As the federal government rolls out financial aid during the COVID-19 pandemic, perhaps a big question, should be: how do we ensure that the benefits of all this government spending ultimately go to local economies rather than financial and corporate elites? I suspect a lot of people don’t realize that the money to finance the recovery is actually being created out of thin air by the Bank of Canada (the BoC). The BoC uses this new money to stimulate the economy by purchasing government bonds, either directly from government or from financial corporations that already own government bonds. It’s called quantitative easing (QE), and it’s is something US, European and Japanese central banks have been doing for more than a decade.
The problem wasn’t that the Fed ended quantitative easing [in 2014], it was that the Fed began quantitative easing in the first place. During QE, not only were commodity prices pushed up, but borrowing costs were dirt cheap. It made sense during the time for farmers to borrow heavily to binge on land and equipment, in order to meet the “demand” for soybeans or other goods that was being signaled to them by higher prices.