A new five-year mandate from the Bank of Canada is expected to be in place within the next 30 days. The question is whether the bank will stick with its current mandate of being a Canadian monetary policy that will preserve the value of money by keeping inflation low, stable and predictable. Or will the bank's role in the economy be expanded to include other popular items, such as boosting the national growth rate and keeping unemployment low?
The Bank of Canada seems to have an interest in role expansion. Just the other day, Governor Tiff Macklem launched the bank into a new mission to reconcile with Canada's indigenous nations as part of its mission. Bank officials and reports have promoted the bank's role in climate change inequality and inclusion at other times. We apologize, but this video hasn't loaded.
Tap here to see other videos from our team. The Bank of Canada can use monetary policy to keep inflation within the set limits of 2.0 per cent, which is why the price surges are now gripping major economies. The value of money is deteriorating as the bank fails to fulfill its prime mandate with the latest inflation rate at 4.7 per cent in Canada.
Other central banks, including the U.S. Federal Reserve, have failed to fulfill their roles as controllers of inflation. Inflation is at a 6.2 annual rate in the United States, a 29 year high of 6.0 per cent in Germany and 4.9 per cent in the European Union. What is wrong with monetary policies that are not meeting their targets? Don't blame us for high inflation, say central bankers who are supposed to keep it low. From President Joe Biden to a vast network of observers and economists, some agree that it's a huge network of observers and economists. Biden blamed OPEC's oil controls for America's rising energy prices and inflation. The Bank of Canada and Fed Chairman Jerome Powell claim that the inflation trend is a result of various economic factors including housing prices, supply chain bottlenecks, COVID, climate-related flood and fire disasters. In a commentary from the Financial Times, Macklem said that the bank continues to believe supply disruptions seem to be lasting longer than we thought, and energy price increases are adding to current inflation rates. The economist Robert Reich wrote a column in The Guardian about rising inflation. Reich believes that there is a deeper structural reason for inflation, one that appears to be getting worse: the economic concentration of the American economy in the hands of a few corporate giants with the power to raise prices. The role of money supply has been swept under the rug and ignored or assumed to be irrelevant. Lost in all of this is a deliberate attempt to detract from the real reason for the price surges now gripping major economies. Many economists have warned that central banks have abandoned one of the core rules of the monetary policy game, the quantity theory of money. The Quantum Theory of Money QTM and its associated monetarist theory was described by FP Comment columnist Philip Cross in a paper published in March for the Macdonald-Laurier Institute.
Nobel economist Milton Friedman, who famously summarised the force driving rising prices, is behind QTM and monetarism. Inflation is always a monetary phenomenon in the sense that it can only be produced by a more rapid increase in the quantity of money than in output. In central bank circles today, the dominant mantra seems to be: Inflation is never a monetary phenomenon. A paper by economists Steve Hanke of Johns Hopkins University and Invesco chief economist John Greenwood argues that the flood of different explanations for the rise in general inflation rates is the result of a simple mistake. Price increases in different areas of the economy due to supply-chain and other issues are fundamentally different from changes in the overall price level.
Greenwood and Hanke say that the current increases in overall price levels are in reality the result of excess money growth that has occurred in many countries and will be delivered at a conference in the U.K. on December 1. There is a correlation between floods and climate Monetary data from 2020 and 2021, showing increases in the broad money supply growth rates from 36 per cent in the United States to 19 per cent in the U.K. 16 per cent in the Eurozone and almost 17 per cent in Canada. These increases will cause increases in the overall price level that have only recently become apparent due to the typical two-year lag between accelerations in the rate of monetary growth and the emergence of higher inflation. The U.S. and Israel are likely to see increases in their overall price levels of approximately 27 per cent and 20 per cent over the next few years, whereas the U.K. will likely see an increase of about 11 percent in the overall price level over a similar period, based on money supply numbers. The expected excess money could raise the general price level by 7.3 per cent for Canada. Hanke and Greenwood say the role of the money supply has been swept under the rug and ignored or assumed to be irrelevant. We have had big growth of monetary aggregates at various times without inflation, so we have to unlearn, according to Jerome Power, recently re-appointed Fed chairman. Greenwood and Hanke responded by asking what was the basis for Powell's claim? Where and when has there been big growth of the monetary aggregates without inflation?