Juno News - 5 government claims about inflation DEBUNKED

00:00:00.000 I'm Jasmine Moulton and this is Reality Check.

00:00:09.700 The inflation rate in Canada is currently nearing 8% and this is the highest that it's been in about

00:00:15.220 four decades. And while politicians and government officials are talking a lot about

00:00:19.800 explanations for this increase in the inflation rate, none of them seem to be pointing to

00:00:24.820 themselves or their own actions. Take a listen. Inflation is not a made in Canada challenge

00:00:31.060 and it's actually less severe here than among our peers. We also know that inflation,

00:00:38.540 a global phenomenon, which is a lingering result of the COVID recession and has been exacerbated

00:00:45.740 by Putin's illegal invasion of Ukraine. And high energy prices have put upward pressure on

00:00:51.920 inflation in Canada. And that is expected to continue in the months ahead. The unprovoked

00:00:57.700 Russian invasion is creating volatility and uncertainty in the global economy.

00:01:03.400 And then Vladimir Putin illegally invaded Ukraine, forcing up the price of food and fuel.

00:01:13.460 And in light of their record profits, economists have said that they are contributing

00:01:16.880 significantly to inflation, that corporate greed is contributing to the inflation that we're

00:01:22.040 experiencing right now. Reopening the economy has brought new complications, leading to higher

00:01:27.100 inflation around the world and here at home. And with oil prices rising further in recent weeks,

00:01:33.260 we can expect inflation to move up again. The Russian invasion of Ukraine is driving up

00:01:38.340 international prices for oil, wheat and other commodities. This will put further upward pressure

00:01:44.100 on inflation in Canada and around the world. We expect inflation will remain close to 5%

00:01:50.160 through the first half of 2022 and then move lower. What we just heard was a bunch of different

00:01:56.300 Canadian politicians and government officials giving various excuses as to why Canadians are currently

00:02:01.640 experiencing high rates of inflation in this country. In particular, there's five claims that

00:02:06.320 government made in that clip that are being dutifully echoed by their friends in the legacy media

00:02:10.980 that need to be debunked. Let's get started. The first myth is that inflation is happening

00:02:15.700 everywhere. It's a global phenomenon. First off, this is a terrible excuse. If you are bad with money,

00:02:21.960 but all of your friends are also bad with money, that doesn't mean that your choices are responsible.

00:02:27.300 And second of all, the Bank of Canada's mandate is not to copy what every other central bank across

00:02:32.260 the world is doing. The Bank of Canada's mandate is to target inflation to about 2%. So if other central

00:02:39.040 banks around the world are missing their targets and are taking actions that are conducive to

00:02:43.320 inflation, then maybe you shouldn't follow what all your counterparts around the world are doing.

00:02:47.700 But more fundamentally, it's not even true that this is a global phenomenon. There are many OECD

00:02:52.340 countries with inflation rates lower than Canada, including G7 countries as well. At the end of the

00:02:57.580 day, when our politicians say it's happening everywhere, it's not our fault, that's essentially them

00:03:02.300 avoiding responsibility for some of their current policies that are conducive to inflation.

00:03:06.700 For example, take the carbon tax that exists in Canada, but doesn't exist in some of the world's

00:03:12.080 largest eminent countries like the United States and China. The carbon tax makes food prices and energy

00:03:17.880 prices more expensive. It's designed to do this. So no politicians, inflation isn't happening everywhere

00:03:23.600 around the world and some of your own policies are making it a lot worse here at home. Myth number two,

00:03:29.240 we're currently experiencing inflation because of the conflict in Russia and Ukraine. As our politicians

00:03:33.680 will state, the conflict between Russia and Ukraine is causing inflationary pressure here at home

00:03:38.120 because the region is well known for its wheat exports, for example, as well as its oil and gas.

00:03:43.900 This may sound odd to you, or at least oddly familiar, because Canada itself is a oil and gas

00:03:50.520 exporter and also a quote-unquote global breadbasket. So if it is true that there are now global shortages

00:03:57.300 in oil and gas and there's a void to fill in the global export of wheat, you would think that Canada

00:04:03.680 actually take advantage of increasing economic output in this current market, which of course

00:04:10.780 would help to counter inflation here at home. While Canada makes up less than 1% of the global

00:04:15.240 population, we account for about 12% of wheat exports globally. On the oil and gas front,

00:04:21.400 according to CAP, which is the Canadian Association of Petroleum Producers, Canada has the third largest

00:04:26.960 oil reserves in the world, yet we import oil from foreign suppliers. Even though Canada produces more oil

00:04:33.240 and natural gas than we need to meet energy demands within our country. Currently, more than half the

00:04:38.860 oil used in Quebec and Atlantic Canada is imported from foreign sources, including the U.S. and Saudi

00:04:44.340 Arabia. So again, you'd think this would be a great opportunity for Canada to step up and help meet some

00:04:49.120 of this demand globally, but we can barely even get our own oil and gas shipped across our own country,

00:04:53.920 let alone overseas. What's worse, according to the Financial Post, Canada imported about 10,000 barrels per

00:05:00.560 day of petroleum products from Russia last year, about 50% made up of gasoline and gasoline blends.

00:05:06.420 So there were certainly a lot of Canadians that were very excited in anticipation with the prospect

00:05:10.760 of the German Chancellor coming to Canada last month, meeting with the Prime Minister, and eager to

00:05:16.500 alleviate Germans' current dependency on Russian oil and gas. But while those in the oil and gas sector

00:05:22.640 here in Canada might have waited with bated breath to hear what the outcome of this meeting was,

00:05:27.060 they may have been disappointed. The Canadian and German governments came to an agreement that

00:05:31.220 Canada would provide Germany with some hydrogen generated from wind farms out in Atlantic Canada.

00:05:37.240 As CTV News reports, Canada currently produces almost no hydrogen that would fit the goals of

00:05:42.840 the agreement. Both countries believe a new hydrogen trade corridor could be set up and running

00:05:47.700 well before 2030. Both governments are clear this agreement will not solve Germany's immediate desire

00:05:54.040 to wean itself off Russian oil and gas, a necessity as the war in Ukraine has threatened European energy

00:05:59.580 security. So it's really unclear how Canadian hydrogen in 2030 is going to keep Germans warm this

00:06:05.960 winter. But what is clear is that this seems like a huge missed opportunity for Canadian oil and gas.

00:06:11.540 And to conclude, it's really unclear how this is the Russian government's fault and not the Canadian

00:06:15.680 government's fault for missing an opportunity to stop oil and gas prices and food prices from skyrocketing

00:06:21.380 here in Canada. Let's move on to myth number three, which is that the Bank of Canada didn't print

00:06:26.180 money. The Bank of Canada recently tweeted out that it did not print money during the pandemic to fund

00:06:31.380 the government's COVID-19 spending. So I reached out to Franco Terrazzano, who's the federal director of

00:06:36.980 the Canadian Taxpayers Federation with a background in economics, to ask him a few questions. Franco,

00:06:42.260 the government spent over $600 billion in fiscal year 2020 to 2021, but it brought in less than $300 billion in

00:06:49.940 revenues and ran a $354.2 billion deficit as a result. So how did the government finance this deficit?

00:06:58.020 Well, governments can raise revenue by taxes or by selling bonds to financial institutions,

00:07:05.860 but the Bank of Canada can also buy Government of Canada bonds. And what was so different about the

00:07:11.620 pandemic is that you saw the Bank of Canada's bond purchasing on overdrive. So the Bank of Canada's

00:07:18.820 balance sheet increased by more than $300 billion during the pandemic, largely by buying Government

00:07:25.700 of Canada debt. Now at the heart of the pandemic, we saw the Bank of Canada's assets grow by about 300%.

00:07:34.340 Now that growth in the Bank of Canada's assets during the pandemic is larger than the growth that we saw

00:07:40.660 in the recession of the 70s, of the 80s, of the 90s, and even larger than the recession in 08-09.

00:07:48.420 So during the 2020 budget year, we saw federal politicians ran up a $328 billion deficit. Now

00:07:57.220 during that time, the Central Bank created new money to buy about $275 billion worth of Government of

00:08:06.500 Canada bonds. Now on April 19th, 2021, we had Finance Minister Chrystia Freeland announced that the projected

00:08:15.060 deficit of 2021 would be about $155 billion that year, or about $3 billion deficit per week. By

00:08:25.380 remarkable coincidence, only two days later, the Bank of Canada announced that it would be buying

00:08:31.620 $3 billion worth of Government bonds every single week. Yes, I know what you're thinking, remarkable

00:08:38.180 coincidence. But look, that really seems that the printing press is being used to fund Ottawa's deficit

00:08:47.540 spending, regardless of where they are buying the Government bonds from, or whether they are buying

00:08:53.860 old or new Government debt.

00:08:54.820 This is getting a bit into the weeds here, but the Bank claims it didn't buy Government bonds directly

00:09:00.740 from Government, that it only bought existing bonds on the open market. Yet the Bank's assets grew across

00:09:06.580 a number of categories. So did the Bank directly finance the Government's spending in a different

00:09:11.620 way, other than buying bonds directly from Government? Like by buying Treasury bills from the Government, for

00:09:17.460 example? Well, the Central Bank is buying Government debt, and is increasing the amount of money. And

00:09:23.780 remember, the more money or dollars that the Central Bank creates, the less that your dollars in your

00:09:28.580 bank account, or your savings account will buy. That is the inflation tax, and Canadians are suffering from

00:09:35.140 it today. Now, absolutely, the Central Bank is lowering borrowing costs for the Government of Canada, and

00:09:42.900 the Central Bank, the Bank of Canada, is buying Government debt. Whether it's old debt or it's new

00:09:49.220 debt, they're buying Government of Canada bonds. And just because they are buying Government of Canada bonds

00:09:55.540 from a middleman, it doesn't mean that they're not creating new dollars to buy Government debt. Also,

00:10:02.980 another important thing to remember is that it's not like the Central Bank wasn't active in the primary

00:10:09.060 market. Now, I have a quote that I want to read from you. It's from Tiff Macklem, the Governor of the

00:10:14.660 Bank of Canada at his committee appearance in 2020. He said, quote, we also took a series of steps

00:10:22.020 to reduce our purchases of Government of Canada Treasury bills in the primary market. At the peak,

00:10:29.620 we were buying as much as 40% of the T-bill auction. Lastly, the bank says quantitative easing is

00:10:37.380 technically different than money printing. How would you respond to that statement?

00:10:41.540 The Central Bank expanded its balance sheet by about $300 billion during the pandemic. Now,

00:10:47.620 how did it get the money to buy all of those assets? Did it have a bake sale? No, it created new money

00:10:54.260 with the click of a keypad. And look, the Bank of Canada says it didn't buy bonds with cash, but are

00:11:02.180 using settlement balances. Okay, but that's creating new money. Because what are settlement balances?

00:11:08.660 Well, let's quote directly from the Bank of Canada when they say, quote, settlement balances or reserves

00:11:16.340 are a unique type of money that the central bank creates, end quote. Oh, by the way, that's from the

00:11:23.300 Bank of Canada's own website on understanding quantitative easing. So Jasmine, what do we make of

00:11:30.100 this Bank of Canada Twitter thread? Well, it seems like the Bank of Canada spinners are working really

00:11:36.740 hard for their next bonus. Because remember the Bank of Canada during the pandemic in 2020 and 2021

00:11:43.780 were busy handing out $45 million in pay raises and bonuses. Remember that was during the pandemic

00:11:50.980 while their neighbors in the private sector lost their job, took a pay cut, maybe even lost their

00:11:56.020 business. And it was also in 2021 when CPI was above 3% for nine consecutive months and as inflation

00:12:04.580 continued to took off. So why did the Bank of Canada hand out $45 million in bonuses and pay raises?

00:12:10.900 Well, that's a really good question because the Bank of Canada itself admits that it failed to meet

00:12:16.740 its inflation target. In fact, the Bank of Canada only has one job and that's to keep inflation low and

00:12:23.300 around 2%. But if you've been to a grocery store or a gas station in the last year, you know that the

00:12:29.940 Bank of Canada failed to do its only job. So why would the Bank of Canada be handing out millions and

00:12:36.340 millions and millions of dollars in bonuses and pay raises? So again, what do we make of this whole

00:12:42.180 thread from the Bank of Canada on money printing? It looks like those Bank of Canada spinners are

00:12:48.980 working hard for their next bonus. So it really sounds here like the Bank of Canada is playing

00:12:54.100 a semantics game. They say they didn't print cash, but here we are in a situation where the money

00:12:59.140 supply has greatly increased since the start of the pandemic. Inflation is approaching 8% and their

00:13:04.580 target was to keep it at two. This brings us nicely to myth number four, which is that you can't

00:13:09.060 criticize the Bank of Canada governor. Of course, there are your typical suspects in the legacy media

00:13:13.140 that lost their minds when Pierre Polyev stated that he'd fire the Bank of Canada governor.

00:13:17.860 But in reality, there were people from across the political spectrum

00:13:21.140 that were lambasting his comments. Kelly McFarland wrote in the National Post,

00:13:25.220 It's a rash, reckless and dangerous pledge. To implement it would be wholly irresponsible.

00:13:30.980 The independence of the Bank of Canada is vital if Canadians are to retain any confidence in its

00:13:36.740 reliability as an institution. So let's talk about Canadians' confidence in the Bank of Canada.

00:13:42.100 Angus Reid conducted a poll recently that showed 41% of Canadians did not have

00:13:47.380 confidence in the Bank of Canada to get inflation back under control.

00:13:51.460 This sounds to me a lot like Canadians don't have confidence in the bank to do its job,

00:13:56.740 not that they're concerned about the bank's independence.

00:13:59.060 Even Paul Beaudry, the deputy governor of the Bank of Canada stated this,

00:14:02.740 The aspect that we should be held accountable is exactly right.

00:14:06.740 Right now, we completely understand that lots of Canadians can be frustrated at the situation.

00:14:12.340 It's difficult for a lot of people, and we haven't managed to keep inflation at our target,

00:14:17.380 so it's appropriate that people are asking us questions. It's about accountability,

00:14:22.020 not the bank's independence. The argument could even be made that confidence in the Bank of Canada

00:14:26.340 would be eroded if it's not going to do its job, which it hasn't been doing very well. So yes,

00:14:31.060 absolutely, the Bank of Canada should be held responsible. And last but not least, the government

00:14:35.380 loves to say this line that it had no choice to spend what it spent during COVID-19. They had our

00:14:41.220 backs after all, and wouldn't it be so scary to think if there was another government in power

00:14:45.380 during the pandemic? So before I discredit this statement entirely, recall, this is a government

00:14:50.660 that has a lot of problems balancing budgets. Our Prime Minister stated on the record that if you spend

00:14:57.220 enough, budgets should quote unquote, balance themselves. And this disastrous way of thinking

00:15:02.100 came to fruition when after his first five years as Prime Minister, he missed the mark by balancing

00:15:07.700 the budget. He added over $100 billion to Canada's national debt before COVID-19 even arrived on

00:15:14.580 Canada's shores. But putting all of that aside, it's clear from International Monetary Fund, the IMF's

00:15:19.860 reporting that Canada outspent its peers in the G7 by a long shot. The IMF states, Canada spent 19.7%

00:15:28.900 of its GDP on its COVID response, which was about $435.2 billion. Furthermore, analyzing the IMF data,

00:15:36.740 the Fraser Institute reported that Canada went into the most debt over COVID-19 compared to 35 other

00:15:43.300 high-income countries. Here's a quote from the report. Canada has the highest deficit to GDP ratio

00:15:49.940 at nearly 20%. And you can see this chart that's on the screen here. To put this in perspective,

00:15:56.100 Canada's net borrowing is more than double the ratio of Germany and triple that of Sweden and Ireland.

00:16:02.980 Furthermore, Canada ranks higher than the United States, the United Kingdom, and is almost double

00:16:08.660 that of Australia, which has a similar economy to Canada. So while it's true that Trudeau opened the

00:16:13.940 floodgates of spending during COVID-19, it's unclear why he had to spend so much more comparatively

00:16:20.340 to other countries. Thankfully, the Fraser Institute offers more insight as to why this might be the case.

00:16:25.380 They found that the government wasted at least tens of billions in, quote, poorly targeted assistance

00:16:31.540 during the pandemic. One example of this was they found that $12 billion went to students deemed to

00:16:36.820 be dependents living with parents in households with at least $100,000 in household income.

00:16:43.460 Sadly, the Fraser Institute found a ton more examples like this that frankly just hurt your brain as a

00:16:48.420 taxpayer. So here's a reality check. The government should stop avoiding blame and making excuses for why

00:16:53.540 there's inflation in Canada. If politicians and government officials are really wondering why we have

00:16:58.260 inflation in Canada, they should stop making excuses and look in the mirror. They should meet

00:17:02.820 their inflation targets. They should stop with the policies that drive up food and energy prices like 0.72

00:17:07.540 carbon taxes. And this should be obvious, but apparently it's not. They should stop spending

00:17:11.780 money that they don't have. That's our show for this week. Thanks so much for tuning in and don't forget to

00:17:16.260 watch a new episode of Reality Check every Wednesday. If you've been enjoying Reality Check,

00:17:21.060 then please support our work. Visit donate.tnc.news.

Juno News - September 07, 2022

5 government claims about inflation DEBUNKED

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