Good afternoon, Mr. Carney and Mr. Jenkins, and thank you for being here with us today.
In the annex to your “Monetary Policy Report”, which you tabled last week, you explain how the Bank of Canada will proceed with what the experts call quantitative easing or, in other words, how it will increase the amount of credit in the economy. You traditionally do that by buying treasury bills.
In the context of this exceptional measure, you could also do so by buying financial assets from the private sector, that is to say the shares or bonds of individual private businesses. The bank will buy those assets by creating money out of nothing.
I must first tell you to what extent this practice of creating money out of nothing and artificially inflating credit troubles me. The inflationary theories of Keynes have been discredited for a number of decades. However, you'd think everyone has suddenly become a Keynesian. If creating new money and inflating credit could really stimulate growth, there would never be recessions or economic slowdowns.
In fact, a number of economists believe that excessive money creation caused this crisis. Excessively easy credit during most of this decade purportedly caused bubbles, particularly in the finance and real estate sectors. A recession occurs when those bubbles burst and the economy has to readjust. If it was easy credit that caused the bubbles and the crisis, I would like to understand how we can hope to get out of the crisis by further increasing credit. By doing that, don't we risk further distorting the economy?
Some say that quantitative easing is now the path to take, since it is practised at most other central banks of the major countries. However, if Canada experiences a less severe crisis because its monetary policy is more conservative and more prudent than those of its partners, it seems to me that doing the same thing as the others is not necessarily the best option.
Mr. Carney, in your report, you admit that purchasing private assets will increase their prices and that that will be done in a neutral manner with respect to sectors and assets of a similar nature. How can you remain neutral, when there are thousands of different financial assets in various sectors? Isn't the bank running the risk of putting itself in a position where it will favour certain sectors or businesses over others?