ANOTHER CAUSE

Re Cause And Effect (Letters, Nov. 24): A letter-writer and many other commentators keep repeating what should be considered a basic economic misunderstanding. They state that the plan of Alberta (and other provincial governments) to lower some taxes and send money to citizens struggling with rising prices will fuel inflation and end up being counterproductive.

The overall price level rises when the money supply increases faster than the quantity of goods and services. However, the Bank of Canada is not buying Alberta’s bonds and monetizing Alberta’s debt, and therefore not creating money to help the province fund these measures, as it did with Ottawa’s massive deficits during the pandemic. It’s more a question of money taken from some pockets and redistributed to others.

There may be other reasons to criticize Danielle Smith’s measures from the point of view of economic efficiency, but fuelling inflation should not be one of them.

Michel Kelly-Gagnon

President and CEO, Montreal Economic Institute