The Bank of Canada and the Canadian Economy

by Maj (ret'd) CORNELIU. CHISU, CD, PMSC, FEC, CET, P. Eng. Former Member of Parliament Pickering-Scarborough East In today's high finance driven western world, it is time to take an attentive look at the relationship and influence of the Bank of Canada on the Canadian economy and the wellbeing of Canadians. This institution has a major influence on our lives and we certainly need to update it so that it suits our contemporary needs and has a major responsibility to the elected Parliament. To give a historical perspective, the bank was chartered by and under the Bank of Canada Act on 3 July 1934 and the Bank of Canada began operations on 11 March 1935, following the granting of royal assent to the act The preamble to the act set out bank's purpose: WHEREAS it is desirable to establish a central bank in Canada to regulate credit and currency in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of Canada In practice, however, it has a more narrow and specific internal definition of that mandate: to keep the rate of inflation (as measured by the Consumer Price Index) between 1% and 3% Currently The Bank of Canada is structured as a Crown corporation rather than a government department, with shares held in the name of the minister of finance on behalf of the government. While the Bank of Canada Act provides the minister of finance with the final authority on matters of monetary policy through the power to issue a directive no such directive has ever been issued. The governor and senior deputy governor are appointed by the bank's board of directors. The deputy minister of finance sits on the board of directors but does not have a vote. The bank submits its spending to the board of directors, while departmental spending is overseen by the Treasury Board with their spending estimates submitted to Parliament. The head of the Bank of Canada is the governor. While the law provides the board of directors with the power to appoint the governor, in practice they approve the choice of the government. So the question is, where is the so called independence of the Bank? The governor serves a fixed seven-year term which may be renewed. With the exception of matters of personal conduct ("good behaviour") the Bank of Canada Act does not provide the government with the direct ability to remove a governor during his or her term in office. Certainly this should be changed! In the case of profound disagreement between the government and the Bank, the minister of finance can issue written instructions for the bank to change its policies. To date, this has not happened in the history of the bank. In practice, the governor sets monetary policy independent of the government. From the above we see an institution which acts independently and is not responsible to the elected government or parliament Rather, I need to assume that it follows instructions from an intricate web of similarly created banks such as the Bank of England, the Federal Reserve Bank in the US, and the European Bank etc. with the head of the dragon being the Bank of International Settlement (BIS) owned privately by historically well established financial families. BIS is really the bank which tells national banks what to do and in fact is a super national organization which dictates governments. But nobody of the elites seems to bother… Let us now look at the latest Bank of Canada decisions. With the exception of the Conservative opposition leader, no attention was paid to the Bank of Canada's latest actions and its failed duties to Canadians. Inflation is high because there are too many dollars and too few goods to buy. The Trudeau government kept spending galore on pandemic related "relief" programs, and the Bank of Canada kept pumping out more and more new money to cover this orgy of government expenditure with no accountability. This rapid, reckless and massive expansion of Canada's money supply has had a profound impact on inflation in this country. According to Bank of Canada numbers, the money supply grew by more than 22% between the start of the pandemic and spring this year. That means more than one in five dollars currently in circulation in Canada didn't exist in pre-pandemic life. When you think about it, that's a staggering amount and all produced electronically…. Considering the responsibility of the government in this matter, and that of the Minister of Finance, we can see that they worked in tandem and in gross incompetence. And who has to pay for it? You and me. International supply chain issues also contributed but not as much as domestic blunders. While the Trudeau government and the Bank of Canada have spent more than a year denying any blame for inflation, the truth of the matter is that the single biggest cause of Canada's inflation is the tsunami of extra cash the government and the bank pumped into the economy. That money is still sloshing around out there. It's also one of the biggest reasons housing prices have skyrocketed: There are hundreds of billions of dollars on the market and a limited supply of housing. The Trudeau Liberals spent almost $400 billion on pandemic subsidies - by far the most, per capita, in the developed world. They didn't have an extra $400 billion to spend. They didn't tax an extra $400 billion from Canadians. What they did was issue bonds in that amount and because there weren't enough private or institutional investors interested, the Bank of Canada chipped in and created enough new money to cover Justin Trudeau's massive overspending. Even though the bank has repeatedly claimed that it wasn't responsible for inflation, its staff had to know that all this extra money flooding the economy would lead to way too much money chasing goods. While Bank of Canada Governor Tiff Macklem has been reluctant to accept his institution's complicity in the worst inflation in 40 years, at least he is now finally admitting that our inflation is homegrown. One has to ask where the Minister of Finance was in this concerning situation. Wasn't it her duty to oversee the Bank and show leadership? Apparently not, as the Minister is more interested in globalist issues led by World Economic Forum (WEF) where she is on the Board of Directors, than national interests. Of course, rather than pointing the finger at his own bank, Governor Macklem blames businesses. Not the bank but those foolish entrepreneurs and greedy workers are responsible for the high inflation! Let's face it. The bank and the government created this inflation and now they are expecting ordinary Canadians to pay for it with higher interest rates, higher prices, lower growth, lower wages, a devalued currency, eroding savings and a general decline in the standard of living. Don't you think it's time to reform the Bank of Canada?