Stephen Poloz is the new Bank of Canada Governor. Before this he headed Export Development Canada, a federal Crown Corporation. Mainstream critics argue that Poloz doesn’t have the “macroeconomic” experience and that he lacks the connections to the world’s central banks that Tiff Macklem has. These objections may be true but they miss the point. He’s supposed to be a dim-witted inexperienced bureaucrat chosen by PMO influence. Poloz has been set-up to take the fall for Carney’s actions. That’s the point.
As far as central bankers go, Mark Carney is a rock star. His cult of personality in the mainstream media influence how people see him. Very few actually look what he specifically did during the 2008 financial crisis. Most journalists focus on him as if he was a public relations issue and skim over these facts: In the wake of the ’08 crisis, Carney’s BoC cut interest rates, supplied the banks with credit and – along with the federal government – facilitated an increase of the CMHC’s balance sheet. These actions ensured that Canada would one day face the same credit crisis and economic depression as the rest of the Western World.
This is where Stephen Poloz comes in. Mark Carney is too much of a celebrity to waste his time in Canada. He’ll head the Bank of England before (probably) moving on to global central bank issuing a global fiat currency. In the meantime when the Canadian credit bubble bursts the media zeitgeist will probably be along the lines of: “oh why, oh why, did we let Mark Carney go? We should have begged him to stay!”
But let’s not forget the Harper Government. Poloz was chosen by Finance Minister Jim Flaherty. Export Development Canada is a crony-capitalist organization that worked closely with the PMO in the auto bailouts. Critics of Harper will jump on this bandwagon pronto, but without realizing that Macklem wouldn’t have been the better choice.
Tiff Macklem was Carney’s right-hand man, a sturdy reliable fella that would steer Canada’s economy through the next crisis. So obviously he wasn’t going to get the job. The establishment need a boob and Poloz is their guy. Now perhaps I’ve arranged the argument to produce the results I expect. The mainstream media never attacked Carney and it’s possible they’ll never criticize Poloz. Poloz is the “partisan choice” as chosen by the Harper Government. So the bursting of the housing bubble will be Harper’s fault. And if Poloz is no Mark Carney, then this is also Harper’s fault. The mainstream media will never scrutinize the BoC until Canadians demand it.
And if Canadians demand it – Poloz will likely take the fall. It remains to be seen whether Poloz sees high commodity prices as detrimental to the Canadian economy and if a “strong” loonie is something that should be offset by “cheap” loonie. He’s expressed this view in the past, but given the government that appointed him, it’s uncertain how he’ll rule. Whatever his past or present views, it’s likely to result in more “monetary stimulus” and lower rates of interest. In other words, economic chaos.
People have no concept of how central bank or macroeconomic policies affect their lives. The most recent example I saw of this was a guy commenting on the star saying this new dude "shouldn't dare raise interest rates" from his "ivory tower" and "penalize regular hard working people". Canadians have responded to five years of rock bottom interest rates by maxing everything out at 110% at said interest rates. These phd economists sure know a thing a or two about pushing the wrong macroeconomic levers. Meanwhile the mainstream media talks about them like celebrities without ever giving any context to their actions. Great post.
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