Maxime Bernier: How the central bank eats your money

It is already well known that the last weeks have been full of speculation. This in regards to the decision to finally raise the rates after keeping them at a low level for more than a year. In such a way, it is considered that great speculation will be established on the next movements of the bank. That being the case, all this is related to the fact that last week the Bank of Canada increased its reference rate by a quarter of a percentage point to 0.5%.

In this way, questions arise as far as I could go and of course how fast. However, it is considered that all these assumptions about the establishment of rates have nothing to do with capitalism and free markets. In fact, this would be more specifically linked to central planning and government control of the money supply. In a monetary free market, the interest rate would be determined by the demand for credit and the supply of savings, as well as any other price in the economy.

Consequences referred to the subject

It should be noted that government control over money has serious consequences and it is incredible that few people know about it. It is necessary to emphasize that one of the consequences that are denoted is that central banks continuously increase the amount of money that is circulating in the economy. An example of this when talking about Canada is that, if citizens use the strictest definition of money supply, it has increased between 6 and 14% annually during the last twelve years. The situation is the same everywhere.

The degradation of money has been enveloped by the effects of constantly creating new money from nothing and a dramatic increase in prices. It has been said that general prices rise not because companies are greedy, or because wages rise, or because of the price of oil rises. That being the case, only the central bank is responsible for creating the conditions for prices to rise by printing more and more money.

One fact that is really important to note is that the Bank of Canada has had an inflation rate of 2% for more than 15 years. Which may seem small, however, when adding 2% of the depreciation of the monetary unit year after year, ends with large numbers.

Ben Bernanke, who is the president of the Federal Reserve, admitted that inflation is the equivalent of a tax. In this way, which is the most insidious of all taxes, which affects the least able to bear it, thus devouring purchasing power, income, and savings.

Source: National Post