inflation, and that it wasn't as transitory as they thought. So they kept pouring gas on the fire.
Now Canadians are in trouble. We've got high inflation, overleveraged households (and governments). Government and BOC have been dismissing these concerns for two years. Now it's happening and we're being told that the people raising the concerns shouldn't mess with the independence of the BOC.
Also, if the BOC's mandate is 2% inflation, and we're hitting 6-7% (and i feel like those numbers may underrepresent the problem), it's not unfair to question the policies and position of the BOC.
It's not my favorite thing that PP is doing, and I think he's overplaying the card a little. I'm just not so convinced that the BOC is this paragon of uninfluenced virtue. We know that the PMO has no problem applying any pressure they can inappropriately on officeholders should be above the political fray (SNC Lavalin).
Countries worldwide are experiencing inflation due to the reasons outlined by Mr. Ragan.Mr. Poilievre knows this and is simply using the Central Bank as a club for electoral purposes. If he actually is not aware, he is not fit to stand for Leader of the CPC.
Great article. However, Central Banks' mission creep has left them exposed to criticism. They increasingly weigh into policy areas such as climate change and inequality. They increasingly feel obligated to act to sustain what would otherwise be unsustainable government finances. Polievre is correct to implicate Central Banks as problems, but his proposed solutions are completely wrong. Instead his prescription should focus on:
-narrowing Central Bank's mandate to containing inflation. Nothing more and nothing less. An undemocratic institution like a Central Bank should have no authority or commentary on other issues
-calling some sort of commission to look at methodologies of how inflation is measured. Considerable evidence exists that Central Banks have underestimated the effects of asset price inflation for some time
-limit the amount of government bonds the Bank can purchase, so that it doesn't face the moral hazard of enabling government borrowing
Poilievre wants to fire Macklem BECAUSE he enabled the Government's deficit spending without taking into account the BoC's own inflation mandate - essentially signalling that he was in lock step with the govt and NOT INDEPENDENT of it.
The rhetoric is not from Poilievre. It is from writers such as this who reduce the entirety of his criticisms to "politicians interfering with BoC".
To suggest that the Governor of the Bank of Canada is not political and totally separated from the Government of Canada is correct in a sense that the bank is to act independently from Government. Unfortunately the Governor of the Bank of Canada answers to the Minister of Finance with in the Government of Canada. When the Government tells him what they are going to do, it prepares him to aid in the printing of billions of dollars to which has put us into the dire situation we are in. How can he possibly be independent when his actions are to aid this government in their massive spending and printing of money? If indeed he was independent and was worth a grain of the salt to which got him into his position, he would have demanded the Government of Canada stop spending. He is no more independent from the Government of Canada than he is from the Rothchild's, considering they own all the shares in the Bank of Canada. If you don't think they influence the workings of Banks then your not very astute. They influence everything, including the Government of Canada and especially the Laurentian Elites. Is it right for them to interfere in our monetary and political discourse, no, but that does not stop them, or the Government from putting their hands in where they don't belong.
Came for the article, stayed for the commentary!
Mr. Ragan, I respectfully and firmly disagree.
The central function of the central bank, i.e. the Bank of Canada, is to protect the Canadian dollar from the depredations of inflation. It is written into the core mandate of the BOC that inflation is supposed to be in a narrow band at about two per cent per annum.
You can argue that the current inflation is due to external factors and I certainly do understand that position. But, but, but. You will recall that Mr. Macklem asserted very vigorously for quite some time that this bout of inflation was "transitory." In that analysis he was wrong and he should bear the consequences.
I would argue that the BOC creation of money by purchasing Government of Canada bonds was absolutely a large factor in creating that inflation. If the BOC had not purchased those bonds then the Government would have had to finance the extraordinary spending by way of market sale of bonds. That may, indeed, have caused interest rates to rise which, in turn, might well have assisted in keeping inflationary pressures moderated.
You have asserted that the "additional" money created is essentially meaningless as it is held on deposit with the BOC. I - again - respectfully disagree with your assertion. Deposits with the BOC are a normal course circumstance. With the "additional" money created the various regulated institutions have "additional" money with which to make those deposits. In other words, to your argument, I - respectfully - say, nuts!
I would also note that the purchase of government bonds and the resulting money creation made the BOC an accomplice to the policies of the government of the day, i.e. the current Liberal (mal)administration.
Further, you argue that the "politicization" of the BOC is a bad thing. I quite understand the argument but, I ask you, if the head of the BOC is doing a bad job, is it not the responsibility of the government of the day to discharge the individual doing that bad job. Carrying that thought further, if the Governor of the BOC is himself an accomplice in carrying out government policy, has he not himself by his actions politicized his job?
Ragan can tell us where the credit side of the unprecedented bond buying (loaning) the Bank of Canada has done with the federal government sits, but he fails to mention that accounting is double-entry that there is another ledger with that much debit to hand out as cash. The government got that money and used it to fund spending levels never seen before in Canada. Pandemic justified or not this is without a question contributing to inflation. It has nothing to do with the interest being collected on the debt on the Bank of Canada side and everything to do with the economic activity that is stimulated with government spending, especially when it gives money directly to people like it did during the pandemic. Although, that is a whole other issue in and of itself because something no one seems to be talking about is what happens when those bonds need to be repaid in the future...
This is a terrific explanation of the issue!
This is the kind of "soapbox sword rattling" that makes Pierre unelectable. Pointing fingers and pretending that they're things that Canadian the government has any real control over is pure spin. That's not leadership.
I fully agree with Pierre Poilievre on his stance regarding inflation and replacing the current governor of the BoC. I am a retired senior who has watched the money that I saved and invested for my 40 working years decrease annually but with a much lower inflation rate. Seeing the value of my portfolio drop by 5-7%/annum, coupled with the artificially low inflation rate, is a hard pill to swallow. The higher inflation numbers increase the burn rate on my savings which I had hoped to use to keep me out of the publicly funded senior care facilities, aka covid charnel homes, and not be a burden on society in my dotage. We need the BoC to get back to keeping inflation down, and not parrot the economic ignorance of the current PM. Replacing Tiff would be a good start.
Take a deep breath and calm down, all you Laurentian elites. PP is just sewing and harvesting resentment in a time-honoured Canadian way, blaming eastern bankers for the woes of the country – especially woes in the west. Have you forgotten funny money and Social Credit? So, of course he favors Bit Coin (and I hope he has some!). And of course, he also aspires to the Trump role on The Apprentice: You’re fired!
It is all political theatre, just like Justin and his socks. And his audience loves it. It he’s “owning the Libs” too!. And being “transgressive. Isn’t that good?
Just don’t look for traditional conservative principles or even consistency, because you won’t find them – for example, a preference for free markets or respect for property rights. Remember: wheat board, bad, dairy monopoly, good? Or aboriginal interference with commercial and property rights (bad!); truckers’ interference with personal and property rights, (just “freedom”, and good for selfies too)?
We are dealing with a politician here, and a Marxist one at that. Which is to say Groucho, not Karl. Because remember Groucho’s pronouncement: “those are my principles and if you don’t like them, I have others”. That’s PP. Situational ethics.
PP sees a successful path to the leadership and maybe even to wooing People’s Party folks, back into his tent. It involves playing tunes that his audience likes. Sound public policy has nothing to do with it. That’s not what the game is about.
As for real courage: like telling people that they can’t vote themselves rich; or bringing about free trade in Canada itself; or invoking the notwithstanding clause to over-ride a real elite like the Supreme Court (see this morning’s decision, on voluntary intoxication which will make feminists and MADD mad); or holding referendums; or saying no to the US (as Chretien did over Iraq) …well…that is years away. If ever. For now it’s the Apprentice. Or maybe the WWF, fight night.
So don’t get caught up in the opera. PP is just doing his own version of virtue signaling - playing to the populist bleachers, where he thinks his success will lie. And maybe it will turn out like his bet on Bit Coin – if he actually had some.
Sir Humphrey Appleby would approve of this column. Monetary policy is far too important to be entrusted to simple people who shuffle onto trains, through malls and into the House of Commons.
No mention of Central Bank interest rate policy? Falling rates for the last 40 years? Extreme credit expansion? Huge and unsustainable debt levels?
Creating 'money' out of thin air is bad long term policy. And now we're starting to pay the piper with steadily rising producer and consumer prices.