Until now, it’s always been the case that, despite whatever other mayhem they may cause, central banks can at least generate positive cash flow. Not anymore, so it appears.
When the Bank buys bonds it locks in the prevailing interest rate and therefore what those bonds pay it until they mature. But on the settlement balances it uses to purchase the bonds it pays the “deposit rate,” which is variable. When the interest on the bonds the Bank of Canada holds is less than the interest it pays on the settlement balances, as it is today, the Bank loses money.
One way to correct this imbalance would be for the federal treasury to cover B of C losses. But this would be politically awkward, so the Keynesians have come up with a better idea: deferred assets.
In our view, the way to solve this problem is to enter the Bank’s losses as a deferred asset on its balance sheet and a deferred liability on the government’s balance sheet.
Basically, we’ll just call our growing liabilities an asset, which we promise to make good on at some undisclosed future date. We’re good for it, right?
One commentator said this about the plan: “So long as they issue dollars–their debt and our “money”–to fund money-good bonds, they can get away with it. With lots of other problems, to be sure, but no hyperinflation. But to issue dollars to pay losses, well, that could spiral into a Weimar-style positive feedback loop.”
https://twitter.com/RealKeithWeiner/status/1541192491193581570
States and banks committing fraud?
Yawn.
“Government is a great idea, it’s just never been properly implemented.”
“We’ll get it right this time!”
The Canadian right is just as dumb as the commies, if a wee bit less evil.
Language is important.
Just as cancer is a potential future good health nodule.