The Bank Of Canada Disputes The Money Printing Claim.

As the Bank of Canada tries to curb red-hot inflation, the central bank is engaged in another fight: a fight against misinformation. In recent weeks, the central bank has been using social media to engage the public in the economy, explaining how inflation works and what it is doing to bring inflation back to its two percent target. However, in its most recent Twitter thread, the bank went beyond explaining the finances and aimed directly at a joint attack on its policy decisions during the pandemic. “#YouAskedUs if we printed cash to fund the federal government. We didn’t,” the Bank of Canada tweeted on Aug. 25, followed by a series of tweets refuting the claim. While central bank officials typically hold speeches and other events to communicate their thinking and set expectations, Laval University economics professor Stephen Gordon says its audience was traditionally smaller than it is today. “The only people who pay attention are the pundits and the market experts. And they’re usually the only people they need to talk to,” Gordon said. Today’s high inflation environment and central bank politicization has led to a wider audience, with more Canadians concerned about rising interest rates and the high cost of living. Along with this increased interest also came a level of mistrust of the Bank of Canada’s activities and a misconception that it was printing money during the pandemic. Conservative leadership frontrunner Pierre Poilievre is sharply critical of the Bank of Canada, vowing to fire Gov. Tiff Macklem if he becomes prime minister. Poilievre has not explained how he plans to fire Macklem, since the Bank of Canada Act does not give the federal government that power. He has also repeatedly claimed that the central bank printed money to finance federal spending and thereby caused inflation. But the Bank of Canada and economists say that hasn’t happened. “There’s always been this expression that the bank is printing money whenever they implement these kinds of policies, but that’s not really the case,” said Jeremy Kronick, director of Monetary and Financial Services Research at the CD Howe Institute. The policy Kronick is referring to is quantitative easing, a measure the Bank of Canada tried to explain in a series of tweets. “We bought existing government bonds from banks in the open market. Why? This helped unblock frozen markets at the start of the pandemic. Allowed households, companies and governments to access funding when they really needed it,” said one of the tweets. “We didn’t print cash to pay the bonds,” the thread read. Sometimes referred to as QE, quantitative easing is a relatively new tool used to keep money flowing when interest rates are already hovering around zero and cannot be lowered further. It gained global attention when it was used by the Federal Reserve in the wake of the 2008 financial crisis. The Bank of Canada first used this policy tool when the pandemic hit to address the risk of deflation. He bought government bonds from financial institutions using settlement balances, or reserves, which he deposited in the accounts of financial institutions and paid interest. As the bank stated, these reserves are not the same as cash. “That buying that bond lowers the interest rate on that bond and therefore lowers other interest rates, which makes it cheaper for you and me to borrow. So that’s really where QE has its impact, not so much the swap,” Kronick said. The Bank of Canada began its quantitative tightening process, where bonds are sold back to financial institutions or allowed to expire without being replaced, in April of this year. The central bank chose the latter option. While the Bank of Canada’s motivation to speak directly to Canadians and justify its policies is understandable, Gordon says he’s not sure how effective its efforts are since the central bank doesn’t have much experience in this area. “They don’t have anywhere near the media arsenal of people trying to push the wrong agenda. So, in a way, they’re massively outmatched,” he said. A recent survey by Angus Reid found that 46 per cent of Canadians trust the Bank of Canada to fulfill its mandate, while 41 per cent said it does not. The survey found that mistrust was greater among people who had voted for the Conservatives or the People’s Party of Canada. The online poll polled 5,032 Canadian adults and was conducted between June 7 and 13. It cannot be assigned a margin of error because, according to generally accepted polling industry standards, online surveys do not randomly sample the population. Looking ahead, the Bank of Canada plans to expand its educational programming on the economy and the role of the bank. Kronick meanwhile says what will ultimately help boost confidence in the Bank of Canada is a reduction in inflation on target. “What matters and will restore that confidence is for the bank to get inflation back under control.” This report by The Canadian Press was first published on August 31, 2022.

#YouAskedUs if we printed cash to fund the federal government. We didn’t. 👇 Keep reading to learn how we’ve braced the economy through the shock of the pandemic. #CdnEcon #AskTheBoC 1/6 — Bank of Canada (@bankofcanada) August 25, 2022

title: “The Bank Of Canada Disputes The Money Printing Claim. Klmat” ShowToc: true date: “2022-10-29” author: “Rex Braud”