At some point we are going to have to throw in the towel and conclude that there is a concerted effort to promulgate the noble lie. It was one thing when the business press argued that the BOC faced technical limits to their capacity to retrench the value of the Canadian dollar, and yet another thing when almost every commercial bank economists pushed the same fallacy. But now no less than the BOC and the Department of Finance, respectively incarnate in Carney and Flaherty, are pushing the same argument. The FP reports:
Bank of Canada Governor Mark Carney said on Tuesday that foreign exchange intervention did not usually work without complementary policy moves.
“I agree with what the governor of the bank said yesterday …. that it is a limited tool,” Mr. Flaherty told reporters.
At least Carney was smart enough to add the vague qualification “complimentary policy moves.” Flaherty of course stripped it down to the most elegant version of the Nobel Lie. For those looking for further detail about why it is simply not true that the BOC is constrained in its capacity to devalue the dollar go over to worthwhile Canadian and read the series of posts on this subject.
So I am curious why would the BOC who most definitely knows what Worthwhile Canadian knows be misleading the public? The only thing I can come up with (because I do not assume people are dumb) is that the neither the BOC nor the Canadian government has any interest in a policy that would be largely regarded as one of competitive devaluation. So instead of fight the policy issue out in public on its merits they are attempting to smother it under a “technically not feasible” argument. That is, they are doing what the BOC always does. Depoliticize and dispense .
The most noble lie