Reacting to Bank of Canada Doesn't Deserve Its Bonuses

Part of the problem is that it's an.

It's like an exponential increase on how.

Many bonuses they're getting. It's like, oh, here we went from, like, hardly any bonuses to like, wow, look, you guys did so good at failing miserably at your mandate. Here's $45 billion. Great job, everybody. Pat on the back. Way to saddle Canadians with more problems.

What the heck is going on over at the bank of Canada? And why are they paying out millions of dollars in extra bonuses for not meeting their mandate as an organization? That's kind of interesting, and I think it's something that should concern Canadians. Perhaps as a Canadian, you've heard about this or maybe you haven't. If you haven't, we're going to talk.

About it right now.

In fact, we're going to react to a little video.

We're going to bring up an article.

That talked about this very recently. And, you know, like myself, if as a Canadian citizen who, you know, pays taxes and those kinds of things, this is the kind of thing that should probably piss you off a little bit.

At the bank of Canada. It's pay raises for me, but not for the bank of Canada. Governor Tiff Macklem told businesses that they shouldn't give their workers pay raises that reflect the higher inflation and the higher cost of living because he thinks that inflation will, quote, come down. Now, that's rich for a few reasons. First, it's easy for Macklem to shrug off pay raises when his salary is half a million bucks a year. Second, does anyone still trust Macklem to predict inflation? Third, the only thing growing faster than Canada's inflation rate is the bank of Canada's labor costs. The bank of Canada's labor Costs grew by $40 million in 2021, or 12%. They grew by 13% the year before. And the bank of Canada just handed out $45 million in bonuses and pay raises during the pandemic and as inflation took off. You know, I can't believe we have to say this, but bonuses and pay raises are for when you do a good job. And the bank of Canada did not do a good job. In fact, it failed to do its only job, which is to keep inflation low and around 2%. So you know what? It's time for Macklemore to take his own advice and stop giving his failing central bankers bonuses.

It's not good that it happened. It sucks for everyone that it's happened, but it's exactly the case. The bonus is exactly that. There should be a performance or something. You have to do something to earn it. Something good has to happen. Quantitative easing isn't, isn't the good thing that you should do where inflation is driving up to a dramatic degree because you've artificially suppressed interest rates for multiple years, even though you've been called out by several politicians about it in the last number of years. Like, it's just absolutely asinine that this is even happening and $45 million extra is getting paid out to people who did a crappy job.

Well, I think a lot of people may not understand the connection in how the bank of Canada has a direct influence in terms of the inflation that all of you are paying today, in terms of all of the higher prices with quantitative easing or money using the printing presses that I'd like to call them. And at the same time, there's a different. There's also a mechanism with the banks that have used fractional reserve banking that also increase the quantity of money supply. So when money, the quantity of money supply goes up, there's a direct impact to our inflation, how much money we need to spend or use to purchase goods and services. But that seems like there's no connection with the people who are running the bank of Canada. There's. That's probably the first part. And you know, Richard, I do disagree with you that they are doing a good job when it comes to the bank of Canada to get the bonus, but that actually may come into a direct conflict to their mandates of what they're supposed to do for their citizens. So.

I like how you said that. Yeah, that's right. So the bank of Canada itself, as a, as a, call it a separated organization or, you know, where they, they have their own balance sheet and books and financial statements that they produce versus what they're supposed to actually be doing, why they exist, their mandate to operate.

If we take a look at their mandate, the bank of Canada is Canada's national central bank and they have four core functions. First is monetary policy. And you saw from the video that the bank's monetary policy is to aim to keep inflation low, stable and predictable, which in the video, 2%.

I think we can agree that they failed.

Really.

I think far, far exceeds the 2%.

Type in the comments if you believe that bank of Canada has failed. Just go ahead and say BOC fail. And I want to see how many.

Comments we can get from people who.

Agree that the bank of Canada has basically shit the bed on this deal.

The second core function is financial system, promoting a safe, sound and efficient financial system within Canada internationally. I Don't have too much to add whether or not that is being achieved or not. Currency the bank designs, issues and distributes banks Canada's banknotes. And then the fund manager, the bank acts as fiscal agent for the bank of Canada, sorry Government of Canada, managing its public debt programs and foreign exchange reserves. So those are their core functions. And we already know that one of these core functions will were was not met.

This video and this article that references what the video talked about. There's a number of publications that picked.

Up the article about it's like $45.

Million in extra bonuses and compensation for people working at the bank of Canada. Part of the problem is that it's an exponential increase on how many bonuses they were getting. It's like, oh, here we went from like hardly any bonuses to like, wow, look, you guys did so good at failing miserably at your mandate layers. $45 million. Great job everybody. Pat on the back way to saddle Canadians with more problems and the manipulation of interest rates. So the funny money in the, in the marketplace is one thing that fractures their banking. But by artificially suppressing interest rates low with the bank of Canada, as they've been doing for a number of years, we've had, you know, the lowest interest rates environment as far as I'm aware of basically in history over the last decade or so. And now we're starting to see a steady increase in rates. And the reason that's happening is because the bank of Canada is trying to now fix the problem that they themselves have create or they in tandem with current governance in the country of Canada, have cajoled together to create this inflationary problem. The only way that they have to really combat that inflation is to rise interest rates because we've had such low interest rates. That's also caused, caused an increase in housing prices across the country, which is a big problem. And construction costs, there's a lot of things going up now. They're rising the rates. And so anyone that's got housing now they're starting to see increases maybe on their mortgage payments they want to buy, they're not able to buy as much property as they were before. So there's, there's a whole overlapping effect here that you can't really see unless you're looking at over a period of time. So you have to look at some, some cause and effect situation. And the bank of Canada's manipulation of interest rates, which is their, their leading like weapon in the curbing of inflation is, is part of what's causing the rapid problem it's like they themselves have caused the problem that they themselves are supposed to, by their mandate, solve for. So it seems like, I don't know, it's like a chicken and an egg thing or whatever, where both the chicken and the egg probably were fed artificial food or whatever and they're going to poison whoever eats them.

Well, they kind of use some very sophisticated terminology like monetary policy and quantitative easing and, you know, all that, those, that terminology sounds really complicated. But monetary policy is just the management of the interest rate and quantitative easing is the amount of money they print into existence and how they distribute it to the other big banks. That's what's creating the saturation of money that's existing in our economy. Now if everyone is getting all that money, they're going to need to put that money somewhere. And what is very hot and driven for a lot of people's investments, particularly real estate in Canada. So if one person is wanting to purchase a home, I purchased a home last year and going through that environment in Toronto, there are 20, 30 bids for just one home. And imagine who's going to win the bid, the one who bids the highest. So if everyone is on a frenzy with extra money that has been circulated by the government of Canada and everybody's bidding more and more and more and more, that's where we're finding ourselves. In the past where house prices were so high, now people are very concerned house prices are going down because now banks may not be willing to lend as much money. So there's no more competitive 30, 40 bids happening for home. So prices are not reflective of, at least back then were not reflective of what the value may have been. And now the prices are coming down from that craze of what was going on.

The value is a perception and the perception of value is what payment can you reasonably afford based on the current interest rate you can put into this, this deal. And now that that's up, you know, one and a half or so percent from, you know, its bottom level price point, that means that the, that that has immediate and direct and a large impact on affordability. Which means that the amount of house you can now quote, unquote, afford to spend on your monthly, you know, incoming revenue, incoming income towards servicing your house costs is, is much lower. So that means in order to buy the same, you know, to get the same payment structure on the current interest rate you're buying, maybe in the Toronto market, you're buying $200,000 less house. Right? So it's a dramatic impact and you know, People keep talking about, oh, the, the hot Canadian real estate market. Okay, well, but what's, what's the causal impact of this? You know, it's, it's, it's not. Because, I mean, there's no reason that the, the real estate market should have been really, really hot during COVID when there's, there's. Half the people were out of work and their income source was the Canadian government printing more money. Like, it's just, it's just doesn't make any sense. Like, it defies a lot of logic. And the reason that it's important to understand is, again, coming back to the.

Core of what we're looking at here.

This little video and these articles. If you have a job and the mandate is to do blank and you fail miserably at blank, you should not be paid $45 million in bonuses. Sorry, that is a fail. And the fact that this isn't like, not like it's not being talked about still, and it isn't like a problem where, again, a lot of people don't even know this has happened is concerning to me because that, it's one of those things that just kind of slides its way under the radar, and then we just kind of forget about it and we move on with our life because we're thinking about getting our kids to hockey practice and soccer practice and all the other stuff. It's just crazy to me that this sort of thing is happening, and it's almost like it gets swept under the rug. And I don't know if you've ever, you know, seen something physically actually swept under a rug before and then lifted that rug later. It's pretty disgusting. Well, that's what's going on in the Canadian financial system right now. And if you're disgusted by it, which you may be, I don't know, you know, there are some solutions that are available. You can go to watchibc.com and you can learn a little bit about some of the ones that we, we promote and talk about, which is the process of becoming your own banker. And if central banks are doing shenanigans, there's some cause maybe for concern about other banking institutions. And if ultimately you don't want to be. You don't want to support a system that may not be designed to support you, but you're a part of it anyway. You're a cog caught up in this giant banking business machine. You are. You are involved in it no matter what. If you want to start making it so that you can separate your cog out of that system one piece at a time. The only thing that I'm aware of, Henry, and correct me if I'm wrong, maybe you you know about something else, but I suspect not. The big thing that makes a difference is the process of becoming your own banker as discussed by R. Nelson Nash in his book becoming your own banker. So again, we have great content that speaks to that. Go ahead to go to watchibc.com you'll learn all about it. But you should be irritated and angry about what's going on at the central bank of the Canadian nation. Probably a bunch. You should be irritated about a lot of other things happening in Canadian nation, but that's that for sure is one that should bother you. It bothers me and I don't have any qualms saying that.

So there's a lot for us to unpack in all of this. Why did the bank of Canada actually pay those bonuses? And what I'm going to share with you is actually going to shock you. I'm actually going to use some of my experience back as being in professional practice where I was designing compensation schemes for executives and owner managers to see what could they properly compensate themselves for a business and if their mandate was to maintain inflation rate at an acceptably low level, in the case of the article, is 2%. Well, let's take a look at the financials and see how did the bank of Canada perform. And some of the things I want to show you is, is again very surprising. So I'm just taking the financial statement straight from the bank of Canada and I'm using 2021 as the example. So you see financial statements bank of Canada December 31, 2021 Aside from all the complex jargon that goes on, you know, you could read this at your own time. But what I want to highlight in particular is first, every set of financial statements shows two years of financials. In this case it's 2021 and 2020. And what I want to show you is actually something more that extends beyond that time. And if we look at the assets or what the investments the bank of Canada has, which are government of Canada treasury bills, Government of Canada bonds, don't worry too much about amortized costs, cost and fair value through profit and loss. But the key is they are lending money to the Government of Canada to spend on the programs that you see to help them finance purchases that they're looking to finance whatever it is that money. Well, I mean, we don't really have visibility of how the most of the money is going. But we do have an idea where the government is spending a lot of the money. When people ask where is this money coming from? It's coming from the bank of Canada printing it in existence for the government. What other items that I'm going to also talk about is the Canada mortgage bonds. But you can basically see from 2020 to 2021 the assets for the bank of Canada and what they will get paid for because they're using bonds, they're getting future income streams or cash flow in the form of interest from government of Canada is $468 billion in terms of assets. There's another few things that I also want to show that you can see is banknotes in circulation. This is the money that they're printing and they're putting it out into existence into our economy. That is $115 billion and that's gone up from 106 in 2020. That doesn't sound like a lot, but.

It'S only $9 billion of fake money printed. That's not that big of a deal.

Only 9 billion. It doesn't sound like a lot in terms of the year to year increase. But what I want to show is if we go into the income statement, we can see their interest revenue that they're collecting from bonds is $4 billion. Last year's 3.3 billion. And if we look at pays for.

That interest revenue, Henry, the government of Canada. Right. Where does the government can get all.

Their money from again?

Oh, isn't that they deduct from our paychecks?

Right. The taxpayers saddled with paying for that income.

That's right.

I remember now.

I got it.

Okay, as long as we're clear on that. But we look at the profit or the net income that they have is $2.4 billion. Now if you hear it, it's a lot of money. But I mean they're the bank of Canada for goodness sake. But what I did was I took some financial information together and what you see is an Excel sheet and I put the exact values of what you see from 2021-2020-2019-2018, 2017. I've taken those numbers of the investments from what they're being held with and I've highlighted some very particular numbers in a very particular color sequence. And here's what I want you to see. Now I think all of you Remember back in 2020, there were some lockdowns and some pandemics that happened during that time where people needed a lot of help and money needed to come from somewhere. Well, this is where it came from. Well, in 2019 that didn't exist. But if we take a look at how much of investments that they've passed to the government in the form of T bills and bonds. Well, in 2017 there was nothing insignificance. Hundred billion dollars, 103, 102 looks pretty normal. Boom. Jumps to 2020, goes up to 360 billion, 407 billion.

What's $260 billion amongst friends, right?

Oh, we're all, we're in this together, Richard. And then there's the Canada mortgage bonds. Where did all of the bonds come from to pay for all those mortgages that people have gotten from housing? While that went from 511 million to 9 billion, 9.5 billion, there's some other bonds that Scott created for 14.4 billion.

That just weren't there at all before.

No, but let's look at 2017. The amount of money in circulation that was distributed amongst all citizens, making us feel rich. But I don't think right now, if we look at it, the amount of money that exists into the economy from 85 million now is 115 billion. If I have the numbers right. Yeah, I think so.

It's a pretty substantial increase in money supply circulation in a five year period of time.

And so again we're talking about inflation and increasing the supply of money has a impact on inflation, historically speaking, in every location that it's ever happened throughout the course of time that I'm aware of. You can learn more about that actually in a great book called the Ascent of Money. And it is unnerving and concerning what we've just shared. And I think that you, you as a listener should be also concerned. And maybe there's a, a letter that you write to your MP or something of that nature. But we definitely have a problem and, and rather than trying to fix it from a top down solution, the best place to start is with the you and me level and that's with a bottom up solution. That's what the process of becoming your own banker is all about. And that's why you should head over to watchIBC.com and learn all about what you can start doing at the you and me level. To separate yourself from a system that's not designed to support you.

Get away from the centralized system, centralized power, away from system that doesn't support you and build your own independent private system that is used to support you and not someone else.