With apologies, another rant about the Bank of Canada

Bank of Canada Governor Stephen Poloz continues to amaze and astound, and not in a good way. Speaking on the fringes of the IMF/IBRD's annual bash in Washington, Poloz delivered some quite remarkable thoughts on the inflated level of household debt in Canada. Everyone, including the IMF, is telling Poloz that the debt is a problem and that he should be doing something about it. Poloz admits it's a problem but declines to do anything about it. 

Poloz is quoted in the linked article as saying that "We knew that easing policy would have implications for financial stability, However, we also knew that those concerns had to remain subordinate to the primary mission of achieving our inflation target and getting our policy back in the zone where the risks are balanced". 

Fine words, those,  that could have been uttered by Alan Greenspan or Ben Bernanke in the years and months before they drove the bus off the cliff back in 2007. Central bankers were supposed to have learned lessons from that, yet the only risks Gov. Poloz seems interested in balancing are the risks surrounding his 2 percent inflation target. If, in the process, the risk of a collapse in the financial system builds up again, well, that's just too bad. He's quite explicit about that:

“Even in extreme conditions, when financial stability risks constrain monetary policy from achieving the inflation target over a reasonable time frame, a central bank would want to ensure that all macroprudential options were exhausted before trying to address those risks with monetary policy,” he said.

Ah, but Gov. Poloz will retort that he is, so, concerned about financial system stability:  “What’s important now is that we finish the job. Ensuring the safety of the global financial system is in all of our interests. We can’t be distracted and lose sight of this objective,” he said.

It appears that Poloz believes that financial stability can be achieved in a world of sustained near-zero interest rates, historic levels of over-borrowing (by governments in the developing world as well as Canadian households) and increasing risk-taking by investors stretching for yield.  Forgive me if I (and, I may say, the IMF, which is becoming increasingly alarmed about the global debt mountain) disagree, very strongly.