44th Parl. 1st Sess.
November 21, 2022 11:00AM
Madam Speaker, we have already stated our position on this bill. I will not elaborate on the fact that cryptocurrency or cryptoassets are not well understood, that they are growing rapidly, that we have no control over them and that they facilitate money laundering and speculation. We have already talked a lot about those aspects.
It is hard to know the implications of all of this, even after talking to economists. Since the Bloc Québécois has already gone over much of that, I want to provide more of a macroeconomic analysis. That is something I know a little more about.
The existence of cryptocurrency causes problems with state economic intervention. Let me explain why. In his 1776 work, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith made the groundbreaking assertion that money and currency were just a veil and not worthy of our attention. According to Adam Smith, money and currency are like watching a play with the curtains down: The actors perform the play behind the curtains, but the spectators see only the curtains and cannot observe the economic life that takes place behind the curtains. This is why, according to Adam Smith, we should take an interest not in money and currency, but in the actors, in the economy in the true sense of the word, and in the different economic forces that interact.
Later on, it was suggested that money is not necessarily something useful. During the crisis of the 1930s, GDP fell by 40% over three years and the unemployment rate was 25%. Very little was done to help the unemployed. It was a catastrophe.
Upon analyzing that economic crisis with some hindsight, it is pretty clear that all the factors that could contribute to a collective collapse were there. Monetary delinquency was one of the reasons why that crisis was so severe, and I use the term “monetary delinquency” because, at that time, people did not believe that monetary policy was very important to the economy. The various players had been allowed to act in a decentralized way, and people later realized that this had aggravated the crisis. During that severe economic crisis, interest rates went up, which further depressed economic growth, after it had already naturally dropped off.
This is where another great economist, John Maynard Keynes, came in and said that governments had a role to play and that they must intervene in the economy. He began telling the government that it had to use its two arms of intervention, the fiscal or budgetary arm and the monetary arm. He helped people understand that monetary policy can be very important to the economy and can change the macroeconomic situation in different countries.
Keynes said at the time that intervention was needed in those two areas, and it just so happens that the Bank of Canada was created in 1935. The bank was created precisely so that the Canadian government could intervene more intelligently in order to ensure the economic well-being of Canadians.
The fundamental objective of the Bank of Canada is to ensure the economic well-being of Canadians. Top economists have worked at Canada's central bank, which is renowned around the world. It is one of the leading banks because it takes its role seriously, it is intelligent and it is there to serve the economic needs of citizens. No leading economist believes that the Bank of Canada does not act in the interest of the well-being of Canadians. By the way, it is beyond the reach of political power.
This led to the creation of monetary policy using fluctuating interest rates to intervene in the economy. Little by little, some economists noticed that the Bank of Canada could influence production, but only in the short term. When it intervenes, its actions tend to have long-term effects on inflation. This is when monetarists came on the scene saying that the Bank of Canada's only job was to control inflation. To understand this, we must go back to the 16th century when Jean Bodin came up with the quantity theory of money.
He was saying that printing money always leads to inflation. Back in the day, the great explorers of America came with a lot of gold, which was the currency at the time. Prices skyrocketed while production had not really changed. That is when it became clear that the important thing when working on and dealing with currency is to keep an eye on long-term inflation.
In the 1990s, the Bank of Canada used the central bank only to control price levels. Its fundamental objective of ensuring the well-being of Canadians turned into an economic objective. The Bank of Canada ensured that prices remained stable. Inflation was allowed to oscillate between 1% and 3% with an ideal target of 2%. The Bank of Canada was the second bank in history to be that transparent, after the Bank of New Zealand.
Why is it so transparent? It is very simple. Between the time when the Bank of Canada intervenes on interest rates and the time that its actions impact inflation, there are several economic agents who intervene. Plus, that time span can stretch up to two years. It is very complex. The economists at the Bank of Canada are not clowns; they are not performers who get overly agitated. No, they are intelligent, hard-working people. They have extraordinary tools. They can tell us the value of the money supply at a given time and how much money, in its various forms, is circulating in the economy. That is what the Bank of Canada does. The more accurate and transparent the bank is, the greater the impact and efficiency. The goal is to improve the central bank's efficiency.
Then cryptocurrency comes and puts a wrench in the works. By introducing cryptocurrency into the economy, by giving it an increasing role, the central bank's connection to interest rates becomes weaker. There is also an impact on the consequences the inflation rate has on the economy. In the end, this is another currency that is out of the bank's control, that is unfamiliar and that will, quite simply, disrupt the well-informed connection that has been created between the Bank of Canada and inflation.
Bodin's quantity theory of money states that the greater the money supply, the more it feeds inflation. This means that the more cryptocurrency there is, the more money there will be, and the more inflation there will be. Conservatives, who fight inflation day and night, want to bring in another money product to further increase inflation. Do they have an economist in their party?
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Mr. Speaker, it is always an honour to rise in the House of Commons, especially to speak to financial bills.
I always think back, whenever I get an opportunity to speak in the House on a financial bill, to what our old friend Jim Flaherty must think of a bill such as this. I think he would have a wry little grin and probably think that it did not quite come up to the measure of what he would be able to do, perhaps.
I also think about Milton Friedman, the father of modern economics in many ways, and what he would say about inflation, because if members go to Santa Claus parades or events in their communities, what are people going to be talking about? They are going to be talking about the economy, inflation, the carbon tax and some world events. Milton Friedman has been dead a long time, but as he said, inflation is “too much money chasing too few goods”. He also said, “Inflation is always and everywhere a monetary phenomenon.”
The Liberal government has said many times, and has passed the hat on excuses for inflation, but it has kind of settled at its last chance to say that inflation is a global phenomenon and we had no chance. However, if we look at the G7 and G20 countries, they all spent; they mega spent. They spent huge percentages of their entire economy, so if everybody is spending that much, we just need to look at what Mr. Friedman said so many years ago. It is quite simple.
I will give the Liberals credit for one thing. Somebody in here slipped a line into the foreword that says, “But we cannot support every single Canadian in the way we did with emergency measures at the height of the pandemic.” The government was spending a lot of money, and some of it very valid. It continues with, “To do so would force the Bank of Canada to raise interest rates even higher.” Here the Liberals are admitting in one line that they cannot do it all for everybody because it would raise spending too much, and on the second line they are saying they would have to raise interest rates to fight the impending spending inflation that would be caused.
“It would make life more expensive, for everyone, for longer. So as the central bank fights inflation, we will not make its job harder.” Well, that would be the first time in seven years the Liberals have made that decision.
I know other members have talked about public debt. To service the debt, the interest we would pay, and members have heard the numbers already, is $24.5 billion this year, $34.7 billion next year and $43 billion in 2023-24. Now, we are not in a debt spiral like the one some of the countries are heading towards yet, but that is a concern.
In the notations in the fall economic update, there is 425 billion dollars' worth of T-bills and bonds that will have to be sent out to the market in the upcoming fiscal year. Now, that is a lot of money to put out into the market and ask people to buy the T-bills, etc. One huge concern out there is if there are no bids, and we have seen that happen in other countries where there are no bids on government debt. I think there probably will be, but that is an awful lot of money to put out in one year, which is a little surprising.
I still have Bill Morneau's first budget from 2016. He had that nice book, which is in my office. I looked at it before I came over here. The Liberals inherited a balanced budget from the Conservatives in 2015, which is a fact. I will also mention that the inflation rate in October 2015 was 1%. There was a balanced budget and 1% inflation. The debt when Bill Morneau was the finance minister was $1 billion. It was $1 billion for Bill Morneau. Under this finance minister seven years later, it was $1 trillion, and now the number is $1.8 trillion. That is $800 billion in seven years, which is a lot of spending. It takes an Olympic effort to spend that much money in that period of time.
The net debt is $1.2 trillion. That is what they always hang their hat on, the net debt-to-GDP. The issue that I think most of us would like to bring up, and I am welcome to be corrected if I am wrong here, is that a lot of the assets, about two-thirds of the assets that the government lists, is CPP and QPP. It is really not even a government asset, if we think about it. It is kind of a dotted line to an asset. Really, if we took out the CPP and the QPP, the net debt would be a lot bigger. I think what I saw on a report was that we would not be number one, in terms of dept-to-GDP. We would be more like four or five, in terms of debt-to-GDP.
These are just some clouds on the horizon. If we do not take care of our fiscal house, we are going to have some long-term issues.
The economic report also talks about what happens if things are not as rosy as presented. That is when it gets really concerning. From now until 2027, believe it or not, the best-case scenario is that we are going to add another $200 billion to our debt. The worst-case scenario is that it is 50% worse, and we are going to add $300 billion to our net debt. I think that is a concern because, next year, the worst-case scenario is a $50-billion deficit.
We keep adding these on, piling these on, and I think a lot of people are looking at this and they are saying, “What am I getting for my money?” A lot of people, in my area, if they are going on a vacation now, if they are lucky enough to be able to afford one, do their level best to avoid Pearson airport. They will try Hamilton. They will try somewhere else, like Kitchener. They do not want the hassles of the Pearson airport.
I think to myself, here we are in one of the wealthiest nations in the world. We should have the best: the best ports, best airports, best infrastructure and best government service. If we want a passport, it should almost be next-day service. Everything is a mess.
Look at immigration. Look at how many unfilled positions there are in our country. Our office is inundated with people who are at the end of their ropes with trying to get somebody to come and work in their businesses. It is just one mistake from immigration, another one and another one. We would like to bring these hard-working people in and let them really put our economy to work.
If we went around and we asked parents what some of their issues are, what some pinch problems in their finances are, health care might be one of them. It is maybe not a financial one, but certainly there are concerns regarding emergency rooms. I am sure that everybody in here who has a kid or an elderly parent knows that it is hours upon hours if we have to go to the emergency room. We have shortages in every position in health care. It would have been great to see a better plan from the government to really deliver an improvement to our health outcomes.
Even the $10-a-day day care business, I have a bit of an issue with that. According to Statistics Canada, there are about 660,000 Canadian families that do not use the government-run day cares. They receive nothing. They do not get $10-a-day day care, so almost half of the kids out there do not get that. Once we are in Ontario, say, for example, when one is in JK, at four years old, parents probably need the extended day program. That is $28 a kid every day. If one had two kids, that can be hundreds and thousands every month.
Yes, if one is lucky enough to get one of those spots in a licensed day care, one is going to pay $10 a day, but the other problem is that, in Ontario, we almost have a deficit of 100,000 ECE workers, day care workers. In the future, this increase to $10 a day is really zero if we do not have the staff to fill the jobs.
There is a lot here. I am sorry if I sound like I am being pretty critical here today, but there is plenty of material to be critical of. That is our job over here. The Liberals will tell us how great they are, and it is our job to point out some of their shortcomings.
The last point I have is on clean tech, hydrogen and critical minerals. I think we would find a lot of commonality, potentially, on all sides. One of the issues we have is that we can never get any of these projects done. To do these projects takes years if not tens of millions of dollars.
With that, I thank the House for the time and I will take my questions.
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