" In other words, keeping inflation low, stable and predictable is key to keeping the economy "on the smoothest possible track for long-lasting economic growth and job creation," says Longworth. By doing this, the Canadian public and private monetary policy is able to avoid an inflationary "boom-and-bust" cycle is one of the leading causes to recessions and increased rates of unemployment. "To put it another way, the Bank's focus on inflation means that the gap between the potential and actual performance of the economy can be kept as narrow as possible."
III. The Negative Side of the Canadian Economy
On the flip side of the careful monetary policy planning is the government's fiscal policy planning, or, according to some, lack of planning. According to Pierre Fortin, Canada is currently facing a looming fiscal problem that is essentially macroeconomic in nature. According to Fortin, the essential problem for Canada is its uncontrolled public debt, which is fourth behind only Belgium, Greece and Italy. Fortin states that the rising government indebtedness has "three major consequences." First, over time it will make the country poorer due to its crowding out of investment and foreign debt and higher tax rates. Second, the public finance sectors, such as discussed above, will become destablilized and more sensitive to variations in interest rates. Finally, the expanding interest payments on these debts require citizens to receive "declining amounts of public goods and services in exchange for rising taxes." This generates deep frustration and "contaminates the quality of democratic life." Because all three of these elements are starting to show signs of existence in Canada, the excellent standing of Canada's economy that exist today is in jeopardy.
IV. The Increase in Foreign Investment
As a result of Canada's strong economic status, many foreign investors have been attracted to the country, which has led to numerous foreign corporate takeovers. However, according to statistics, this increase in foreign investors has not created a hollowing out effect in corporate Canada but in fact has played a significant role in the strengthening of the economy. Statistics show that foreign investors have actually created more head-office jobs in recent years as compared to Canadian corporations. (Vieira, 2007).
Further, foreign...
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