Conservatives are rarely regarded as champions
of the little guy. However last month, leadership candidate Maxime Bernier made
proposal to cut inflation,
which would provide enormous relief to ordinary Canadians.
like a tax,” said Bernier, who cites Ludwig von Mises, Friedrich Hayek and the
Austrian School as his key economic influences. “(It) eats away at our
purchasing power, revenues and savings.”
Inflation at 2%
(the BOC’s current target) may seem small, but it means prices double every 35
to ask the Bank of Canada to study the benefits of adopting a 0% inflation
target, has attracted surprisingly little attention. But if enacted, it would make
the loony a store of value almost as good as gold.
A stable dollar
would also make essentials like food, housing and consumer products more
affordable to ordinary Canadians.
interest rates needed to implement such a policy, would also boost savings and help
to stabilize pension plans, which are increasingly underfunded, due to their
inability to generate returns on their fixed income investments.
A hidden “Poloz Tax?”
Stephen Poloz, governor of the Bank of Canada
approach flies in the face of almost all conventional economic thinking.
Led by Paul
Krugman, governments, tenured university professors and the big banks almost
, that GDP growth is best generated though a mix of
increased spending financed by rising taxes, borrowing, and most recently
central bank financing.
Bernier, who cut
his teeth at the free market-oriented
, prior to entering politics, will have
none of it.
create and grow wealth simply by printing more money and encouraging people to
borrow and spend,” says Bernier. “The only way to create wealth is by investing
more, working more and producing more.”
Bernier is a
particularly strong critic of the Bank of Canada, which, under Stephen Poloz’s
leadership (and others before him), has sharply increased the cost of living
for ordinary Canadians.
For example the
average cost of buying an existing home has shot up by 34% since 2013, the year
that Poloz took office, according to the Canadian Real Estate Association.
increase because businesses are greedy,” says Bernier. Ultimately only the central
bank is responsible for creating the conditions that cause inflation.”
alone in his assessment of current central bank rising prices policies; which
here in Canada we might call the “Poloz Tax,” for lack of a better term.
Ben Bernanke, a
former Chairman of the US Federal Reserve, has made similar observations.
particularly critical about the Bank of Canada’s approach because its effects
are hidden to ordinary Canadians.
As John Maynard
Keynes himself noted, such measures are hard even for professionals to
understand, although the late economist was clear about their effect.
“By a continuing process of inflation, governments can confiscate
secretly the wealth of their citizens,” Keynes famously wrote. “The process
does it in a manner which not one man in a million is able to diagnose.”
Harder work, lower taxes and
balances his sound money stance with a wide variety of proposals targeted to
generate organic economic growth, based on demands created in the real economy.
for example measures that would encourage business investment, to better enable
Canadian companies to compete on the international stage.
that when businesses invest in plant, equipment, software and other
productivity-enhancing items, - measures which create or protect jobs and
generate spin-off activity, - they
should benefit from accelerated tax write-offs.
Bernier is also
a strong proponent of deregulation.
while Canada has long negotiated free trade deals internationally, domestic
free trade between provinces continues to be hampered by a variety of
At first glance,
Bernier’s sound money policies appear to be common sense.
However in “tax,
borrow, print and spend” Ottawa, they amount to heresy. So much so, that
whether Bernier can muster public support against the entrenched interest
groups remains an open question.
The fate of the
Canadian economy hangs in the balance.