OTTAWA - Canada's economic recovery is in jeopardy unless the Bank of Canada gets more aggressive in pumping up the country's money supply, says a paper written for the C.D. Howe Institute.
Economist David Laidler says the central bank's aggressive reduction of short-term interest rates has been undercut by the shrinking economy and a plunging inflation rate.
Laidler says that without non-traditional monetary action by the Bank of Canada, the few encouraging signs that the economy is preparing for a rebound will quickly wither.
He argues the central bank should crank up the printing presses.
The danger with increasing the money supply is that it will sow the seeds for runaway inflation down the road, but Laidler says the odds of an inflation problem arising are remote and, even so, the current recession is a far worse problem.
