Pronouncements on Bank of Canada policy by Conservative leadership candidate Pierre Poilievre have sparked criticism from a UBC economics professor..University of British Columbia professor Michael Devereux, an expert in international finance and macroeconomics, blasted Poilievre’s May 11 pledge to fire the head of the Bank of Canada..“It is outrageous that a potential prime minister of Canada could make such a threat to an independent institution which is so central to the proper functioning of the Canadian economy. The governor is appointed by the government for a seven-year term and during that term he or she is insulated from political pressures, acting solely to achieve the bank's mandate of low inflation and financial stability. Central bank independence is a critical requirement for a successful economy in the modern world,” Devererux said in an interview with Western Standard..“The statement is reckless in that it jeopardizes the reputation of Canada in the international financial system and could erode confidence in the Canadian economy as a safe location for investment.”.The statement is not without precedent. In 1961, James Coyne resigned as Bank governor amidst a political and personality clash with John Diefenbaker. Coyne’s successor Louis Rasminsky was successful in his demands for changes to the Bank of Canada Act that ensured he could manage monetary policy without political interference on a day-to-day basis..In the 1993 election campaign, Liberal leader Jean Chretien was highly critical of Bank governor John Crow. They disagreed on what the proper inflation rate should be, and when his term ran out in 1994, he was replaced by his deputy Gordon Thiessen..Nevertheless, Devereux believes Poilievre’s comments reflect a low ebb in Canadian political discourse..“’The statement by Poilievre itself is a sad commentary on the state of politics in Canada, since it reveals that real debate about important policy issues has been replaced by populist soundbites that are designed for pure theatre, and simply distract audience attention away from the real challenges that are faced in this country.”.Because year-over-year inflation hit 6.7% in March, Devereux does think the Bank was slow at the switch..“Most of the inflation pressures are due to factors beyond the Bank's control, but even so, they have probably been too slow to react to the growing inflation.”.Devereux’s UBC bio acknowledges his “many connections with central banks and international organizations, particularly the Bank of Canada, the Bank for International Settlements (Hong Kong), and the Federal Reserve Bank of Dallas.” It may not be surprising then, that he opposes Poilievre’s pledge to prevent the Bank of Canada from issuing a digital currency..“The digital currency would act as an efficient means of settlement of all types of payments for both households and firms in Canada. It would also act as an alternative to cryptocurrency, which is on balance a good thing, since cryptocurrencies tend to be pretty useless as a means of payments, and also facilitate criminal activity,” Devereux said..“The only possible negative is that it might threaten the intermediation function of the private banking system, if a large number of current depositors moved their deposits to the Central Bank. But the Bank of Canada is aware of these risks, and presumably is taking steps to alleviate them.”.Poilievre supports MP Andrew Scheer’s Bill C-253 which would allow the Auditor General to audit the performance of the Bank of Canada. But Devereux doesn’t think there’s anything to find. .“I think this suggestion is purely a political ploy. The Bank produces very clear and transparent accounts already. There is absolutely no suggestion that the financial practices of the Bank or any of its staff have been underhanded or suspicious in any way.”.However, in an interview with Western Standard, Scheer said he was “excited” to have Poilievre endorse his bill, and that the audit they want would go deeper than current routine examinations..“The bank is audited every year...[in] balance sheet audits. And that's just making sure that the left column adds up to the right column. But what the Auditor General does is that deeper dive into policy development, whether or not departments and agencies follow proper protocols, proper decision-making processes. And that's what's needed,” Scheer said..“The bank has been protected from that oversight for decades. And my bill would eliminate that exemption and empower the Auditor General to come in and do a performance audit.”
