Thank you, Purebread Bakery in Function Junction.
I was putting stocking stuffers together for the staff at Recycling (they do a heck of a tough job about which many of us in the public … know [nothing]).
The stocking packages looked unfinished without fresh baking, but with COVID-19, we couldn’t bake in our kitchen.
Early Saturday morning, the Purebread staff called management at home and in turn let me have some shortbread for a song. It just makes the gift packages right.
Thank you, Purebread.
Cheryl Bate // Whistler
Vail Resorts’ ‘irresponsible’ travel encouragement
Over the past week our family received multiple emails from Vail Resorts encouraging us to travel to the U.S. and ski at their resorts. Everyone is well aware COVID-19 is currently rampant in many U.S. states and the hospitals in many U.S. areas are full or beyond capacity.
Travel, essential or otherwise, is not advised between Canada and the U.S. In British Columbia even travel between Vancouver and Whistler is discouraged as we try to limit the spread of COVID-19. Although clearly nobody from Vancouver is following that directive.
Under these circumstances, it is irresponsible for Vail Resorts, or anyone, to actually be encouraging people to travel outside their home area at this time. These ads are highly inappropriate, as we all should be trying to minimize our contacts to help curb the spread of COVID-19.
Vail Resorts’ marketing department should be aware that anyone returning to Canada from the U.S. is required to isolate for 14 days upon re-entering Canada. From previous ski trips to the U.S., we know that there are some great places to ski in the U.S. Now is not the time to be encouraging people to travel if we want to stop COVID-19 from continuing to spread.
However, COVID-19 aside, there is an upside to these ads for anyone living in Whistler.
This morning we arrived at Creekside at 7:40 a.m. to find the parking lot full. The line-up went across the bridge to Starbucks, down to Lake Placid Road, counter clockwise between the parkade and Legends, and back again towards Highway 99.
We drove to the Village to give Blackcomb a try. Traffic was backed up to the highway along Village Gate Boulevard. We turned around and went home. As we passed Creekside, the lift line extended west under the highway. So, for all you people with pent-up travel desires, take Vail Resorts up on their enticing offer to ski in the U.S. at their resorts.
Go there, stay a long time, and don’t forget to self-isolate for two weeks when you get back. Everyone in Whistler will thank you.
Bryce Leigh // Whistler
Looking for balance
Thank you for your excellent editorial about gender violence (Pique, Dec. 10, “We have work to do”).
It is a sad indictment of our society that our best response to increased gender violence is to build more women’s shelters.
My sister says that until we understand the necessity for balance between the feminine and masculine principles in our systems, we will be incapable of imagining holistic solutions to gender violence, or other existential problems like war, the climate emergency and pollution.
Meanwhile, we can look to the First Nations’ culture where, despite the blind efforts of both patriarchal systems—the Canadian government and the Catholic Church—the balance of feminine and masculine principles are intact. In First Nations’ culture, abuse is recognized as a symptom of illness; the abuser, not the abused, is separated, given shelter, and healed.
Julie Malcolm // Squamish
The dangers of modern money theory
Soon the governments of Canada and its provinces will unveil their fiscal budgets for parliamentary approval early next year.
As a precursor, our federal government recently issued the Fall Economic Statement. It fits perfectly Winston Churchill’s criticism of bureaucratic discourse that “by its very length defends itself against the risk of being read.”
I suffered through reading the entire 237-page document. It does indeed portend an economic fall. Edited for political correctness by the Prime Minister’s Office with many useful charts, tables and numbers developed by the finance boffins in the Department of Finance, it is more a manifesto of the Liberal social policy agenda, embracing identity politics, than a proper economic statement from our government.
Its spending priorities are a myriad of program “investments,” pitched mostly in the context of the Liberals’ populist agenda. Foremost among them, the “Gender Results Framework—Gender Equality & Diversity”; along with climate change, systemic discrimination imbedded within our police forces, and the plight of our Indigenous citizens. Pursuits the Liberal pollsters insist, rightly or wrongly, are in the forefront of voters’ minds and hearts.
That no mention is made of the deeper consequences—serious longer-term risks we must bear in return for short-term benefits we need—should cause Canadians to take pause and look at the whole picture through a clear lens of logic and common sense.
The Fall Economic Statement is littered with Liberal policy platitudes while devoid of serious analysis of fiscal and economic consequences, the risks, and how government accountability will be assured for the vast amounts to be spent. As one example: “the government proposes to invest an additional $781.5 million over 5 years starting in 2021–22, and $106.3 million ongoing to combat systemic discrimination against Indigenous peoples and expand efforts to combat violence against Indigenous women, girls and LGBTQ and two-spirit people.”
Canadians will rightly see this as a sound ambition, but just how and where will that exceptionally large amount of our money be spent and accounted for is an obvious unanswered question. What is the outcome expected? How, why and when will this translate into action and real change? Such spending is no substitute for leadership in engendering attitudes of inclusivity, compassion, and acceptance throughout the nation—it is a sign of failure.
In another example: “To fight climate change, protect forests and create good jobs, the government proposes to provide up to $3.16 billion, over 10 years, starting in 2021-22 … to Natural Resources Canada to partner with provinces, territories, non-governmental organizations, Indigenous communities, municipalities, and others to plant 2 billion trees.”
Perhaps the Liberals assume Canadians can be made to believe money will grow from trees!
Nowhere in the entire document could I find the word “meritocracy” and on only seven occasions is the word “accountability” used. And in each of those occasions it is only in the context of holding accountable various institutions, notably the RCMP, for its apparent malevolent behaviour; not for how the government will hold itself accountable to its citizens for expenditures unilaterally made on their behalf. No mention in the entire 23-page document of “free enterprise,” “capitalism” or “competition.”
While no Canadian should quarrel with the need for strategies and funding to address national economic and societal imperatives, the announced programs should be framed not simply as dollars to be doled out, but rather as specific results aspired to achieve.
Vast program expenditures mischaracterized as “investments” foisted upon citizens without goals against which the efficacy of the money spent can be judged, lays waste to our Canadian traditions of prudent fiscal responsibility.
Canadians deserve explanations as to what these so called “investments” will return and how they will be administered. To ensure the objectives are sound, clear and with milestones to report on progress we deserve transparency; what we have is opacity.
As of Oct. 31, 2020 Canada’s aggregate debt outstanding was $ 1.421 trillion (56 per cent of our GDP) including $286 billion issued from April 1 to Sept. 30 to finance the emergency COVID-19 response stimulus. The single-largest buyer of this debt has been the Bank of Canada whose balance sheet has exploded almost five-fold from year-end 2019 ($120 billion) to the $533 billion reported Sept. 30, 2020.
Of this amount $362 billion are Canada treasury bills and bonds, and about $20 billion in provincial, and even corporate bonds. That is the principal reason for our low interest rates, which in the circular logic of our government, underpins their long-term borrowing strategy—borrow massively now to lock in these terrific low rates of interest!
Our fiscal budget deficit sits at $382 billion of which $282 billion has been spent on the COVID-19 response with a further $50 billion expected over this year. Over five years our accumulated fiscal deficit is projected to be $653 billion, but that excludes a further $50 billion requirement for “non-budget” funding of our government’s pension obligations. As a consequence of our government purchasing so much of its own debt (to fund its fiscal deficits), we can expect sustained low interest rates. But that will also cause federal and provincial defined benefit pension obligations to rise massively, and these will need to be funded by the federal government issuing and purchasing yet more of its own debt.
A major deficiency in the Canada Economic Statement is that nowhere in the entire document does it describe who will buy all the bonds the government will need to sell to finance these federal tax shortfalls—a massive and growing deficit. It will have to be backstopped by the Bank of Canada because the government cannot allow interest rates to rise significantly as would be the case were this debt sold only to private institutions—domestic and foreign. The private sector, foreign investors and banking system have their buying limits—which may soon be reached.
Moreover, Canadian consumer debt has reached $2 trillion dollars!
How often have Canadians been lectured by their government to reduce their excessive household borrowing? Even to the point of the Office of Superintendent of Financial Institutions imposing an array of regulatory measures on the banking system to impede homebuyers from qualifying for conventional mortgage financing. But what is true for one household (not being able to live beyond your means over the long-term) is also true for the nation (the collection of all households). Talk about the pot calling the kettle black.
Given this unprecedented level of government and consumer debt any significant increase in interest rates would be catastrophic, and the Bank of Canada thus has little choice but to buy whatever debt the government stuffs down its throat.
Purchasing massive amounts of bonds needed to finance fiscal deficits is printing money. It means that interest rates remain artificially low in relation to what market risk would demand, and the debt just keeps being rolled forward for future generations of taxpayers to deal with.
Welcome to modern monetary theory (“MMT”)—the convenience marriage of monetary policy (seigniorage) and fiscal policy (spending).
Fiscal and monetary policies of modern monetary theory have become mainstream economic thinking amongst G10 nations (Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States). A coordinated approach of holding benchmark interest rates held near zero with institutionalized quantitative easing that includes direct purchases of even corporate debt and equities by central banks.
Together with other monetary manoeuvres that act to distort and suppress market forces gives governments ever increasing control—terminally ill enterprises allowed to survive while investment capital needed for growth cannot be properly priced; and assets benefiting only a small subset of society become inflated bubbles. The tentacles of government extend deep into our affairs and our pocketbooks as it employs and controls ever more of our economy. We have socialism by stealth.
Amongst the G10 Canada is spending the most on COVID-19 response—about 17 per cent of our GDP compared to 12 per cent for the U.S. Our outstanding debt is projected to increase from $ 1.421 trillion now to $ 1.831 trillion by March 2024 and likely to $2 trillion within a few years more.
Most of this relates to funding the accumulating federal deficits (tax shortfalls) which, notwithstanding tax increases, will require issuing a lot of debt. Add to this the rapidly growing fiscal deficits of our largest provinces not fully accounted for in the Fall Economic Statement projections. Provinces cannot print money—the federal government will have to buy their debt as well, or issue yet more of its own to cover these deficits.
So massive is the borrowing requirement that we have exceeded the maximum allowed under the Borrowing Authority Act, approved by Parliament in 2017, which provides a three-year maximum borrowing authority. The limit was suspended through emergency measures approved by Parliament at the onset of the COVID-19 crisis. Soon Parliament should rule on a new limit. It should be a serious debate—but will it?
As a footnote, the U.S. Congressional Budget Office projections indicate their debt will increase from about $20.3 Trillion (100 per cent GDP) now (similar to the Second World War) to almost 200 per cent over the next 30 years. “The Congressional Budget Office expects federal debt to be worth over $120 [trillion] in 2030, or 195 [per cent] of GDP.” The salient point being that the U.S. expects to be able to sell its bonds almost indefinitely to investors who presumably will accept minimal yields to hold them. Perhaps possible only as the U.S. dollar remains the world’s primary reserve currency.
Will Canada be so fortunate? Canada has been purchasing up to 40 per cent of the bonds the government is issuing! What will happen when a tipping point is reached where most, if not all, of the bids on the bonds the government needs to sell are from government itself? Surely this means in the absence of a sharp rise in interest rates with ensuing economic depression the outcome is equally untenable—hyperinflation.
Nobel economist Milton Freidman once pointed out that “the only money the government has is that which it expropriates from its citizens” (through taxation). While for a time government can get away with funding operations from seigniorage—printing money through central bank bond purchasing—ultimately taxpayers are on the hook. It is well known that seigniorage (revenue a government acquires through its ability to issue new currency) eventually leads to higher inflation.
We also know from polls that most Canadians believe the main purpose of taxation is to re-distribute income, while its true purpose is simply to pay for the essential services government must deliver that cannot be practically or more efficiently provided by the private sector. Our military, policing, regulation of financial markets and the institutions that safeguard our welfare, liberty and freedom, being prime examples. This misconception is not lost on the Liberals. The COVID-19 stimulus response has opened the door to a much larger and broader spending spree, leading to unsustainable levels of borrowing, debt, and higher taxes than are necessary.
Canada can never default on its domestic debt as it can always print more money to settle it—but that money if not invested productively becomes worth less and less. Domestic and foreign bond investors we count on now may become hard to find. And if the only buyer for most of the bonds Canada (and the provinces) needs to sell is the federal government itself, we have a crisis. Unlikely on the scale of Argentina, Venezuela, Zimbabwe … but a serious loss of living standard is very possible from the path we are on.
How many Canadians understand this possibility? The Liberal’s Fall Economic Statement is silent on this threat—a case in point. Sadly, few Canadians, not least their politicians, have much appreciation for how MMT works nor its inherent risks. And those who fret are placing their faith in Bitcoin and other cryptocurrencies, which have their own set of risks—and gold.
Our Canadian deficit spending/debt spree experiment, and those of our allies, is not sustainable in the long run. It will start unravelling with asset price inflation (commodities, real estate, stock markets), followed by the wealth effect of pushing up consumer price inflation and wages to keep pace; and only then as the tipping point is reached, will there be a realization amongst central bankers, governments and other institutions of past errors made.
Thomas Jefferson once wrote: “It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world.”
Rex J. McLennan // Whistler
