Notice that for nearly 20 years (the 1970s and 1980s) our inflation rates tended to closely parallel those of the USA and in fact tended to be a touch higher. Then in the 1990s, they diverged - and Canada's inflation rates remained a percentage point or more below the US's.

Now for a fun chart.

The above chart is for the United States. Notice how money supply growth and the decennial trend in inflation rates move in absolute lockstep.

PS - notice the pronounced trough between the 1860s peak and the 1910s peak - in between those decades was the US civil war and the recovery that followed. This was pretty much the only economic disruption the USA has ever had that affected such a fundamental cycle.

I'm baaack.

Ok. The Canadian anti-inflationary tendencies being stricter than that of the USA's seem to be largely a product of John Crow's personal paranoias. Linda McQuaig's description of John Crow's IMF experience and thus knowledge of Latin American hyperinflations, coupled with the still-fresh memory of the 1970s and how that time period affected industrial economies all point to a possible explanation - that being that John Crow was perhaps more strongly impressed than the case warranted for inflation control and that his personal fears of inflation had a good deal to do with his actions as Governor of the Bank of Canada.

By contrast, Gerald Bouey, while having been front and center in the battle against high inflation in the 1970s, appears to have been tolerant of the "status quo" of inflation rates doing about 4% per year since 1983 unil he retired in 1987.

There's a big difference between having to bring inflation down from 12% to 4% and wanting to pull it from 4% down to almost zero.

John Crow's war record in his battle against inflation have led to the following results:

• The longest recession of any G7 country in the early 1990s
  
• The weakest recovery seen in Canada from that same recession compared to other G7 countries
  
• The highest unemployment rates in Canada seen since the recession of the 1980s
  

Gordon Thiessen and David Dodge, unfortunately come from the same stripes as John Crow (G. Thiessen having been Senior Deputy Governor under John Crow since 1987), and David Dodge having been on the Anti-Inflation Board back in the 1970s as well as having been the architect of Paul Martin's 1995 budget.

However, a small encouragment to me is that the Bank of Canada has changed its inflation targetting in a little-trumpeted news release - it was buried in the National Post when I read it some time ago. The targetting is now "core" inflation instead of overall inflation, which as I mentioned in another thread, introduces a bias as to whether or not to raise interest rates. Why? Because under the old targets, the Bank of Canada would already be raising interest rates because overall inflation year-over-year has gone above the 3% mark. But core inflation continues to remain at about 1.5% to 2.0% year-over-year.