Debates of June 7th, 2023

Budget Implementation Act, 2023, No. 1

[The Assistant Deputy Speaker, NDP, Carol Hughes]

Order. The hon. parliamentary secretary knows full well that he should be a role model to other members and should not be making any disturbance while someone else has the floor.

I would ask him to put his eyeglass piece away as well.

[Some hon. members]

Oh, oh!

[The Assistant Deputy Speaker, NDP, Carol Hughes]

Order, order, order. I am sure we can get through this evening. It would be beautiful if we could run through this evening smoothly. I have a feeling that is not quite going to happen, but I am going to try.

Again, I want to remind all members, if they want to have conversations, to take them out.

[Some hon. members]

Oh, oh!

[The Assistant Deputy Speaker, NDP, Carol Hughes]

Order. Even when I am speaking, I think I deserve the respect of this House.

The hon. Leader of the Opposition.

[Pierre Poilievre, Conservative, Carleton, ON]

Madam Speaker, I think we can all agree that if the member from Kingston is our role model, that is a good reason why we are in so much trouble today.

This spending that has led to the inflation was utterly predictable, but its consequences have been utterly devastating. It is obvious by looking at the lineups at food banks across the country, which, in many cases, actually go many blocks down the street and around the corner. There are the cases of the young people who now estimate that they will be in their fifties before they will be able to move out of their parents' homes. These are not anecdotes.

Just the other day, one prominent financial institution estimated that if a family was earning a quarter of a million dollars, it would take them 25 years in Toronto to save up for a down payment. It used to be that 25 years was the term it took to pay down a mortgage, now it takes that long just to get a mortgage, which illustrates the immense contortion that our economy has suffered. This is not without notice around the world. The IMF now says that Canada has the economy that is most at risk of default crisis out of all the countries in the advanced and developed world. Right now, household debt is 107% of GDP, which is to say that the combined debt of Canadian families is 7% bigger than the entire GDP of our country, and we have the worst household debt of any G7 country.

This debt was not an accident. When governments create cash, they are sloppy about it. They do not simply print the money and hand it over to the Prime Minister to spend, although I think he might prefer that kind of efficiency, rather they have a central bank purchase government bonds on what is called the “secondary market”. In other words, the government sells the bonds to the financial institutions and the central bank buys them back.

This creates an artificial private-sector demand for government debt, which makes it very easy for government to borrow money. After all, if I say to members that I will sell them a bond today for $1.00 and buy it back tomorrow for a $1.10, it is pretty easy to imagine that members would accept that transaction so that they could arbitrage the 10¢ profit on the back and forth. This allows government to spend cash very easily and it also increases the money supply. It balloons government and the financial industries. It is why, when the Federal Reserve is engaged in this practice of so-called quantitative easing, it has been wildly popular in both Washington and on Wall Street among Democrats who like big government and among Republicans who like big banks, because both of them actually profit when government creates cash to inflate financial assets and to inflate the spending capacity of itself.

Therefore, what ends up happening is that those who benefit off government expenditures profit, those who benefit off the financial sector profit—

[The Assistant Deputy Speaker, NDP, Carol Hughes]

I will interrupt for a second.

I am made aware that there is someone who is taking pictures from the lobby into the chamber. I will ask one of the clerks to go over there and ask anybody who has been taking pictures from the lobby into the chamber here to delete those pictures.

I would remind members that they are not to be taking pictures in the House whether they are in the House or in the lobby looking into the House. If they want to take pictures, they can take pictures from the TV.

I am hoping someone will take care of it.

The hon. member for Mégantic—L'Érable on a point of order.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Madam Speaker, we just heard a government member say that she took a picture in the House. I would ask her to delete the photo from her device, since everyone saw it happen.

[The Assistant Deputy Speaker, NDP, Carol Hughes]

If members have taken pictures, I would ask them to make sure they delete those pictures. Members know that taking pictures in the House is not permitted. If they cannot help but take pictures, I would ask them to leave their phones in the lobby.

I will also remind members not to be talking across the chamber. They can take their conversations into the lobby.

[Pierre Poilievre, Conservative, Carleton, ON]

Madam Speaker, as I was pointing out, this practice of so-called quantitative easing was not invented in Canada. In fact, it started long ago in Japan, which caused a massive gap to appear between the rich and the poor, because the Japanese government printed cash, inflated asset values, left the working class behind and inflated the wealth of the super-rich. This led to a long-standing slump in Japanese economic growth, because investors no longer had to invest in productive assets that would generate wealth for the Japanese economy. Rather, they could just sit on their property, their stocks or their bonds and allow the Japanese central bank to inflate the values. The Americans then replicated this idea of quantitative easing in the U.S. financial crisis. The result was a disaster. It was a decade of very slow economic growth.

Furthermore, there was a major expansion in the gap between rich and poor. While the working class in America was losing its jobs to automation and outsourcing, it was not enjoying any of the lower prices that those competitive forces should have provided because the central bank was neutralizing cost savings by inflating the cost of living by printing cash. We saw a massive explosion in the wealth of Wall Street and Silicon Valley, while the working poor in industrial states, such as Pennsylvania, Ohio and others, found themselves more and more disenfranchised. Their wages were going down, yet their prices were going up. They looked around and saw incompetent CEOs and other financial sector insiders, the same ones who had caused the U.S. financial crisis, not going to jail where they belonged. Rather, they were getting richer and richer. Therefore, the working poor came to believe that the system had ultimately been rigged against them.

Now I bring this to the present, because the government claims that because all central banks were engaging in quantitative easing, we had to do it as well. The American federal reserve is our big, friendly neighbour to the south. The argument goes that if it does something, we have to do it too. However, that is provably false. In the 2008-09 financial crisis, the American government printed cash to buy government debt. They did something called quantitative easing. In Canada, we did not do that. Our government signalled to the central bank that it would not be authorized to participate in fiscal policy by printing cash to buy government bonds. Yes, we ran small, temporary deficits to get through that financial crisis, but we did it by borrowing real money, not by printing cash. That is why we rebounded faster than the Americans did. We had lower unemployment. We were the last in and the first out of the recession, and we never had inflation above 4%. We were back to our inflation target in a year. This proves that we did not need to do what the Americans did, just as our mothers taught us. Just because our friends are jumping off a bridge, does not mean we should do the same.

We know that the Swiss did not print cash during the COVID crisis. Rather, they used real money; when they ran deficits, they borrowed real money. They quickly returned to a balanced budget, and the result was the lowest unemployment, the lowest interest rates and the lowest inflation. This was despite the fact that their European neighbours all had massive inflation crises because their central bank on that continent had behaved differently.

All these experiences were laboratories to demonstrate the folly of the government's actions. I called this folly out on the floor of the House of Commons as early as the fall of 2020, when all that cash was moving into our economy and already beginning to inflate the cost of living. Core inflation was already rising and starting to break above the 2% target, yet they continued when it was clear that there was—

[The Assistant Deputy Speaker, NDP, Carol Hughes]

I have a point of order.

The hon. Minister of Seniors.

Bill C-33—Notice of Time Allocation Motion

[Kamal Khera, Liberal, Minister of Seniors]

Madam Speaker, an agreement could not be reached under the provisions of Standing Order 78(1) or 78(2) with respect to the second reading stage of Bill C-33, an act to amend the Customs Act, the Railway Safety Act, the Transportation of Dangerous Goods Act, 1992, the Marine Transportation Security Act, the Canada Transportation Act and the Canada Marine Act and to make a consequential amendment to another act.

Under the provisions of Standing Order 78(3), I give notice that a minister of the Crown will propose at the next sitting of the House a motion to allot a specific number of days or hours for the consideration and disposal of proceedings at the said stage.

The House resumed consideration of the motion that Bill C-47, An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023, be read the third time and passed.

Budget Implementation Act, 2023, No. 1

[Pierre Poilievre, Conservative, Leader of the Opposition]

Madam Speaker, now that we know what worked and what did not work, we have to understand the consequences of the fact that the government took the wrong path. I do not need to go on at any length about the ravages of inflation. We have all heard the stories. We can all tell heartbreaking stories.

I see a member right now looking at emails on his phone from people who cannot pay their bills. I see a member across the way saying that our member for Barrie—Innisfil is in trouble for looking at an email from a constituent. He should be looking at those emails. Maybe that member would benefit if she looked at emails from her constituents as well. I understand that, if she were to do so, it would be a great burden on her personal guilt to learn of the single mothers who are skipping meals, the families who are now defaulting on their loans from a 16% year over year increase and the number of Canadians who are missing their mortgage payments. She could take a moment to look into the eyes of the 37-year-old who has been working all his adult life and still cannot afford a home. She could talk to the farmer who borrowed so he could expand his farming operation under the government's promise that the interest rates would be low for long. If she looked at their emails, then maybe she would be less arrogant in supporting the very inflationary policies that have caused all this misery. Maybe, if the Liberals would listen to the people who pay the bills in this country, just for once, we would not be in the mess we are in right now.

This was all so predictable. The great Nobel Prize laureate and economist Milton Friedman said, “Inflation is taxation without legislation.” He also said, “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” In Friedman's view, central bankers try to avoid their last big mistake. Every time there is a threat that the economy will contract, they overstimulate it by printing too much money. This results in a rising roller coaster of inflation, with each high and low being higher than the preceding one. Rapid increases in the quantity of money produce inflation. So said the greatest expert on monetary economics in the history of the world, as recognized by the Nobel Committee.

Thomas Sowell, one of the greatest economists ever, said that “inflation is a way to take people's wealth from them without having to openly raise taxes. It is the most universal tax of all.” He said that the first lesson of economics is scarcity. That is, “there is never enough of anything to satisfy all those who want it. Meanwhile, the first lesson of politics is to disregard the first lesson of economics.”

The great Hayek said, “With government in control of monetary policy, the chief threat in this field has become inflation. Governments everywhere and at all times have been the chief cause of the depreciation of the currency. Though there have been occasional prolonged falls in the value of metallic money, the major inflations of the past have been the result of governments either diminishing the coin or issuing excessive quantities of paper money.” He also said, “A great many of the activities which governments have universally undertaken in this field and which fall within the limits described, are those which facilitate the acquisition of reliable knowledge about the facts of general significance. The most important function of this kind is the provision of a reliable and efficient monetary system.” That is something the government has failed to provide.

Furthermore, the great French philosopher Frédéric Bastiat said, “Money serves only to facilitate the transmission of these useful things from one to another.... When legislators, having ruined men by war and taxes, persevere in their idea, they say to themselves, ‘If the people suffer, it is because there is not enough money. We must make [more].’”

The tactic the Prime Minister deployed was nothing creative or new. It has been the tactic of emperors, kings, presidents, prime ministers, and incompetent and self-indulgent leaders. When they run out of other people's money, they create more cash.

I think of the story of Henry VIII, who spent lavishly and without restraint on himself, spoiled his court and, of course, ran out of money. However, there was a difficulty in creating cash in his time. That was because the British pound was actually a pound of silver. When people ran out of silver, they ran out of the ability to make money. Henry VIII had a silver coin. How could he create cash when he had no more silver left? He had already spent it all. What did he do? He had his smelters melt it down and remint it with copper on the inside and a tiny layer of silver on the outside. Then he could multiply the number of coins almost without limit.

I know members are anxious to hear the rest of the story.

[The Assistant Deputy Speaker, NDP, Carol Hughes]

I know members may be very interested, but I do not think they should be chatting at this point or trying to answer some of the questions that the Leader of the Opposition is asking during his speech. It is not quite time. I would remind members to afford the speaker the respect he deserves.

Aside from the person who has the floor, I would ask members to please be quiet. If they are having a hard time doing that because they are sitting together, I can do what teachers do and separate them.

The hon. leader of the official opposition.

[Pierre Poilievre, Conservative, Carleton, ON]

Madam Speaker, I know they are just excited to hear the rest of the story and that is why they are having troubling containing themselves.

What was Henry VIII to do? He used copper on the inside of his coins and silver on the outside to multiply the coins without limit. There was only one problem, and that is that he put his big, ugly, fat mug on the front of the coin facing outward. He wanted everyone to see him straight on. That meant his nose protruded. His nose would rub on the inside of pockets, and that silver would rub off and then everyone would see the red nose. Every time an Englishman pulled out a coin and saw a silver coin with a big, ugly red nose in the middle of it, they knew they had been robbed of the real purchasing power of their money and that Old Coppernose had stolen from them again.

By the way, the money supply in that period increased by 80%. Guess how much prices went up in the same time period: They went up 80%, but he was not the most creative.

[An hon. member]

He knows.

[Pierre Poilievre, Conservative, Carleton, ON]

Madam Speaker, the House leader knows. He is the most ambitious student in the lecture hall today. In fact, he knows he could give the lecture. He knows more about it than I do. The great House leader of the Conservative Party is here today.

Henry VIII, despite the creativity of his copper coins, was not the most creative at all. I would say that Dionysius was even more creative in generating new cash. Let me tell members about Dionysius, and then that member can tell me about Diocletian afterward.

Dionysius was a Greek ruler of the island of Sicily. Yes, the Greeks at one time ruled Sicily. I know it is now Italian. Members do not need to tell me that, but back then it was Greek. Dionysius could not control his spending either, just like Henry VIII. He would run out of money, so he sent his men out to take all of the jewellry off the statues of the gods so he could sell them off, saying that they were merely loans that had come from the gods above.

When those riches ran out as well, Dionysius had to resort to other tactics. This is what he did. He took all of the coins he had collected, which were called drachmas. That is the Greek word for what we would call a dollar. Every coin was one drachma. He said he had a simple answer and just marked a “two” in place of the “one”. All of a sudden they could have twice as many drachmas.

I hesitate to share this story in front of the Prime Minister, because I do worry he might simply turn every loonie into a toonie and every toonie into four. If we run out of money, we can always create more. To the Liberal friends across the way, please do not tell this story to the Prime Minister. I thank them very much. We have a bargain. This is a strict secret. By the way, those listening out there are sworn to secrecy as well. Do not tell the Prime Minister. We do not want to give him any ideas.

The result of course was that all of the working people on the island effectively had a real cut in their purchasing power of 50%. Yes, they had the same number of drachmas but half as many coins, so each drachma would buy half of what it did. He literally cut the wages of the people in half, but he was able to spend those coins before the inflation set in. In other words, he was able to enjoy the newly created riches for the brief instant in time they lasted before inflation melted them away, and then it was the people who lost the purchasing power.

So it is with so-called quantitative easing. It is always the bankers and the government insiders who touch the new money first and, therefore, enjoy the riches most splendidly. The working class only get those dollars when they trickle down from the top and they no longer have their purchasing power. That is why we must, and when I am Prime Minister we will, once and for all put an end to trickle-down economics. It does not work. It never works. I will never allow it.

We know the creation of cash has caused the inflation that exists, the massive poverty, the misery and the feeling of brokenness across the land. The tent cities, all of that, are the result of what the government has caused through the creation of cash, but I am here today to warn of a much graver and insidious risk still ahead of us.

This is where I rely on Churchill's second method of foretelling the future, and that is the cyclical method: Look at what has happened in the past to predict the cycles of the future. We know that this is not the first time governments have created cash or run up massive debts. We need to understand where it leads after the inflation cycle is gone, and what can often come next.

Here, today, I rely on the wisdom of the Stoics. The author of Stoicism, the modern author of Stoicism, Ryan Holiday, wrote of the “premeditation of evils”, a Stoic exercise of imagining things that could go wrong or be taken away from us. As Seneca would say, the unexpected blows of fortune fall heaviest and most painfully, which is why the wise man thinks about them in advance.

I regret that I have to think about these unfortunate and possible blows of fortune that are coming our way.

I have a question for us. If someone had a time bomb ticking away under their home, what would they do about it? Well, if the person did not know it was there, they would not do anything at all because they would have no reason to respond. Assuming that the person survived its detonation, they would have to scramble to rebuild their life.

We know what it is like to be struck by unexpected blows. We have seen them: the attacks of 9/11, the COVID pandemic, of course the U.S. financial crisis, all things that were little foreseen and little foretold. As a result, we all had to scramble to respond to what we did not prepare for.

Why is it that western nations have such difficulty foretelling the dangers that are coming? In recent decades, we have been breathtakingly unprepared for terrorist attacks, natural disasters, mortgage crises and al Qaeda. All of these things were words that were unknown until, all of a sudden, they struck.

I quote again from Ryan Holiday that it is impossible to prepare for or prevent something you're unaware of, yet in each of these recent crises, the warning signs were there if we had looked for them. If we only listened to the ticking time bomb, we could have found that bomb and defused it before it detonated, saving the world untold misery.

Now a new danger gathers in this country. It is the growing probability of a debt crisis. Here is the simple math. When governments and their people amass a total stock of debt that is three times bigger than the size of their economy, they become predisposed to experiencing massive debt crises. I regret to report to the House of Commons—

[The Assistant Deputy Speaker, NDP, Carol Hughes]

There is some feedback from the government's side. I would ask them to please be respectful and to be quiet.

The hon. leader of the official opposition.

[Pierre Poilievre, Conservative, Carleton, ON]

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—

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

It is a huge assumption. There is no guarantee—

[Pierre Poilievre, Conservative, Carleton, ON]

There is no guarantee.

[The Assistant Deputy Speaker, NDP, Carol Hughes]

I would ask the hon. parliamentary secretary to hold off until it is time for questions and comments. There is still a little while until then, so I would ask him to be patient.

The hon. Leader of the Opposition.

[Pierre Poilievre, Conservative, Carleton, ON]

Madam Speaker, that was an unusually helpful comment from the member across the way. He says that there is no guarantee that interest rates will be that high when people are up for renewal. There is no guarantee that I will get into a car accident, so why should I wear a seat belt? There is no guarantee that the plane cannot land itself, so why could the pilot not just have a nap while the flight is in course? There is no guarantee that I will die if the parachute does not open, so why do I not just forget to pull the cord? That is the kind of logic we get from the other side. It is so ridiculous, and we wonder why we are in such a mess.

There is no guarantee that the house will get robbed, so why bother locking the doors, right? There is no guarantee I will get into a car accident, so why buy insurance, right? Why would we mitigate against any risk because there is no guarantee that risk will manifest itself into any mal, right? That is exactly the kind of mentality that is getting us into this trouble. He is saying that because there is no guarantee that things will go wrong, we should do nothing to protect against it going wrong.

[An hon. member]

What would you do?