In this post, first I am tearing up a Dougald Lamont article, then will propose an alternative to capitalism. So, we're going through some deep doo-doo here.
"My Submission To Canada's Budget Consultations: Diagnosing Canada's Economic Woes - Private Debt Levels Pose an Existential Threat to Canada's Economy & Financial System," by Dougald Lamont. Some parts of Mr. Lamont's article:
Canadians are now facing a debt crisis - an insolvency crisis. "Instead of engaging in a serious analysis of the Canadian economy, these are knee-jerk solutions based on ideological assumptions of trade barriers that do not exist, of taxes that are too high when they are already low, or of stifling regulations when oversight is often non-existent.
Reversing the capital gains tax increase is completely unjustifiable.
The idea that Government can be "reimagined for the 21st century" with massive cuts and by replacing people with AI is drivel and baseless hype.
There are no measurable provincial trade barriers, and trying to remove something that is not there will not result in $200-billion in gains from trade.
Reason #1 for Canada's fouled-up economy: The Price of Oil
Reason #2 for Canada's fouled up economy: High personal debt from a colossal Real Estate bubble
Since the Global Financial Crisis of 2008 and before, Governments and Central Banks have been trying to fix the economy by lowering interest rates so that people go into more debt by driving up real estate prices.
Instead of investing in productive "real economy" businesses, R & D and innovation, Canadians as individuals have added more than a trillion dollars in personal debt that has gone into driving up the price of real estate.
Commercial real estate is already in deep trouble.
This relates DIRECTLY to economic misery in provinces like Alberta and Saskatchewan, where there were housing and mortgage debt booms along with the oil boom.
Reason #3 for Canada's fouled up economy: A Global Pandemic, Especially Central Bank Responses
The trouble for the Canadian economy is not government spending, or government debt, it is the absolutely colossal amounts of private debt that Canadians are living with. Canadians are among the most indebted people in the world.
These distortions were not caused by immigration, housing supply numbers, or by fiscal policies: they were caused by the Bank of Canada's monetary stimulus and QE, that have made the crisis worse by flooding the economy with easy money that has gone entirely to driving up the price of assets.
Unwinding this insolvency crisis and softening the blow should be the single greatest priority of the Federal Government, and it the crisis will not be resolved until levels of private debt are brought to a manageable level.
What is required is a large-scale injection of public equity to displace debt: Should a crisis occur, there must not be a repeat of the 2008 financial crisis or the 2020 pandemic, when the Bank of Canada created money to support investors banks for their bad risks, while the economic fallout was passed entirely to Canadian citizens through austerity.
These problems that have created a trap for the Canadian economy
• - Too much personal private debt, which is keeping real-estate prices high, and is strangling the rest of the economy. This "sunk cost" of debt across the entire economy has created a sunk cost dead weight that is preventing us from moving forward.
• - Not enough investment in productive businesses in the "real economy" or public investments to maintain or improve legacy infrastructure
Solution 1: A Debt-for-equity swap to stabilize the economy, injecting new equity for Debt Relief and Debt Restructuring, especially Personal Debt
Solution 2: Investment in New Jobs and New Business Creation
In practice, what we need to escape the trap is a multi-year, post-pandemic recovery plan, modelled on the same policies that Canada and the U.S. used to rebuild to recover from the Depression and the Second World War."
This post has many truths, but also a lot of malarkey. Canada emulates USA in debt tradition. Canada is beset with the same issue constraining EU success–like the EU, Canada has a monetary union but not a fiscal union. Like in USA and for many other central banks, by law but not by necessity, for the Back of Canada, issuance of money must be matched by issuance of debt. Like the EU, Canada needs nation-building projects such as answering "why are we here" and "what is our purpose and goals," rather than thinking that infrastructure projects equate to nation-building. National purpose was the topic of a column in The Globe by Alasdair Roberts, "We're missing a vision for Canada." The EU also has no unifying concept, no overall sense of purpose to focus collective action. It, like Canada, is a loose basket of fiefdoms–deplorables, if you will. All these matters must be addressed to bring about any meaningful change.
Like the USA, Canada is wallowing in debt at every level and like USA, Canada will become very much poorer before any improvement is possible. These entire nations are living beyond their means; they are not productive enough to afford their levels of imports–they don't export enough to pay for their toys. USA has enjoyed reaping the windfall of consuming the world's savings by running the world-reserve currency and by massive bonds issuance. Canada runs a copy-cat scheme but doesn't actually have the same backing by the savers of the world. City people, in particular, lack the productivity to pay for their imagined "cost of living" and imported toys, thus run up massive personal debt to "make ends meet." As for their food supply, their "work" or schooling is supposedly so important that they have to be able to pay someone else to grow and process their food for them. This applies to every other aspect of their lives as well.
Mr. Lamont speaks of "helicopter money," (I'm not defining terms this evening, you can refer to Mr. Lamont's article or google) in which a sum of money is sprinkled into people's bank accounts. This is pure malarkey–Baby Trudeau relied heavily on this policy–in fact, every time he opened his mouth money poured out. Tossing out a token amount of liquidity to people who refuse to live within their income is nonsense; to make matters worse, with Trudeau it was borrowed money, adding to national debt, and it is an extremely poor way to manage liquidity flow through the economy–it is absolutely non-management.
The entire financial management system of Canada (and USA) needs to be re-worked. The Bank of Canada is a money sovereign at least within its own currency. Unlike the U.S. Fed, however, it is not a lender of last resort. Being a money sovereign, it could, if legal restraints were removed, issue money without the requirement of bonds issuance. It need not match issuance of money to issuance of debt. As commercial banks do, it could create money from nothing, but it absolutely must manage the flow of this liquidity through the economy. Therefore supposed "independence" of central banks is a non-starter–they must integrate with the entire economic reality. Before continuing with this theme, a few more comments on the Lamont article.
Interprovincial trade barriers - This is a constant meme from the Fraser Institute and like Lamont says, is basically a non-issue, except for regulated trades and professions. That there are provinces at all is a bigger issue. Nobody can afford this excess layer of provincial/state governance, just let it die. "Levels of government" is a swear-word in my books.
Taxes are too high/low - I will thoroughly shred the notion of taxes later on, they are a crime against the meaningful flow of liquidity through the economy. As it is, a dollar might change hands only 3-5 times before it is removed from circulation. WTF?
On "stifling regulations" - I will get into the full aspect of regulations, or what I call the "No" regime - an entire bureaucracy assembled for the purpose of telling you what you can't do, to be replaced by an operational system of "Yes" in which you are funded and enabled in your economic advancement.
Capital Gains Tax - the late great economic advisor Tom Meikle (who, among other things, managed the re-structuring of the B.C. Turkey Grower's Co-op) said that it is impossible to make money in this country. And a capital gains tax is one of the serious drawbacks to investment/re-investment. Someone was successful? We'll take care of THAT problem! This is another area where the government makes money by devaluing the currency and one of their various methods of sucking private liquidity dry. It is another feature of the "no" regime. As well, they ignore the distinction between capital and property assets.
Regarding reason #2, "High personal debt from a colossal Real Estate bubble" - these are two distinct issues. Personal debt exists from living beyond your income (yes, income is stagnant) and real estate became a bubble for two reasons. They aren't making more land anymore, and all asset classes went up in price (not value) from depressed interest rates. These are all direct results of treating instruments of debt as assets, part of the overall capitalist scheme. Wouldn't you rather own a property asset than a debt "asset"? Yes, low interest rates create the impression of easy money allowing insatiated demand into the real estate market, and, since there is no new land, market forces charge more for the same property, while somebody keeps devaluing the currency.
Reason #3 for Canada's fouled up economy: A Global Pandemic, Especially Central Bank Responses. Being as most interest rates were at or near effective lower bound, central banks did large-scale purchase of (debt) assets as a means of injecting liquidity into economies (the liquidity channel) while keeping their balance sheets intact. The portfolio rebalancing channel, in which these purchases altered the duration and credit risk in private investors' portfolios, was more important than the signaling which informs future monetary policy stance. See CGFA Papers No. 68, March 2023.
The monetary problem in Canada was Baby Trudeau's oral money
jet, plastering every nook of the economy with wasted liquidity,
all on borrowed funds, with the Bank of Canada taking out the
trash by ruining its balance sheet with government bonds - thus
kicking the COVID cost down the road for future generations to
pay off. Then Mr. Lamont goes on a debt jubilee binge:
Solution 1: A Debt-for-equity swap to stabilize the economy,
injecting new equity for Debt Relief and Debt Restructuring,
especially Personal Debt.
So, one giant debt jubilee? This concept of debt relief illustrates a complete failure to understand the basics of debt (which is actually some fat-cat's income). Yes, debt is a moral issue. There is a massive debt wall that you can't even see over, between here and anything you would want to do about it. Debt, once created, cannot go away–it must be paid back, refinanced, or defaulted on. Someone will lose the money owed. People run up debt from living beyond their income–their income does not match the life style they think they deserve. Governments run up debt because they think they have to borrow any money they spend beyond tax income. This is a fallacy in two ways. If governance aligned fiscally with their central banks, the bank could issue money without borrowing. That may presently be a legislative restraint, but it is not a necessary constraint. The other side of this coin is that the fat cats, the 1%, the large banks, who pull the policy strings behind the scenes, force governments to borrow from THEM in order to fund the fat cat's income desires! Eisenhower had it partly wrong in his Farewell Address - "In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex." He was going to add in "congressional" but his brother recommended against it. But what is missing is the banks. The armaments manufacturers AND THE BANKS profited immensely from the wars, they are the twin demons. The banks which have always amassed the profits from everyone else's endeavors, were a convenient source of funds for countries at war, on both sides! They have woven themselves into the workings of government so thoroughly that politicians can't imagine finance which doesn't involve big banks and big investors, all eager for their cut of the nation's wealth via national-debt interest payments. They eat before you do.
Personal debt is actually the result of restricted liquidity flow and misdirected liquidity flow*#8211;does a bank CEO really deserve a 8-figure salary? For doing what, exactly? Every effort of business and government is to keep working people just scraping by, nothing more. All these issues will be addressed in the main article below.
Solution 2: Investment in New Jobs and New Business
Creation.
In both Canada and USA, productivity is totally inadequate to
afford the desired imports. Regardless of the forward economic
path chosen, these countries are going to get
very much poorer (Warwick Powell article) for a long time
before any improvement is possible. According to Jacob Stoller,
author of Productivity
Reimagined, our low productivity is for a large part,
attributable to waste. He recommends C I (continuous
improvement), often called "Lean," or "Six Sigma," to locate and
remediate waste and quality problems continuously as they are
discovered, enabled by regularly receiving input from front-line
workers. "The respect for workers that's central to C I
environments also improves psychological health of employees, as
confirmed by high employee engagement and low turnover
statistics."
Enough of the complaining - standby for:
At this point on many Stubsacks, you would hit the paywall to read further. Look, no paywall! And IMO what you find beyond here is more important than any paid content elsewhere. I'm trying to supersede "Das Kapital" by Karl Marx.
How can it be that in Canada (a dilapidated parliamentary system) and USA (a dilapidated "republic"), governance in a so-called democracy has turned into government by a CEO? What part of a business model is democratic? Let's face it–the CEO-style of government is a failure. In China, the CPC (Communist Party of China) is "communist" now in name only. It more closely resembles the hierarchy of the former Dynasties in that it is an assemblage of the smartest people in the country. It is a meritocracy. Around 10,000 students apply to the main university, 3000 are selected and 3000 attend. Most of these graduates will find placement in the Party structure in alignment with their training. This cadre of the brightest people are the backbone of government structure, which operates along the C I principle (continuous improvement) of always doing better, with the proviso that if one fails at an assigned task, they are dropped from the ranks. So what would you prefer–the smartest people in the country doing the governing, or the stupidest person you can imagine, and tossing that one out every four years and putting another one in charge? And, need I mention, these smart people stay in their roles as long as they perform well and keep improving the development of the country. Now do you think elections are still wonderful? Do you want to be manipulated by election advertising while knowing that advertising itself is what breaks the supply/demand relationship in the economy, and promotes manufactured consent?
Another issue with elections is that this process enables the ideologising of government. Political parties vie for capture of the levers of power (and finance) to bend them to their purpose, on the pretense of "for the public good" but I think we know better by now.
Now imagine that you could change this entire governmental edifice and create a positive social structure on a meritocracy system similar to what has been achieved in China. Imagine a system of "Yes" resulting from being funded and encouraged by governance rather than facing the great wall of "No" from the massive faceless regulatory bureaucracy, which exist to tell you what you CAN'T do, as a result of continuously imposing new laws.
Instead of these massive numbers of regulatory employees, the most competent ones would move into the central bank. I will explain later what all these people do. Freed from the present legislative confines, the central bank can issue money ex nihil just as the commercial banks already do. The commercial banks require their funds to be paid back, with interest, while the central bank, working on behalf of the common good, is eventually paid back by improvement in national productivity. But if the central bank can simply issue money, what is the need of taxation? Taxation is not required–the bank can issue money without issuing a balancing quantity of debt, because it is a money sovereign! In our corrupt financial system, government spending is a transfer of liquidity from government to the private sector and taxation is a transfer of liquidity from the private sector to government. But here, I'm talking in the language of the corrupt system. If you peel back that veneer, you will see that government spending is a transfer of DEBT from the private sector to the national debt, and taxation is a call upon the general population to pay down the national debt, all the while the true flux of value in the economy accrues to the rentier class via profits and interest payments on the national debt. So far, I am still in agreement with "Das Kapital." But there's much more, we're taking a deep dive here into the unknown!
The entire cycle of debt must be broken! If a sink is overflowing, stop mopping and turn off the water! First step is incurring no more debt! Mr. Lamont's plan to roll over personal debt into some kind of "equity" whatever that means, is just plain nonsense. By their indebtedness, these consumers leapfrogged into a standard of living above what they could afford, hoping to pay off the difference later on with future earned income. So if you erase their debt, they get all that surplus for free, and you really sting the people who are mortgage-free savers. If you wish to eliminate their debt, send them back to their previous economic position and sell off their borrowed assets. Bailing them out is a poor use of public liquidity. As for public debt, such as national debt, a large part of that has been borrowed from foreign investors and will have to be paid back, an ongoing burden on domestic productivity for a long time. To make it worse, bear in mind that this borrowing was not actually needed in the first place. It was just an imposition by world banking on governments to force them into balance-sheet household-style accounting with interest due to THEM and with a penalty from their friends in credit-rating to penalize them if they get behind in payments. After either paying back that foreign debt, or defaulting and taking the lumps, you can get on with building the nation, debt-free. Don't say it's impossible for the central bank to simply create money! It truly can, but has been shoved into a regulatory box created by the large banking sector, who control government which writes the rules that force central banks to operate like a household. For more on the devious realm of international banking, see some posts by "History Meets Finance" on YouTube.
To create money, you do it like the commercial banks do, you open an account for the recipient, put a debit in that account and a credit in your liabilities account. Voila! The books balance! If you understand bookkeeping, you know what I mean by debit and credit. Thus there is no taxation, there is no hoarding of wealth, thus no financialization–that layer-upon-layer of fictional capital based on trading instruments of debt, such as default swaps, currency swaps, stock markets and every other form of financial gambling. The object is to get funding INTO the economy, while taxation extracts it and penalizes earnings and creates a false higher-floor for labour costs compared to other nations. Why give people money then claw some back? You say - how then do they pay their "fair share"? If they work for wages or normal salaries, they have ALREADY paid their "fair share" by being paid about 1/8 of their value to the economy.
But there is a catch. For this monetary system to hold the trust of other nations in order for you to be able to acquire imports, this flow of liquidity MUST be directed toward productive purposes while minimizing "entitlement" as it is presently understood. Not needing to horde money relates to not having to "save" for retirement. You should not expect to amass a surplus, but also would not be in need. From each according to his ability, to each according to his... Productivity! This is not communism - it is not "central planning" - it is central banking free at last!
Yes, I know, some smarty-pants is going to say, "How can you keep loading up the central bank's liabilities column - eventually there will be collapse!" Great question! First, we'll take a couple steps back. Say you go to your present bank and see a dollar coin laying on the floor. Who does it belong to? All money in the bank, even on the floor, belongs to the bank. In the new system, all money is owned by the central bank which has exclusive rights to manage its flow through the economy. There is no need for you to horde money, no need to do "investments." The central bank controls investment. Back to the question, what about the liabilities on the central bank's balance sheet? They are offset by the bank's asset column. And what is/are the central bank's asset(s)? The bank's asset is The Nation! One huge property asset! As Dr. Warwick Powell says, "Credit is not a fixed resource, it is an enabling mechanism." For a look at public ownership of infrastructure in China, see Li Jingjing's short video about China. If you go out and buy something, cash payment, do you have to pay yourself back? Nonsense! You can see how stupid that idea is. Does this mean public ownership? Yes, duh, but not by government as you presently know it, supposed governance by impostors and ideologues standing in the social place where real governance should reside. No, public ownership can be ownership by the collective "you" of the nation, a communal project of (true) nation-building that we can all participate in.
Li Jingjing's little video shows a pretty picture of China's public ownership of infrastructure, but China has made serious errors. China has allowed banks, money hording, capitalist speculation, stock markets and multiple levels of government improperly funded, resulting in and encouraging the housing construction bubble. Now you might ask, in this new system - will commercial bank CEOs still get 8-digit salaries? What commercial banks? All these distributors of debt "assets" are GONE! These people, and tax-preparers and tax collectors and hedge-fund managers and credit-default-swap managers and investment dealers and arms manufacturers are NOT doing productive work! If we want to bring up the average per-worker productivity level, the first obvious task is get rid of waste (as per C I), so eliminate non-productive work! Remember, "to each according to their productivity." There is no need for hording money, there is no need for "investment" (buying of someone else's debt). The central bank does the investment and doesn't like competition - the bank is investing in YOU and what you can do to improve the nation. No investment also means no foreign investment; all import/export works through central bank operations. Of course, the Fat Cats take a massive hit - their fictitious capital turns to the dust it actually is - but this financial collapse is going to happen anyway with the self-inflicted destruction of the world reserve currency by certain morons. The coming collapse will make the ~9% world-average drop in GDP in 1929 look like a picnic.
Looking back at Steiner's Threefold Social Order, he notes the old social order from medieval Europe with the divisions of the Plough, the Sword and the Book (p. 106), as social hierarchies. He wishes to replace that with a three-part interacting social order, recognizing the realms of economic life, public rights and spiritual/cultural advancement. These could be achieved through the administrations of the State and the Courts and Education. In Steiner's system, somehow the education system controlled the national wealth and funded young people as they started their career with the proviso that any end-of-life funds returned to the system. I need to rework this a bit and put banking at the core which all else flows in and out from. The present system of isolating the central bank with supposed "independence" (while locking it in a box?) totally prevents its best social purpose. Used properly, it is the "mother lode" of society, the beating heart that courses liquidity to every part of the economic body. Remember, ideology and politics are gone. People complain that you can't get money out of politics. John Dewey said in 1905: "Politics is the shadow cast upon society by big business." Why do you want that shadow? The bigger problem is how to get politics out of money, which is exactly what my system is designed to do. Imagine you have the central bank sitting in the center of the economy. And this is why I move many of the smartest government employees into this bank–it is a big operation. Say one of those "fiefdoms," (province/state) or other agency wants some funds. They go to their own window at the bank and make their request. The bank, after de-ideologizing the request, may issue the funds. The requesting agency must show that these funds go toward some necessary and productive purpose. By productive, I mean increasing productivity or betterment of society. If individuals or groups of people acting in a business capacity wish to have some funds, they go to their mentors in the education system to request the funds. You are always linked to your people in the educations system–remember, we are working on the C I (continuous improvement) system here. You never leave school! The education system is your distribution centre for your funding.
I will have to leave the literally volumes of granular detail on the full implementation of these concepts to the thousands of people graduating every year and entering the meritocracy. In a system of true meritocracy, adversarial political parties are unnecessary and detrimental because everyone's duty is to work towards betterment of the entire nation. You may keep your private property with the proviso that you can translate your pride of personal property ownership to your concept of community and nation.
But what are the chances for replacing Capitalism? In the latest article by John Rapley (Globe & Mail, Sept. 20, p. B7) "Red tape is sticky as capitalists don't exactly love capitalism," he quotes Mancur Olson: "Policies with concentrated benefits but dispersed costs will draw more support than opposition." To the contrary, Mr. Rapley says: "Those who stand to lose from a regulation that has enriched them will fight like lions." And: "A society that has grown so rich that the desire to preserve wealth overpowers the drive to create more income." For more on Mancur Olson, read about his Collective Action theory on Wikipedia and a PDF on ResearchGate.
Any concept that even hints at diminishing the wealth, real or imagined, of the Fat Cats will be met with extreme resistance, so action must occur from bottom up. That is, when you are totally fed up with capitalism and fake government debts. Yet here we have a Prime Minister who has drunk the Kool-Aide of Big Banking (Goldman-Sachs alumni) thinking about pushing austerity on Canada. Oh, like he did to the UK when he ran the central bank there, pushing the UK into an unstoppable slide into economic ruin? And austerity is ABSOLUTELY unnecessary! Re-read this article if you don't believe it!
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