It will seem irrational to most Canadians, but the surprising truth is that the Bank of Canada is explicitly trying to increase unemployment. The Bank’s Governor Tiff Macklem recently claimed that the unemployment rate in Canada was too low: “unsustainable,” in his words, and must be increased by using high interest rates to slow down economic activity and reduce employment. This idea – of using unemployment as a deliberate tool to undermine wages and protect business profit margins – has been implicit within orthodox monetary policy for many years. But it’s both rare and angering to hear that made explicit as the goal of economic policy. In this commentary, originally…

The Centre for Future Work recently co-published with the Canadian Labour Congress a major new report on inflation: its causes, consequences, and how it could be tackled in a more balanced and fair manner (rather than throwing the whole economy into recession, which seems the inevitable outcome of the Bank of Canada’s current strategy). The report has generated considerable attention in print, broadcast, and social media. CBC’s daily political podcast, Front Burner, published a feature-length interview with report author Jim Stanford (Director of the Centre for Future Work) on why the Bank of Canada’s current approach is punishing workers for inflation they clearly did not cause. He discusses the options…

Centre for Future Work Director Jim Stanford recently joined renowned political analyst and opinion researcher David Herle, on his Herle Burly podcast, to discuss the rising risk of recession in Canada, why the Bank of Canada is raising interest rates so aggressively, and whether there is a fairer way to manage post-COVID inflationary pressures. Stanford warned of the dangers of applying 1970s-vintage inflation theories and remedies to the unique combination of supply disruptions, energy price shocks, and oligopolistic market power than explain the current upsurge in inflation. He also emphasized that governments have ample fiscal room (given rapidly shrinking deficits) to support jobs and economic activity in months if the…

The Bank of Canada has been under attack from all sides for its actions (or, in some critics’ eyes, inaction) in response to rising inflation. To reinforce public support for its actions, the Bank has launched a communications offensive to explain – and justify – its actions. The Bank even posted a lengthy thread on Twitter arguing that since inflation hurts “all Canadians,” its efforts to bring inflation down through rapid interest rate hikes will benefit us all. This attempt to dumb-down monetary policy making was not just ineffective in its tone. It inadvertently revealed major flaws in the Bank’s economic reasoning. In this commentary, originally published in the Toronto…

Central banks in Canada and around the world have begun an aggressive cycle of monetary tightening: lifting interest rates quickly to undermine domestic employment and spending, in hopes of brining inflation back down toward their preferred targets (2% in Canada). Already, this shift in policy is having major impacts on forward-looking asset markets: stock markets, debt trading (especially for emerging economies), cryptocurrencies, and housing prices are all falling sharply. Many forecasters expect a worldwide recession to result from these measures. History suggests they are likely right: never before in Canada, and rarely anywhere else, have central banks succeeded in disinflating their economies to the extent now planned without experiencing a…