Mr. Speaker, do you remember grade school history class, when a student would raise her hand and ask why the king did not just create more money if there was not enough? He was the king, after all. Almost all children ask that question at school at some point when they are learning history. Then the teacher has to explain that, if the king creates more money, inflation goes up.
Young students are not the only ones asking that question and thinking about the concept of creating more money to cover government spending. Academics, U.S. members of Congress and even former U.S. presidential candidate Bernie Sanders have endorsed a concept called “modern monetary theory”, which states that a government can spend as much as it wants and the central bank can just print more money. If inflation goes up, as the grade school teacher tells the students, all the government has to do to reduce inflation is raise taxes. Ultimately, the people are the ones who have to pay, but in the beginning, everyone thinks it is all free.
This theory is becoming more popular. The current federal government says it is against the theory, but is that really the case? Let us look at the numbers. Last year, the government ran up a $350-billion deficit, of which the Bank of Canada bought $300 billion, or over 75%. The fact is, the Bank of Canada now owns almost one-third of the federal government's debt. The debt that is now in the hands of the Bank of Canada has increased by hundreds of percentage points.
This year, the government announced that it would borrow $3 billion per week. How much will the Bank of Canada provide to the government each week? Also $3 billion. For every dollar the government borrows each week, the Bank of Canada will provide the same amount. This has never happened in the history of the country. Even during wartime, when money was needed to finance armies, money was loaned by citizens. They bought interest-bearing bonds, allowing them to save money while financing the war against the enemy. Now, however, the government has decided to print money.
Is this really a modern concept? If my colleagues think that a concept used over 2,000 years ago is modern, then I guess we can call it modern. Let us recall the dictator Dionysius of Syracuse, who never had enough money because he was always fighting wars and living lavishly. Unable to pay his bills, he collected all the coins on his island, each of which was worth one drachma, the currency of the Greeks at that time. He then stamped each one-drachma coin with the number two. Now he had twice as much money to spend.
It was like magic, except now the public had to pay twice as much for all the goods and services on the island because the money was worth half as much as it was before. The ultrarich, the dictator's entourage, the bankers, the big businessmen and the military leaders were much richer, but the workers had to pay more just to put food on the table and survive.
That is not the only example. In Europe, throughout the great Napoleonic Wars, kings and leaders tried to mint more coins with less silver to fund their wars. During the wars, people noticed that there was less silver in the coins and that the cost of living was going up for ordinary citizens.
In Germany, during the First World War, the government inflated the value of its currency tenfold. After the war, the Germans had to cart around a huge amount of money just to buy a loaf of bread. At the restaurant, they would order 10 or 15 beers at once as soon as they arrived because the price could shoot up hour by hour over the course of the evening. They were better off ordering as soon as they got to the restaurant.
The economist Milton Friedman, who won the Nobel Prize in economics for his work on inflation and the creation of money, demonstrated that in the United States, the United Kingdom, Japan, Germany and Brazil, there was a perfect correlation between an increase in the production of money and an increase in prices.
That is the history of the creation of money. When there is too much money chasing too few goods and services, prices go up. Have prices gone up in Canada since the government began paying its bills with printed money?
A Financial Post article states that the central banks and government are out of touch with Main Street when it comes to the rising cost of living. According to the latest Canada's Food Price Report, every year, the cost of meat increases by 5% to 7%, the cost of bread increases by 4% to 6%, and the cost of vegetables increases by 5% to 7%, and gas prices have increased by 78% to $1.18. Yes, prices are going up.
Home prices have also gone up by one-third, or 30%. Young Canadians cannot even dream of owning a house because of the skyrocketing prices. That is good for the wealthy. The ultrawealthy are seeing their assets increase in value, but the working class, the people doing the work, are seeing their wages decrease in real terms. A lot of money is being transferred from workers to the ultrawealthy.
Elected officials never voted for this inflation tax. This tax is worse than all other taxes because it targets the poor, who do not have assets and cannot increase their net worth.
We must control the spending and stop the central banks from printing money so that we can protect the value of our dollar and the value of workers' time. This will give us an economy that compensates people based on merit, on their contributions, not based on the inflation of their assets and cost of living.