Re: Colin Bartlett’s response to my letter entitled “Bank of Canada and infrastructure” (The NEWS, Jan. 28).
Bartlett asserts: “For the Bank of Canada to create the vast sums now required, the resultant inflation would effectively pass the real cost of this so-called free money down onto the shoulders of consumers who would pay for it in increased prices.”
“The end result would be the same had the government simply increased taxes. The government was brought to this conclusion in 1974 when the Bank of Canada’s attempts to cover the huge overruns at that time created massive inflation, which took years to get under control,” Bartlett wrote.
Bartlett should know this is simply not true.
On June 16, 2015, Bill Wilson of Qualiucm Beach answered a similar Bartlett comment in a letter to the editor (“Debt privatization.”)
“According to this (http://canadianinflation.com/historical-canadian-inflation-rates/) from 1974 to 1982, inflation soared higher than the rest of the post war era after the Bank of Canada ceased to finance major governmental projects and programs.”
He continues, “The consequence of this change in financing was exposed in the 1993 Auditor General’s Report. An astounding 92 percent of federal debt was due to accumulated interest. Mr. Bartlett omits any reference to the prolonged and steady decline of such debts under Bank of Canada funding in the first twenty post-World War II years.”
Also in a June 9, 2015 letter (“Public debt,”) another response to Bartlett errors, Neil Dawe of Parksville similarly pointed out that “Canada’s federal debt had grown at between five and 10 per cent until 1975.
For the next 12 years, after privatization, it grew at an average of over 20 per cent, taking the debt from around $20 billion in 1973 to $277 billion in 1987. Average inflation for the 24 years prior to 1974 was 2.8 per cent; for the 24 years after 1974 it was 5.4 per cent.”
The data is there for Bartlett to read in the linked historical inflation rates: the rate in the worst post-Second World War year — 1981 — ranged from 12.1 to 12.9 per cent, whereas in 1973 the last year the Bank of Canada provided interest free money to run the country, rates ranged from 5.6 to 9.4 per cent.
Derrick GrimmerErrington