In the midst of the highest consumer price inflation rates seen in decades, many economists are pointing to the “easy money” policies the Bank of Canada and other central banks adopted in early 2020 when the COVID panic hit.

Although it makes sense to blame rising prices on a flood of new dollars (and euros, etc.), this explanation also raises a new puzzle. Why are Canadians paying an average of more than two dollars per litre for gasoline now, but not back in 2010? After all, the Bank of Canada and the Federal Reserve engaged in—at the time—unprecedented monetary injections in the wake of the 2008 financial crisis. If “loose money” is the culprit today, why didn’t consumer prices explode then just as now?

Part of the answer is that the public was panicked after 2008 and its demand to hoard money skyrocketed. That’s why massive infusions of cash from central banks didn’t have the same impact back then as they did after the 2020 COVID crisis. We can see this distinction clearly in the data if we look at broader measures of money. 

For example, consider the United States. The Federal Reserve’s total asset holdings jumped from $925 billion in mid-September 2008—when the financial crisis struck and Lehman Brothers failed—to a whopping $2.2 trillion over the next two months. When a central bank buys new assets (in this case, U.S. treasuries and mortgage-backed securities), the process creates new dollar reserves for the banking system. Thus, the most narrow measure of the U.S. money supply, namely the “monetary base” (sometimes called M0), roughly doubled in the 12 months following the September 2008 crisis. 

Indeed, back in 2008 we also saw a large spike in the next measure of money, M1, which counts paper currency and the public’s checking account balances (there was a definition change in the way U.S. authorities measure M1 starting in 2020, but that doesn’t affect our analysis of the 2008 episode). Specifically, in the U.S. M1 increased more than 20 percent over the course of 2008 whereas this measure of the U.S. money supply had been pretty flat throughout 2006 and 2007. Again, just looking at these numbers, one might have supposed that U.S. consumer prices would rise sharply in 2009. But they didn’t.

But when we move to the next level we begin to see a difference between then and now. The measure M2 includes not just paper cash and chequing account balances, but less liquid claims such as deposits in retail money market funds. And following the 2008 crisis, U.S. deposits in these funds collapsed by some 20 percent (about $200 billion) over the course of 2009. In terms of the broader measure of money, because this key constituent of retail money market funds was collapsing while other components (currency and checking accounts) were rising, the overall measure of M2 didn’t grow at an unusually high rate.

Specifically, in the 12 months following the financial crisis of the fall of 2008, M2 in the U.S. only grew 7 percent. In contrast, in the 12 months following the COVID panic in the spring of 2020, M2 in the U.S. grew 24 percent. This helps explain why consumer price index (or CPI) inflation has been so severe in recent years, while it was tame following the 2008 crisis.

The lesson for Canadian officials and the public should be clear. Other things equal, “easy money” policies cause consumer prices to rise, just as they teach in economics textbooks. The reason some economists (including this writer) gave premature warnings about inflation back in 2009 is that this natural tendency was more than offset by the public’s rushing out of less liquid forms of wealth (such as money market funds) and into safer forms such as commercial bank deposits. But the Bank of Canada must know that its “easy” policies after the 2020 pandemic help explain the current pain at the pumps.

Nicholas Roske was arrested on June 8^th and charged with the attempted murder of Justice Brett Kavanaugh of the American supreme court. The 911 call that Roske himself made—“I need psychiatric help”—led to his arrest across the street from Kavanaugh’s house. He allegedly made assassination threats, was heavily armed, and travelled from California to the justice’s Maryland home. He was angry about a potential supreme court ruling restricting abortion rights.^{1Armed man arrested near Supreme Court Justice Kavanaugh’s home charged with attempted murder https://abcnews.go.com/Politics/man-arrested-supreme-court-justice-kavanaughs-home-allegedly/story?id=85259333}

Congressional hearings into the January 2021 assault on the Capitol are focusing American attention on political violence. The Kavanaugh threat got relatively less attention. The New York Times put the news on page 20, and the Washington Post filed it under “Local Crime and Public Safety”, next to a report about a traffic accident. 

If you get your news from a still more progressive source, at Mother Jones the senior news editor was not as sanguine about bloodshed at the Supreme Court.

“We apparently just came unacceptably, terrifyingly close to catastrophe,” wrote Jeremy Schulman. “The assassination of a Supreme Court justice would be … a threat to American democracy every bit as severe as the January 6 insurrection and Donald Trump’s attempts to overturn the 2020 election. … Everyone, across the ideological spectrum, needs to take this completely seriously and figure out what can be done to prevent the country from plunging into a new era of political violence reminiscent of the 1960s and 1970s. The fate of our republic depends on it.”^{2The Assassination Plot Against Brett Kavanaugh Is a National Emergency https://www.motherjones.com/crime-justice/2022/06/the-assassination-plot-against-brett-kavanaugh-is-a-national-emergency/}

The fate of the republic does not depend upon it; after all, the assassinations of the 1960s did not vanquish it. But it did shape the politics of the time, and while assassinations have not been a regular part of political life for a few decades, it is not foolish to worry that they may return.

Assassination was a present danger and a political force throughout the twentieth century. Assassinations go back much further, of course, to Julius Caesar most famously—a development that loosed that demon in imperial Rome. Several of Caesar’s successors were also assassinated.

The most consequential assassination of our time set off the Great War—a calamity that resonates even today. Austria-Hungary went to war after the 1914 assassination in Sarajevo of Archduke Franz Ferdinand, heir to the Habsburg throne. By the end of the war, the Austrian emperor, German Kaiser, Russian tsar, and Ottoman sultan were all deposed. Gavrilo Princip’s bullet may have been the most consequential shot in history.

In a century of unprecedented violence there would be many more political killings, perhaps the most notable being the assassination of Mahatma Gandhi in 1948 in a newly-independent India. Gandhi was killed by a fellow Hindu, a nationalist who objected to Gandhi’s conciliatory approach to Muslims and the new state of Pakistan.

The first family of Indian independence, the Nehru/Gandhis (no relation), would suffer two assassinations. Prime Minister Indira Gandhi, daughter of Jawaharlal Nehru, India’s first prime minister, was assassinated in 1984 by her Sikh bodyguards. Her son, Rajiv Gandhi, succeeded her. He was assassinated in 1991 by the Tamil Tigers.

For Americans, the 1960s was the time of the assassins. John F. Kennedy was killed as president in 1963, and his brother Robert while campaigning for president in 1968. Just months before RFK’s assassination, Martin Luther King was shot and killed in Memphis. In 1969, Malcolm X would be killed in New York. In 1972, Alabama Governor George Wallace was shot while campaigning for president. He survived but remained paralyzed for life.

In 1970, Canada had its most prominent assassination since that of D’Arcy McGee in 1868. Pierre Laporte, deputy premier of Quebec, was killed by the Front de libération du Québec during the October Crisis.^{3“The October Crisis refers to a chain of events that took place in Quebec in the fall of 1970. The crisis was the culmination of a long series of terrorist attacks perpetrated by the Front de libération du Québec (FLQ), a militant Quebec independence movement, between 1963 and 1970. On 5 October 1970, the FLQ kidnapped British trade commissioner James Cross in Montreal. Within the next two weeks, FLQ members also kidnapped and killed Quebec Minister of Immigration and Minister of Labour Pierre Laporte. Quebec premier Robert Bourassa and Montreal mayor Jean Drapeau called for federal help to deal with the crisis. In response, Prime Minister Pierre Trudeau deployed the Armed Forces and invoked the War Measures Act — the only time it has been applied during peacetime in Canadian history.” https://www.thecanadianencyclopedia.ca/en/article/october-crisis}

The 1970s brought prominent assassinations around the world. King Faisal of Saudi Arabia was killed by his own half-brother’s son in 1975. In 1978, the Italian Red Brigades killed Aldo Moro, former prime minister of Italy and close friend of Pope Paul VI. In 1979, the Irish Republican Army blew up Lord Louis Mountbatten’s boat, killing the United Kingdom’s most prominent military personality and the uncle of the Duke of Edinburgh. 

Having dealt a lethal blow to the Royal Family, the IRA would make another spectacular attempt, attempting to kill Prime Minister Margaret Thatcher in 1984. She narrowly escaped from a hotel bombing that killed five and injured 31.

The nadir of assassinations came in 1981, when Ronald Reagan (March), Pope John Paul II (May), and Anwar Sadat (October) were all shot. The president and the pope survived; the Egyptian peace-maker was killed by an Islamist extremist.

Sadat’s assassination for making peace foreshadowed the 1995 murder of Yitzhak Rabin, killed by an Israeli who objected to Rabin’s making peace at Oslo. The twin assassinations of Sadat and Rabin, by their own people, have made Arab-Israeli peace more difficult—the price for the peacemakers could well be death.

While political violence is never absent, the Rabin assassination seemed to mark an end to a century plagued by them. There have been assassinations since: Rafic Hariri in Lebanon (2005) and Benazir Bhutto in Pakistan (2007). Yet assassination has retreated from a prominent role in this century. 

Might the time of the assassins return? Haiti’s president, Jovenel Moïse, was assassinated last July. There was an assassination attempt against Vladimir Putin earlier this year. 

In the United States, had Roske decided to rush Kavanaugh’s home rather than call 911, the justice could well have been dead, possibly setting off widespread violence.  

In 2011, Gabby Giffords, a Democratic member of Congress from Arizona, was shot. Six years later, Steve Scalise, Republican of Louisiana, was shot. Both survived. 

In a country plagued by mass killings on a weekly basis, with two members of Congress shot in recent years, is the assassination of supreme court justice outside the bounds of what can be imagined?

Justice Kavanaugh was not hurt. The next time, and the next target, may not escape harm.

The signs are ominous. Fear about our political situation is widespread. How much worse will matters be if the time of the assassins returns?