Insights Linda McQuaig
Radical hints of a better economic future
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Photo: Alexander Lesnitsk / Pixabay
obody told us we could do that!” exclaimed a startled British commentator when Britain suddenly abandoned the gold standard in the depths of the 1930s Depression. The move came as a shock because everyone had assumed the gold standard – an international agreement linking currency rates to gold – was an immutable law of nature, along with much else about the economy. And then, just like that, it was gone. That sense of shock is probably not unlike what many people are feeling today as all our longheld assumptions about how the economy works – and what is and isn’t possible – suddenly seem no
more certain than when we’ll be able to get our next tattoo. For years, we’ve submitted to the economic orthodoxy dictated by Bay Street: that governments must deliver balanced budgets and low spending or economic disaster will follow – as surely as gravity will bring a heavy object plunging to the ground. Then along came the pandemic. Suddenly the Bank of Canada is creating vast amounts of money, which the federal government is distributing to Canadians across the country. Nobody told us we could do that! In fact, it’s just what’s needed. To prevent an economic collapse, our central bank is buying $5-billion a week in government bonds, which is effectively creating money out of thin air. Private banks do this all the time; they effectively create money whenever they issue a loan. It’s one of the reasons banking is such a lucrative business. Now, the Bank of Canada is creating enormous sums of money to help pay for
the federal government’s huge increase in spending during the pandemic. Bay Street financial interests are grudgingly accepting this, given the emergency, but they want it to stop as soon as possible. But wait! Not so fast! Now that we see how it can be done, one is tempted to ask: could this be a way to pay for increased government spending on future things we truly need – like building hospitals and public transit and investing in renewable energy? This is the sort of dangerous thinking that a phalanx of powerful interests – from the Fraser Institute to the financial press – are keen to crush, realising it could spread more easily than coronavirus at a crowded, maskless beach party. But, as economist Jim Stanford suggests, “the genie is out of the bottle”.
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ay Street is determined to return to low government spending and to ensure that the recovery focuses, not on new aspirations, but on restoring the corporate world so that it’s as rich and dominant as it was before the crisis. As the Fraser Institute’s Jason Clemens insists, the priority must be on tamping down government intervention and encouraging entrepreneurial innovation, while avoiding tax hikes. In other words, resurrecting the old orthodoxy – and making sure the rich aren’t asked to pay a penny more. ColdType | July 2020 | www.coldtype.net
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