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Analysis and insight into trends
in money and banking, and their impact
on the world's leading economies


% annual growth rate:

M3Nominal GDP
Seven years to 20177.23%3.73%

Sources: M3 from OECD database and nominal GDP from IMF database, as at October 2018.

The medium-term relationship between money and nominal GDP growth in Canada, 1971-2017

Five-year moving averages of annual % changes, with 1973 being the start of the first five-year period

Comment on monetary trends in Canada

With the exception of the oil crisis of the 1970s, Canada has maintained relatively stable and moderate rates of growth of broad money compatible with low inflation and stable economic growth for several decades. In the years running up to the Global Financial Crisis, excessive broad money growth  - 10.2% annual growth in 2004, 9.86% in 2006 and 12.1% in 2007 - led to asset price inflation, both in residential property and stock markets. However, compared to other developed economies, Canada returned far sooner to stable rates of growth of money and output growth following the Great Recession. The steady rate of growth of M3 at an average of 7% since 2010 has been accompanied by a sustained annual rate of growth of the economy around 4%, and quite stable inflation within the inflation target range of 1-3% (but ideally 2%) followed by the Bank of Canada.

Banking and finance in the early years of the United States of America were chaotic. Two of the founding fathers - Thomas Jefferson and James Madison - were hostile to banking, since the issue of paper money led to inflation and default. According to Jefferson,

"...banking establishments are more dangerous than standing armies"