I gave a speech last year in Sweden to explain that inflation was caused by central banks such as the Federal Reserve, European Central Bank, and Bank of England.
Today, let’s add the Bank of Canada to the list. Here’s a look at its balance sheet and you can see that there was a dramatic increase in money creation. No wonder Canadian prices, which only increased by 0.7 percent in 2020, jumped by 3.4 in 2021 and 6.8 percent in 2022.
I’m highlighting this data because Canada’s dilettante Prime Minister, Justin Trudeau, does not want to admit that his country’s inflation problem was caused by bad monetary policy.
Instead, he wants to blame grocery stores and is threatening them with higher taxes if they don’t stabilize prices.
I’m not joking. Brian Lilley explains the issue in a column for the Toronto Sun.
…grocery prices are too high,…food inflation is a real problem for many, but adding extra taxes won’t help. …It’s horrible economics and even worse policy but it’s the type of populist claptrap from the left that people will lap up and say, “Yeah, tax those guys over there with all the money!” …This is the type of policy that comes from authoritarian regimes like Venezuela where politicians have long tried to control prices but without any success. …These are the economic ideas that Trudeau wants to import to Canada, not to help Canadian families but because his Liberal Party is behind in the polls. Trudeau has been warned about inflation on things like food for two years now and hasn’t acted. He could consider cutting or pausing his carbon tax which adds costs for farmers, costs for truckers and costs for retailers which ultimately gets passed on to consumers, but he has refused to do so. Since inflation started to rise in 2021, Trudeau has increased the carbon tax three times.
Writing for Canada’s Financial Post, Jason Clemens and Milagros Palacios of the Fraser Institute condemn Trudeau’s knee-jerk statism.
…no matter what the policy issue or problem, the Trudeau government’s approach is almost always the same: more government. Top-down planning by politicians and bureaucrats has replaced entrepreneurship, business investment and economic dynamism as the drivers of our economy. More taxes and borrowing, more government spending and more regulations are the solutions to everything in the Trudeau government’s world. …in the latest example of Trudeau’s “more government” approach, the government has threatened to impose a new tax on grocery chains if food prices are not stabilized. …However, Trudeau’s threat flies in the face of a number of careful analyses, including one by Statistics Canada in the fall of 2022 that found food price increases are the result of bottlenecks in the supply chain… This conclusion was buttressed by a recent report by the Bank of Canada, which also investigated potential sources of the country’s current inflation…the increase in consumer prices was largely a result of firms passing along their increased costs to consumers, rather than retail firms benefitting from higher prices.
Yes, various firms did pass along higher costs to consumers, but don’t forget – as Milton Friedman taught us – that bad monetary policy caused the overall price increases.
When Trudeau tries to blame the private sector for the mistakes of his central bank, I’m reminded of this cartoon, which perfectly captures how politicians made mistakes that caused the Great Depression and then blamed capitalism.
P.S. While Trudeau’s blame-shifting is despicable, it’s presumably not as bad as this vacuous statement by the head of the European Central Bank.
P.P.S. While Canada’s central bank screwed up, at least its mistakes wasn’t as bad as the mistakes of central banks in Turkey, Sri Lanka, Venezuela, Zimbabwe, and Argentina.
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Image credit: DoD photo by EJ Hersom | Public Domain.
