[StickMan]

Governments have always borrowed money by selling bonds to lenders. What was different this time is that the Bank of Canada bought these bonds right back at a higher price from the financial institutions that bought them in the first place. This made it easier for the Trudeau government to sell those bonds and raise debt, because lenders knew they would be repaid a bigger sum almost immediately by the central bank.

And how does the central bank pay for the bonds? It deposits money into the accounts that financial institutions have at the Bank of Canada. Because those deposits are the equivalent of cash, they instantly add to the Canadian money supply. From the start until the end of the Bank of Canada’s quantitative easing program, the M2 money supply in Canada grew roughly 25 per cent.

Figuratively speaking, that is money printing. And the increase in the amount of electronic money in these accounts leads to increases in paper money later on. That is why bills in circulation went up 27 per cent, from $90 billion to $114 billion, during the quantitative easing period. That is literally $24 billion of printed money.

For those financial institutions that keep the money on deposit, the Bank of Canada must pay interest — at the going rate. Because rates are now rising, the central bank is now losing money and will need a bailout from the federal government for the first time in history...

The only reason to do it was to fund government overspending. It allowed Trudeau and Freeland to wave away the danger of supercharged deficits by claiming they could basically borrow for free. Had the government been forced to borrow real money from real lenders, interest rates on government debt would have been higher and Trudeau would have been forced to borrow less.

Worse still, all the cash that was pumped into the financial and mortgage systems created a massive housing bubble...

According to Bloomberg, Canada has the second most inflated housing bubble in the world. But that bubble is now bursting as the government suddenly reverses course with sharp rises in interest rates. Monthly payments on mega mortgages are rising, even as house prices are falling, so people cannot even sell their homes to pay off their debts.

Liberals like to say that all this inflation is the result of the Russian invasion of Ukraine. But less than 0.3 per cent of Canada’s trade is with those two countries, and the things that they produce are things we already have — food and energy. In fact, the higher commodity prices should have helped our resource-heavy economy, but for the fact that the Trudeau government has hit farmers with fertilizer tariffs and carbon taxes and blocked or bungled every single pipeline or LNG export terminal proposed in seven years.

Inflation was already 5.1 per cent when Russia invaded Ukraine. And even the governor of the Bank of Canada has now said “Inflation in Canada increasingly reflects what’s happening in Canada.” One of his predecessors, Mark Carney, who is now positioning himself to replace Justin Trudeau, said that inflation “is principally a domestic story.”

https://nationalpost.com/opinion/pie...uced-inflation