Note to the Bank of Canada, you don't control Inflation!!!

reportonbusiness.com: globeinvestor.com - Bank of Canada sticks to low interest rates

The Bank of Canada says that inflation is under control.

Interestingly, we had this article yesterday that read

China exports everything from jeans and T-shirts to toys and computers. Is inflation next?

Hmm, something doesn't add up. If the Bank of Canada controls inflation, how can China export inflation? And if China can export inflation, could they also be responsible for the lack of inflation?

And the answer to that is YES, China has a much bigger impact on inflation in Canada than the Bank of Canada. In fact, the only reason we've had any inflation is because the Bank of Canada doesn't acknowledge this fact.

If you look goods and services that the Bank of Canada does have an affect on (mainly, goods and services produced in Canada) you will see that they have a very poor record.

Housing is the prime example. A house is a good like any other, and yet housing prices have increased dramatically. Almost to the same level as it did in the US.

http://www.clevelandfed.org/research/commentary/2009/0909-1.gif


Let's take a look at some other numbers.

http://www.statcan.gc.ca/pub/62-001-x/2009011/t031-eng.htm
Since 2002=100%, you will see that Durable and Semi-Durable goods are actually more affordable now than in 2002 (thanks to China!!)

Services, food and shelter, the three items that I believe the Bank of Canada has the biggest affect on, are up substantially.

The Bank of Canada, through its influence on the dollar, also has a huge affect on the price that Canadians pay for commodities. This has lead to a large increase in cost for transportation and energy prices.

So what exactly is the Bank of Canada achieving through their policies? I argue that they didn't really achieve anything. Had they did nothing at all, the prices of good would have decreased thanks to China, and the prices of housing, foods and services likely would be much lower, which would have translated to a higher standard of living for all Canadians.