“That it be an instruction to the Standing Committee on Finance that it have the power to divide Bill C-2, an act to provide further support in response to COVID-19, into two bills: Bill C-2A, an act to provide further support in response to COVID-19 (business support programs); and Bill C-2B, an act to provide further support in response to COVID-19 (benefits and leave), provided that (a) Bill C-2A be made up of part 1 of Bill C-2; (b) Bill C-2B be made up of all other parts of Bill C-2; (c) the House orders Bill C-2A and Bill C-2B to be printed; (d) the Law Clerk and parliamentary counsel be authorized to make any technical changes or corrections as may be necessary to give effect to this motion and; (e) if Bill C-2A is not reported back to the House within two sitting days after the adoption of this motion, it shall be deemed reported without amendment.”
He said: Madam Speaker, sometimes the simplest questions are the hardest to answer. The other day, I was in the finance committee, where the government was asking parliamentarians to approve another $7-billion expenditure. It sent 10 government officials to tell us all of the wonderful things this $7 billion would do. I had a simple question: Where does the money come from? Silence blanketed the room.
I sat quietly and patiently, looking up at the Zoom screen, to find out if a reassuring voice would answer an obvious and simple question. We were told the majority of the 10 officials were from the finance department. If any department were able to tell us where the money comes from, one would expect it would be finance, but silence continued to triumph. The awkwardness thickened to the point that it could be cut with a knife.
Finally, the chair broke in and encouraged me to ask another question that might be easier for these 10 government officials to answer. I then asked the chair if he could tell us where the money comes from. He was likewise perplexed. He sat baffled in front of the committee, unaware of what to do. This is the chair of Canada's parliamentary finance committee, here in a G7 country.
Of course, there are really only four places that money that passes through the House comes from: one, it can be taxed; two, it can be borrowed; three, it can be printed; or four, God forbid, it can be cut from something else and reallocated. However, none of those answers were forthcoming.
Instead, a fifth novel explanation of the providence of this money came forward, finally, about three minutes into the long committee silence. One official said that the money is within the government's broader macroeconomic framework and that he could not speak to it. If $7 billion can appear magically from something called a “government's broader macroeconomic framework”, then everyone should have a broader macroeconomic framework.
Imagine what a single mother could buy at the local grocery store if, instead of having to rely on decreasingly valuable Canadian dollars to buy food for her kids, she could carry around with her a broader macroeconomic framework. Imagine if the worker who cannot afford to gas up his car could just open up his wallet and, instead of pulling out increasingly worthless Canadian dollars, he could pull out a card inscribed with “broader macroeconomic framework”. Then he might even be able to fill up his tank with gas. Maybe that 28-year-old, who lives in his parents' basement, despite having a good job, because house price inflation has made it impossible for him to buy, could, instead of using inferior Canadian currency to bid on a house, walk up to the realtor and say that he has decided to pay not with cash, not even to pay with debt, but with a broader macroeconomic framework card.
I hope that at the end of my remarks, a minister and the government will announce, just in time for Christmas gift purchases, that they will mail out a broader macroeconomic framework to every Canadian household, so parents could, in collaboration with Santa Claus, make sure there are gifts under the tree for every child in these impossibly difficult times.
If we are going to ask the simple question of where the money comes from, why do we not ask the yet simpler question of what money is, because sometimes it is important to go back to first principles in order to make sense of this crazy world of ours. Money, of course, is merely a technology by which we transport value over time and space. Without it, our spaces would have to consume in the present everything that it produces.
Most species do. They have to eat what they kill right away, lest it be stolen or spoil. Squirrels can squirrel away a bit, which is a good habit the government should learn from, but most species have to use it or lose it.
We developed a technology to allow two people exchanging things to go ahead with their exchange. Even if each did not have the ability to supply the other with what they wanted, they could simply use this technology, called money, to transport the value between each other across time and different geographies.
Over time, money has taken many forms. In one island in the South Pacific it was a ledger carved on scarce limestone. In some places it was beads or seashells. In prisons, they use cigarettes. When I was a kid in school, it was candy. Throughout history it became metal, some precious, some brute. We had gold, silver and copper. Many different means of translating value across space and time have been used.
Politicians have found it a nuisance to pay their bills and use money with integrity. Back in 1215, poor old King John was forced by the barons and the commoners to sign this nuisance of a document called the Magna Carta, the great charter. In that document was inscribed the principle that the crown could not tax what the people had not approved. That principle is still in place here in this Parliament today. The government cannot spend what we do not vote on, 800 years later.
When we look around and see the beautiful green here, we know where it comes from. It was the colour of the fields in which King John was made low. That green should remind everyone that the people in the fields doing the work are the ones who produce the money we spend around here. That might have been a better answer in the committee than the government's broader macroeconomic framework, but I digress. After King John was prevented from taxing what people had not approved and was forced to go back to the commoners to get their permission to take their money, he and his successors became increasingly creative in sourcing the cash they acquired.
Years later, King Henry VIII, who is more famous for clipping off the heads of his subjects, decided that he could get his hands on money by clipping coins. He and his regime would clip off the edge of a coin. That way, they could melt those edges down and make more coins. Back then, it was hard to make coins because it was the British pound, which was a pound of silver. By clipping off a piece, they could melt it down and create more coins and Henry could inflate the value of currency in his hands, thereby deflating the value of the wages that his peasant class earned.
He got even more creative later on, which is how he got his famous nickname. He would have his minters melt down the British pound and re-mint it with just a tiny coating of silver around the outside of a copper coin. People thought they were getting a silver coin. Meanwhile, on the inside, they actually got copper.
The problem was this: Being the egomaniac he was, he did not want a profile shot, so he had his face placed facing outward on the coin, so it stared everyone in the eye when they looked at it. Because his nose protruded out from the coin, it would rub against the inside of people's pockets and the silver would scrape off the tip of his nose. Then they had a silver coin with a red nose, which is how he got the nickname “old coppernose”. Every time someone saw that red copper nose, they knew the king had stolen the real value of their money.
Throughout time, other politicians found other creative ways. Dionysius, who was a Greek dictator in Syracuse, actually took all the one drachma coins and restamped them to give them a value of two drachma, so all of a sudden he had twice as much money.
I hesitate to tell that story in the House because I worry the Prime Minister might think he could do the same. If we run out of money, we can always get more and turn loonies into toonies, and toonies to fours. That might be the next creative idea by which government could get its hands on money.
Throughout the 20th century, we saw this same tactic of cash creation. The most famous example was in the early 1920s in Germany. It created so many new units of account that inflation ran out of control. People needed to have a wheelbarrow full of cash in order to buy a loaf of bread. If people went to the bar to try and drink away their inflationary blues, they ordered all their beer the beginning of the night because, as the minutes went on, beer became more expensive.
We, in this part of the world, have not been immune to this inflationary disease ourselves. During the post-war era, we inherited monstrous debts from fighting the fascists, but governments had hard money from the end of the war until the early 70s. We basically operated on an American-led standard. If someone had a U.S. greenback, they could exchange it at a rate of $35 per ounce of gold.
In that period, we had an enormous amount of prosperity. The Americans paid off their war debts here in Canada with solid currency. We wrestled the inflationary beast to the ground in the post-war era. We took our record debts, which we inherited from the war, and we paid them off. We increased the size of the Canadian economy by 300%. By 1973, we had basically become a debt-free country.
However, what happened in the 1970s? President Nixon wanted to spend on warfare and welfare. Of course, the Americans were bogged down in Vietnam, which was a costly enterprise, and President Nixon wanted to keep his popularity at home, so he decided to spend, spend, spend.
In the decade that followed 1971, not only did they unleash the American dollar from any particular standard, but they also increased the number of U.S. dollars in circulation by 150%, while output only grew by about 39%. In other words, the amount of money grew about four times faster than the amount of underlying output that the money represented.
Here in Canada, we had Pierre Elliott Trudeau. He looked down at all the inflation that the U.S. government was creating. It had reached double-digit inflation down there. It was a total inflationary crisis. The American dollar was devalued on an international basis and was incapable of buying affordable petroleum on the world market. They like to blame OPEC, but they took no responsibility for the fact that the unit with which they were buying oil on the international markets was itself devalued.
Trudeau looked at all the misery in the United States. He looked at how people were lined up at gas stations waiting for an hour and a half to gas up their cars. He saw the poverty that was overtaking inner-city streets. He saw the expanding wealth gap in the United States of America. What did Pierre Elliott Trudeau say to all that? He said, “Let us have some of that up here.”
Then he started printing money here in Canada and massively increased the money supply within Canada. I have the data right here. Between 1971 and 1981, the money supply in Canada grew by over 200%, while GDP only grew in real terms by about 47%. We can imagine that money is growing in supply at more than four times the rate the economy is growing, so we have more dollars chasing fewer goods. What does that get us?