Bank of Canada action could cause mass inflation

The Comer action against the Bank of Canada is an attempt to force it to make interest-free loans to government.

I refer to Derek Grimmer’s letter ‘Bank of Canada and infrastructure’ (The NEWS, Jan. 28).

The Comer action against the Bank of Canada is an attempt to force it to make interest-free loans to government to cover expenditures and debt.

The action has been going on for years and, in the view of many, likely to fail. Even if it wins I believe little will be accomplished.

To quote the renowned economist Milton Friedman: “There is no such thing as a free lunch — someone somewhere has to pay.”

In this case it would be the Canadian taxpayer.

A generally accepted economic principle tells us that to create large amounts of money in the absence of an offsetting increase in gross domestic productivity is inflationary.

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.

Colin BartlettParksville

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