44th Parl. 1st Sess.
June 7, 2023 02:00PM
- Jun/7/23 2:37:59 p.m.
- Watch
Mr. Speaker, it is clear that the government has not taken the climate crisis seriously. Its actions show that very clearly.
Today is supposed to be Clean Air Day, and at the same time our country is burning. We can even smell the smoke in this chamber. Our country is literally on fire and the Liberal government thinks that business as usual is fine. We have a Conservative Party that is in full denial mode.
When will the Prime Minister realize we have to take this crisis seriously, we have to protect our environment and we have to protect the air for our kids and for our future?
108 words
- Hear!
- Rabble!
- add
- star_border
- share
- Jun/7/23 2:57:03 p.m.
- Watch
Mr. Speaker, the global inflation crisis that faces Canadians and people around the world has global roots, whether it is the war in Ukraine, which Putin is responsible for, or coming out of the pandemic.
We can say that Canada's economic recovery has been much faster than it was during the much shallower recession in 2008 under the previous government and that employment is up higher than it has ever been. At the same time, too many Canadians are hurting, and that is why we have been stepping up with targeted supports, which are not increasing inflation, but are responding to the reality of Canadians who are struggling.
109 words
- Hear!
- Rabble!
- add
- star_border
- share
- Jun/7/23 8:18:50 p.m.
- Watch
Madam Speaker, it was good to hear from the hon. member for Timmins—James Bay. He does make a lot of noise, but that is because an empty wagon rattles the loudest. The people of Timmins keep telling me, as I have been there four times in a year, that they have seen more of me in the last year than they have seen of him in the last decade, and they are happy about that.
Over the last eight years, we have seen a massive, possibly unprecedented, mounting of both public and private debt. We have to understand where we were and where we are in order to understand where we are going. In the last four years, the government has doubled our national debt. That is more than half a trillion dollars of new debt. The Prime Minister has added more debt than all previous prime ministers combined.
He will be quick to point to many different excuses that have caused this run-up in our national debt. I will point out that while there was a COVID pandemic, this is not the first crisis we have ever seen in the history of the world. While there has been a war between Russia and Ukraine, this is not the first war ever fought in the history of the world.
We had the great global recession under the previous Conservative government. We had two wars: one in Afghanistan, and another in Iraq and Syria. We managed to do so while keeping the debt the lowest in the G7 and balancing the budget. Other countries faced similar challenges without adding as much debt.
For example, the Swiss, who are right in the centre of Europe, closer to the conflict in Ukraine, and more dependent on global supply chains than we are because they are a landlocked nation surrounded by the European Union, were able to balance their budget, pay down their deficit, pay down their debt and keep interest rates, inflation and unemployment lower than all of the other OECD countries. That proves that just because there is a pandemic or a war in one part of the world, it does not force a government to completely bankrupt itself.
Let us recall that the Prime Minister added $100 billion of debt before there was a single case of COVID. He has added roughly $100 billion since COVID came to an end. During the COVID pandemic, 40%, or $200 billion of the new debt that he added, had nothing to do with COVID whatsoever according to the Parliamentary Budget Officer. The idea that we can blame all of this new debt on factors out of his control is provably false.
The Prime Minister had a choice and his decision was to spend without any thought for future generations or for the financial viability of the country. In order to enable his spending, he unleashed nearly unprecedented printing of cash. This was done through something called quantitative easing where the central bank purchased government debt at exceptionally high prices, driving down yields on that debt, and ultimately pumping $400 billion of new cash into the economy in less than two years.
Many will say the Liberals had no choice. There was a pandemic after all. Let us review that excuse. The pandemic did not bring a liquidity crunch. In fact, the economic phenomenon of the pandemic was that people had more cash than ever before, but they were banned from spending it. The problem was not the lack of cash, as had been the case in the previous great global recession.
The problem was that people and businesses had bank accounts that were overflowing with cash with nowhere they were allowed to spend it. In that kind of environment, the worst possible thing one could do is to print more cash and further overflow bank accounts with that money, which, in the end, we knew would ultimately have led to inflation.
During that run-up of the size of our monetary base that kept money printing, the Minister of Finance, always looking for the trendiest new slogan that would win her applause in Davos or Brussels or at some other international symposium, said that all this cash that was filling up bank accounts was like a “pre-loaded stimulus”, something that could be unleashed to revive a dead economy. Of course the economy was only dead because governments had shut it down, not because there was a lack of cash with which to facilitate commerce. When the economy opened, all of that excess cash was unleashed, and the goods we buy and the interest we pay were automatically and predictably bid up.
We do not fault the government for having created programs to pay people's bills while governments locked them down and prevented them from paying their own. Where we did object was with the government giving out $2,000-a-month payments to prisoners, to dead people, to teenagers who did not have that kind of money before the crisis occurred, and in many cases had no jobs at all.
We objected to the government continuing to pay out these benefits well after there were more than a million vacant jobs. In other words, we were paying people not to work while there were a million vacant jobs they could have been filling. Simultaneously driving up unemployment and job vacancies, an unusual coincidence of achievement or, in reality, negative achievement in the use of this policy.
The reality is that we warned the Liberals at the time that if they did not restrain themselves this would lead to a crisis. It would start with inflation and be followed up by an interest rate increase. This was not based on some invention—
965 words
- Hear!
- Rabble!
- add
- star_border
- share
- Jun/7/23 8:53:59 p.m.
- Watch
Madam Speaker, I regret to inform the House that, while history shows that countries where the debt is more than three times the size of the economy have a strong propensity toward debt crises, according to S&P, Canada's total public and private debt is now 474% of GDP. That includes government debt, household debt, business debt and financial sector debt combined. This makes us the second most indebted country, relative to GDP, of any country in the G7, with only Japan being worse.
I spent a lot of time when I was the shadow minister of finance studying debt crises, and there is a phenomenal book called Big Debt Crises, written by Ray Dalio, the single most successful hedge fund manager in the history of the world. In it, he quantifies the precursors to debt crises. He put together the 48 biggest debt crises that have happened in modern world history, and he put together a chart of the debt-to-GDP ratios of all of those countries. I will list off some of the crises that might come to mind.
There was the Greek debt crisis that happened roughly just over a decade ago in Europe. That crisis then spread to Spain, Portugal and other European countries. There was the U.S. financial crisis, which was ultimately a mortgage debt crisis. There are the examples of the Argentinian debt crises of 1998 and 2001. I could go on.
In putting together all 48 of these biggest debt crises, he recreated the debt-to-GDP ratios that all of these countries had, public and private debt as a share of GDP, and I took the liberty of taking Canada's current debt-to-GDP ratio and putting it in that list. What did I find? Our current debt-to-GDP ratio is bigger than all of those other crisis countries except for two. In other words, there were 46 countries on this earth that had massive financial meltdowns with significantly smaller debt levels relative to the size of their economy than we have here today.
The question is why we have, up until now, not had a full-scale meltdown. The answer is obvious. It is because we have had such inordinately and artificially low interest rates. Even today, as rates rise, much of the debt that is in the current stock of the country is still locked in at lower rates, but that is not a permanent phenomenon. In other words, every passing day, somebody's mortgage comes up for renewal, and the artificially low rate they had up until then renews at a much higher rate. This is the fundamental risk we have. The same goes for government debt. Some of it is locked in at lower earlier rates, but governments have mortgages.
Bonds are just mortgages. They are just varied terms. Some of these mortgages are 90 days. Some of them are 30 years. Most of them are somewhere in between, but all of them at some point come up to renewal, and when they renew they do so at the rates that are present when the renewal occurs. Slowly but surely, that is happening already.
Where do we manifest the higher rates? Ironically, it is in the Bank of Canada itself, because the bank purchased government debts and government bonds when rates were low, and is therefore collecting a small yield on those debts. The bank purchased those debts by depositing money in the central bank's accounts of financial institutions, which sold the bonds back to the bank.
Those deposits are receiving the policy rate of interest that the central bank pays out, which is now 4.75%. In other words, the Bank of Canada has bought government bonds that pay out 0.6% and paid for them with deposits that it now has to pay out 4.75% on, so our central bank is losing money every single day. In fact, the central bank, were it not backed up by the government, would be bankrupt today, because its liabilities are worth so much more than its assets. This is a very unusual situation, but it is a precursor for what everyone else is facing.
I ask this: What happens in the year 2026 when all of the mega mortgages that people took out five years before at artificially low rates with artificially high home prices all come up for renewal, and the rates are three or four times higher than the families had been paying up until that time? All of a sudden, we are going to have hundreds of thousands of people renewing their mortgages at the same time at an increase of interest rates of 3% or 4%. That is not a three or four percentage point increase. That is a 300% increase, because four is actually 300% higher than one. The artificially low rates then create a multiplying effect when they collide with new and real higher rates.
Imagine then that there are hundreds of thousands of people who can no longer afford their monthly payments because they have gone up by $1,600 a month, and the average family only has $200 extra in their bank accounts. They are now paying $15,000 or $16,000 more per year in interest on their mortgages, all at the same time. What will they all think to do? They will sell. What else are they going to do? They cannot afford their homes anymore, and they cannot pay for them, so what will they do? They will sell when everyone else is selling and then, all of a sudden, there is a fire sale.
Furthermore, who is going to be around to buy? Are other people going to be able to pay 5% or 6% mortgages on million-dollar homes? Of course not. Therefore, there will be a preponderance of sellers without buyers to match then. Then what happens? House prices—
993 words
- Hear!
- Rabble!
- add
- star_border
- share
- menumenu
- notificationsnotifications
- home
- mailmail
- searchsearch
