Tiff Macklem Doesn’t Seem To Understand His Job

The Bank of Canada must be focused on bringing down inflation, not artificially sustaining our overdependence on the housing market.

Canada’s economy is dangerously overdependent on the housing market.

This overdependency has been caused by many factors, including local restrictions on expanding the housing stock, high-tax anti-growth federal policies that disincentivize job creation and investment, rapid population increases, and large scale money-printing.

An economy with stagnant productivity was flooded with money, and that money unsurprisingly went towards fixed assets like housing.

Now, with high levels of inflation and absurdly overpriced housing, an entire generation is being locked out of the Canadian dream.

Unfortunately, for those hoping for a quick resolution to this issue, the Governor of the Bank of Canada – Tiff Macklem – seems intent on perpetuating it.

Consider this, per BNN Bloomberg:

“Bank of Canada Governor Tiff Macklem conceded that rate hikes have hit the country’s homeowners hard, saying the impact of higher borrowing costs on consumers is a major reason why he chose to hit pause before the U.S. Federal Reserve.

In an interview with Bloomberg News, Macklem said the central bank needs time to gauge how households and businesses are adapting to higher rates before it makes any further moves.

Canadians “are more indebted today than they’ve ever been,” Macklem said after a speech Tuesday in Quebec City. Although some households were able to build up cash reserves during the pandemic, “extra savings are probably not going to last as long as the higher debt.”

The governor’s comments underscore the uncertainty faced by policymakers as the economy — and Canada’s richly-valued housing market — are tested by the highest interest rates in 15 years.”

Here’s the problem:

Dealing with overindebted homeowners is not Macklem’s job.

His job – and the job of the Bank of Canada – is to deal with rampant inflation and bring it down.

Inflation in Canada currently stands at 6.3%, far above the 2% target.

It’s not Macklem’s job to end the fight against inflation because he’s worried about the debt levels of Canadians.

That’s a job for the Parliament, who should respond to the situation and craft legislation that unleashes Canada’s productive potential, a point well-made by Aaron Wudrick:

“Wait, what? That sounds like something a politician might want to worry about, but it’s not what the Governor of the Bank of Canada should be worrying about. The Bank’s job is to be laser-focused on inflation, and inflation alone.”

https://twitter.com/awudrick/status/1623462335061938179

By making the fight against inflation secondary to something that isn’t supposed to be Macklem’s focus, he risks incentivizing further increases in debt and a further reliance on the housing market for ‘growth’ in Canada, which would represent doubling-down on the same untenable approach that has put our situation into such a bad situation to begin with.

Covering for failed Liberal policies

Another problem here is that Macklem is again making a very political decision in a role that is supposed to be apolitical.

The federal government could easily provide relief to over-indebted homeowners by scrapping the carbon tax, cutting income taxes/sales taxes, and repealing policies that hold back the energy sector.

Lower overall tax rates, lower energy costs, and a billions in new energy sector investments (which could have happened if Trudeau didn’t snub Japan and Germany when they asked for more LNG), would provide some relief to those who face serious debt problems.

By choosing not to do that – the Liberals & NDP just voted against a Conservative motion that would have ended the carbon tax – the government is making a deliberate choice to increase the financial pressure on indebted Canadians.

It’s not Macklem’s job to cover up for the consequences of those federal actions.

It’s not his job to prop up indebted consumers who are struggling because of misguided Liberal policies.

Macklem’s job is to bring down inflation.

Yet again, just as we saw with Macklem’s inability to forecast the surge in inflation (at a time when Pierre Poilievre was warning about what was about to happen), Macklem demonstrates that he still doesn’t understand his job.

Spencer Fernando

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