Bank of Canada Should Raise Rates to Pop Bubbles, Says Former Carney Advisor

Paul Masson, former advisor to Mark Carney, says the Bank of Canada should raise interest rates and pop the housing and debt bubbles.

He says years of low interest rates have distorted the economy and driven people to take higher risks. The accumulation of debt has left Canadians and their institutions stretched thin, ill-prepared to withstand the impact of another financial crisis.

Mr Passon correctly describes our situation.

The Bank of Canada could raise rates very quickly by selling assets. It will definitely not do this, because it would cause a depression. All talk about “maybe” raising rates “in the future” is just that: talk.

Should the BoC raise rates? Well, the Bank of Canada should be closed down, so really all of its assets should be sold. Central banks exist to empower governments and the elite at the expense of everyone else.

But in the context of having the BoC and Canadian dollars, I am sympathetic to the argument that the BoC shouldn’t really do anything. It would be reasonable to leave the money supply as it is and let the market determine interest rates from there. The BoC shouldn’t be jacking the rates around, whether to raise them or lower them. Let the market set interest rates free of further invention. This would give us a bit more time to prepare for the crash, versus an active contraction of the BoC’s balance sheet. “Laissez-faire.”

— Read more at The Financial Post —