Why do we have a Central Bank?

Why do we have central banks? Asking such a broad question to ten economists is sure to elicit at least twenty different answers. However, we argue that, in its most basic form, the main purpose of having an independent institution in charge of monetary policy is to smooth out the inevitable ups and downs of business cycles so that a society and its people can achieve their full growth potential without the adverse effects of wild economic fluctuations. Looking at U.S. data going back 164 years, we do observe a significant and gradual reduction in the vagaries of the economy after the creation of the Federal Open Market Committee (FOMC) in 1935. During the previous 80 years, U.S. citizens sp

Market Update - July 2019

The markets were relatively quiet in July, with account values for the month mostly unchanged. Major themes for the month included: The Federal Reserve lowering interest rates for the first time in a decade, renewed trade talks with the US and China (which now look to be hitting a roadblock), and lastly the reporting of second quarter earnings by major companies in both Canada and the US. The July corporate earnings reports have been unexpectedly strong (companies reporting their April-June earnings results) – with over 70% of companies having beaten expectations in the US and only 18% missing their targets. The results in Canada have also been better than expected, with 63% of companies be

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