Builders are using that money to build houses, which are then bought by people taking advantages of the Central Bank’s low interest rates. Those people are spending even more money in refrigerators or furniture. In other words: money is moving around, and the economy is benefiting. And for real: while other western countries are in de-leveraging mode, Canadian’s “debt as a share of income to levels greater than those in the U.S. before a slump in the housing market brought on its last recession”, says Bloomberg news agency. That’s why Canada’s banking system has been ranked the world’s soundest by the World Economic Forum for five straight years.
Is not that Canada didn’t feel the punch of the crisis. Is that its balance sheet had to expand just a few billion dollars in 2008 (around 50% from 53 billion to 78.3 billion) while the American Federal Reserve had launched several quantitative easing programs in the hundreds of billions. You see the difference: while the whole world (including in some sense Mario Draghi’s European Central Bank) is printing money like crazy, easing money like there was no tomorrow, Canada’s central bank has remained almost truthful to their foundational “zero bookvalue policy”: assets and liabilities had to be the same, the rest being given to the Government as dividends.
Also, in their last policy meeting, they even say the direction is just the opposite: less easing, not more easing. Or, in their own words: “The Bank has decided to maintain the target for the overnight rate at 1 per cent. Over time, some modest withdrawal of monetary policy stimulus will likely be required.” Yes, you read it right, they are reducing the stimulus. Revolutionary.
And the reason isn’t inflation: Its mandate is to keep the Consumer Price Index between 1% and 3%. It has been around 2%.
Maybe is because all this kind of credentials that Britons had to shout for help to direct their monetary policy to a Canadian. Mark Carney, the governor of the Bank of Canada, has this week agreed to take control of the Bank of England. A new line of thinking is coming to the Atlantic island. Some hints of the new policy are already known: no more QE for the time being. They have already decided not to extend its stimulus programme, which has already injected £375bn into the UK financial system.