Saturday, February 14, 2015

The Bank of Canada Wants to Kill You

Slowly and gradually. By dismantling civilization.

They surprised everyone (except me) when in January they were like, “hey, these low oil prices might pop the housing bubble. We best cut interest rates and let Canadians feel rich a little longer.” Unfortunately that's not an exact quote but that's essentially what happened.

Senior deputy governor Carolyn Wilkins hinted at dropping rates again in March. They call it taking out insurance. And it is. They are taking out insurance on their jobs.

“If potential output growth turns out to be lower than we think,” says Wilkins (and this is an actual quote), “we have the tools to bring inflation back to target.” Of course by inflation she doesn't mean the money supply which according to StatsCan increased by $146,532 million between 2013 and 2014. What Wilkins means by inflation is the general price of a collection of goods and services that they, the Bank, has chosen.

I suggest BoC employees start reading Mises.

Instead they look to the labour market “for guidance in setting the path of monetary policy.” According to Randall Bartlett, a senior economist at TD Economics. Bartlett also thinks the Bank will cut interest rates in March.

I'm not sure what the Bank will do in March. If the economic situation has stabilized, I can see them holding off for a little bit. But they certainly won't raise interest rates.

It's hard to predict what the Bank will do when it's led by someone who has isolated every single variable in the economy (and with 30+ million Canadians, that's a lot of variables) into a single factor: oil. “Oil prices,” says Poloz, “have got to be responsible for - like - 99 per cent of what we’ve seen.”

Okay, he didn't actually say 'like' in the real statement.

Here's an idea: maybe central bank intervention into the loanable funds market is to blame. You can't just arbitrarily increase or decrease interest rates without causing some kind of an effect. How can one seriously scrutinize the effects without addressing the cause? Before getting to Mises, I think Poloz and his technocratic team should start with this White Stripes song.

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