Author: Michael Babad And Cathrine Mulroney
The first is the fact that the governor of the central bank of Canada is an unelected official with too much power and independence. In a real sense, he is unaccountable to the people. The second big problem is the ability of foreign interests to affect out dollar, which forces the central bank to adjust interest rates. The fear of inflation was the reason for not expanding the money supply. Banks slashed loans in order to pay off government debt. By choking off credit just when it was needed most, the depression was longer and much more severe. The Bank of Canada was nationalized in 1935 by Mackenzie King’s government. The focus on just battling inflation by several governors drove up interest rate and caused unemployment to soar to dizzying heights. The governor’s decisions have brought about the downfall of the Liberals in the 1970s and the Tories in the 1990s. The mandate of the central bank must change. Not only be to battle inflation, but to have a goal of a low unemployment rate too. Canada’s autonomy has been questioned because our debt to foreign investors stands at 40%. The government must cut its dependence on foreign interests. The board for the Bank of Canada has to become more active and alert, like that of the U.S Fed. It should also be filled with professionals. There is past evidence that indicates it does not understand the governors mandates and goals, and is thus, lay and unable to participate in policy. Also the debt carrying costs must be taken into consideration when determining interest rates. The zero inflation focus of the governors of the past has resulted in high unemployment and political instability. Michael Babad and Cathrine Mulroney are journalists and have produced articles for major Canadian newspapers and have also written a few books as well.