As the saying goes, a rising tide lifts all boats. That was certainly the message Bank of Canada Governor Tiff Macklem was hoping to hammer home in his latest press conference.

“We will be supporting the economy through the full length of the recovery, helping to bring it back to full capacity with full employment,” Macklem said. Policy makers “agreed that as the economy shifts from reopening to recuperation, it will continue to need extraordinary monetary policy support.”

Extraordinary is becoming ordinary. The Bank of Canada has pledged to keep interest rates pinned to the floor well into the future, and said it will continue to purchase $5B worth of government securities on a weekly basis. Of course, for every action there is a reaction. Mortgage rates have been forced lower, with 5 year mortgage rates below 2%, a sea of liquidity is stoking concerns about inflating an already frothy housing market.

When asked by Reuters journalist, Julie Gordon, if he had any concerns about re-igniting a housing bubble, Macklem responded, “we think a considerable amount of this strong rebound in housing activity reflects pent-up demand. We’re not extrapolating going forward from these recent numbers.”

In other words, the Bank of Canada is expecting housing demand to slow from here, or is perhaps  trying to find an excuse to continue these extraordinary policies.

It’s not just the Bank of Canada though. There is an obvious coordination on the fiscal side as well. The Trudeau Government pumped households full of cash in Q2. Ottawa’s income support resulted in a $56 billion increase in government transfers to households. Which, combined with debt payment holidays, resulted in Canadas household debt to income ratio to plummet from 175% in Q1 to 158% in Q2. Meanwhile, consumer insolvencies tanked, falling 45% from last year.

It’s a feel good story, with the click of a few buttons, Canadian households are suddenly better off. Households and politicians are both wondering why we never tried this before? We have ushered in a new era of unlimited stimulus, or at least that’s the belief. It is going to be nearly impossible to scale back these programs. What future government is going to win an election by campaigning for  austerity?

In fact, we are just getting started.  A guaranteed basic income for all Canadians has emerged as the top policy choice of Liberal MPs. The Liberal caucus is calling on the government to adopt the idea in a priority policy resolution for consideration at the party’s upcoming national convention. And MPs consider it so important that they’ve designated it their top resolution, guaranteeing that it will go directly to the Nov. 12-15 convention for debate and a vote.

Welcome to 2020, where extraordinary becomes ordinary.

Three Things I’m Watching:

1. Household debt to income ratios fell in Q2 thanks to Government transfers and debt payment deferrals. They are, however,  expected to resume their climb in 2021 as deferrals expire.

2. The Bank of Canada will continue to purchase at least $5B per week in government bonds “until the recovery is well underway”

3. Reprieve for renters. In Toronto, condo rental listings are exploding higher.


  1. > What future government is going to win an election by campaigning for austerity?

    Almost any of them, obviously. Every party since Thatcher & Reagan have all pitched austerity budgets from the Conservatives through the NDP. They, like you, like to act like a currency issuer is somehow under the same constraints as a currency user. It sounds homey and intuitive even though it’s completely wrong.

    The biggest risk to our economy isn’t stimulus, it’s that people see “deficit” and think it’s something that should to be eliminated.


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