The Bank Of Canada Is Responsible For Their Lost Credibility

OpinionSpencerFernando

A free and democratic nation must be able to question and criticize our central bank, particularly when the central bank makes repeated errors.

Once again – and it seems like a broken record at this point – the establishment media is criticizing Pierre Poilievre for ‘daring’ to question the Bank of Canada.

In a Globe & Mail column, Andrew Coyne labelled those questions as “Pierre Poilievre’s reckless, baseless attacks on the Bank of Canada’s independence”.

Coyne called Poilievre’s moves an “assault” on the central bank, and claimed it is “the height of recklessnesss” to “undermine the bank’s credibility at this, of all moments,” amid high inflation.

Of course, one would think that the Bank of Canada being repeatedly wrong on inflation and rapidly inflating the money supply would be grounds for criticism.

How ‘independent’ is the Bank of Canada

What’s notable about all of this is that – as pointed out by ScotiaHodl on Twitter, the Bank of Canada is not as independent as is commonly assumed:

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And indeed, when looking at the Bank of Canada Act on the official government website, we find the following:

Government Directive

Consultations

14 (1) The Minister and the Governor shall consult regularly on monetary policy and on its relation to general economic policy.

Minister’s directive

(2) If, notwithstanding the consultations provided for in subsection (1), there should emerge a difference of opinion between the Minister and the Bank concerning the monetary policy to be followed, the Minister may, after consultation with the Governor and with the approval of the Governor in Council, give to the Governor a written directive concerning monetary policy, in specific terms and applicable for a specified period, and the Bank shall comply with that directive.

Publication and report

(3) A directive given under this section shall be published forthwith in the Canada Gazette and shall be laid before Parliament within fifteen days after the giving thereof, or, if Parliament is not then sitting, on any of the first fifteen days next thereafter that either House of Parliament is sitting.

What this demonstrates is that the Bank of Canada is ‘independent’ in name only, and that the federal government always possesses the potential power to control what the Bank of Canada does.

Now, this is notable because of how human nature works.

Since the Bank of Canada knows that the federal government has that power, they will feel substantial pressure to align their policies with what they think the federal government wants.

For example, when they see the federal government massively increasing government spending and pursuing inflationary policies, they will feel pressure to enable that massive spending and debase the currency.

And that is exactly what has happened in this country.

Interestingly, Coyne has previously been just fine questioning the independence of the Bank of Canada as noted by Luke Kawa:

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Who is responsible? Those who make the mistake, or those who point it out?

One of the oddest things about the attacks on Poilievre for criticizing the Bank of Canada is that they ignore the agency of the Bank of Canada itself.

The Bank of Canada is the institution that repeatedly made errors on inflation – which was supposed to be ‘transitory’, and who have been a significant part of eroding the value of our money.

Those mistakes have had a real and negative impact on Canadians.

Not long ago, the Bank of Canada was claiming that interest rates would be low for quite a while, which surely encouraged many Canadians to take on more debt.

Then, the Bank of Canada said they got it wrong on inflation, and are now raising interest rates, surely to the surprise of many who were told this was unlikely to take place.

That is what has crushed the credibility of the Bank of Canada.

Credibility is lost through error, not through those who criticize the error.

The error happens first, the criticism after.

It is the Bank of Canada that bears the responsibility for their lost credibility, not Pierre Poilievre or others who criticize the BoC.

Democracy requires holding powerful institutions accountable

The final point I’ll make here is that we must always hold powerful institutions accountable.

Democracy cannot survive unless our institutions answer to the Canadian People.

An institution as powerful as the Bank of Canada must be the most accountable of all, given the immense control they wield over the economy and the value of our hard-earned money. To say otherwise is to fundamentally misunderstand what democracy is all about.

Spencer Fernando

Photo – YouTube

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