Two years ago I wasn't the governor. Two years ago and through the early part of the pandemic, the economy suffered its biggest collapse in history. GDP plummeted 15%. The unemployment rate shot up from 5.7% to 13.4%. Roughly three million Canadians were out of work and more than another three million Canadians were working less than 50% of their hours.
This was a situation where there was a serious risk of deflation. There was a huge amount of excess supply in the economy. Many Canadians were not working and if there hadn't been a really concerted policy response, there would have been a real risk of deflation.
Why is deflation so damaging? When a deflationary mindset sets in, people think prices are going to fall and their tendency is to wait and buy things later when prices are lower. Things are already really weak, so when people decide to wait and buy things when prices are lower, that just weakens the economy further. In an economy that has a relatively high level of household indebtedness and a mortgage payment is a fixed nominal value, getting less income makes those payments become more dangerous.
Those comments were very much in the context of an economy that was in danger of deflation. We were not predicting inflation. We took bold action to, first of all, put a floor under the decline and then support the recovery. We weren't predicting deflation, but we were indicating that were we not to take bold action, that could very well be what would happen.
We saw from the Great Depression.... Why is it called the Great Depression? There was a big decline and then a very prolonged period of an incredibly weak economy. A lot of people suffered as a result.