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Economy

Conrad Black: Hard currency standard the best way to fix Canada’s teetering economy

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8 months ago

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The country should fix the value of its currency to the value of a combination of precious metals, oil, basic housing and food

Oil pumpjacks.
Oilfield pumpjacks near Longview, Alberta on Sept. 10, 2020. Photo by The Canadian Press/Larry MacDougal

Canadians have been advised to prepare themselves for economic stagnation for the first half of this year and a reduction in the whole year in per capita net income for Canadians, (the GDP divided by the population). I find myself resistless against the temptation to inflict upon patient readers yet again my program for a radically different approach to fiscal and monetary management that will capitalize on Canada’s strengths and resume the long-lost progress back toward being, except for petro-states and tax haven states, the wealthiest per capita country in the world except for the United States, and with a more prosperous lower income bracket than the United States. The present ruling orthodoxy of central banking and national treasury management is one where all currencies are steadily losing value by being inflated at various rates and are measurable only in relationship to each other. There is no such thing as a hard currency as that phrase was known a century ago when the principal currencies were linked to the price of gold.

If someone casually reads the works of Dr. Samuel Johnson in the 18th century and of Charles Dickens a century later, it is clear that the cost of a quart of milk, a loaf of bread, or normal lodging for a night in London did not change. In the intervening century there were booms and busts in the economy but not inflation. It was only after the terrible destruction of the First World War in which 16 million European men in the prime of their lives were killed and tens of millions wounded or enfeebled by disease, and there was terrible destruction in Belgium and eastern France and parts of Eastern Europe, that inflation became unavoidable. It became practically impossible to maintain a sustainable level of public confidence without expanding the money supply and direct or indirect relief of the unemployed and dispossessed, and the world’s currencies began to lose their value.

Through the 1920’s Germany staggered under an artificial weight of reparations for the First World War: Germany was substantially responsible for the outbreak of the war by giving a ”blank cheque” to Austria-Hungary against Serbia, but those countries and trigger-happy Russia all share in the blame for the start of that terrible war. The Austro-Hungarian Empire collapsed and was broken up and Russia was taken over by the Communists and Germany was left to pay the victorious powers for the cost of the war. Predictably, it could not afford this burden, and borrowed money to pay some of the reparations and then defaulted on the resulting loans. The speculative bubble in American equities (especially) eventually burst, a terrible depression settled upon a still war-shattered world, and our masters in government could see no escape except to spread money around in welfare, workfare, and soon enough, rearmament and the conscription of huge numbers of people to the armed forces and defense production industries. The Second World War followed and the postwar arrangements were much more satisfactory than after the First World War, because the United States did not plunge into isolationism but rather took the lead in promoting international cooperation.

Nearly 80 years have followed without a major war between the most powerful countries; democracy and the market economy have expanded greatly and the percentage of chronically poor people in the world has declined from approximately 70 per cent in 1945 when most of Europe and Japan and large parts of China were a rubble heap, to under 10 per cent now. These are astounding achievements but they have been accomplished in part because of a steady and deliberate debasement of all the currencies in the world. Generally incomes have risen at a rate higher than the rate of inflation so collective and average personal net worth have increased but the entire economic monitoring system is on a ski slope.

In all of the circumstances, it is time for some substantial reforms, and Canada, as a very rich country both in its natural resources and the skill of its workforce is in a position to be an innovative influence. There is precedent for this: John Turner as finance minister connected taxes and benefits to rates of inflation. Brian Mulroney and Michael Wilson moved federal government tax revenue significantly from income taxes to taxes on non-essential spending. Jean Chrétien and Paul Martin devolved many joint federal-provincial spending requirements downwards to the provinces, which largely passed them on to the municipalities.

This chiefly enabled the federal government to balance its budget for 14 consecutive years. Stephen Harper attempted to assure a reduced public sector share of GDP by reducing the federal sales tax (HST), mistakenly confident that he would not be succeeded by a regime that believed that deficits solve themselves. Canada should fix the value of its currency to the value of a combination of agreed quantities of precious metals, oil, basic housing and food: a yardstick that would reflect the value of the most desirable commodities and the cost-of-living to people of modest means. We would resurrect the concept of a hard currency but attached not to a relatively rare and elite precious metal such as gold, but rather to a combination of resources representing the wealth of this country and modified by the cost-of-living to people of vulnerable incomes. This would be too varied a yardstick to be vulnerable to speculation. The desirability of hard and stable currencies would become obvious and would quickly be emulated. As much as can practically be done, we should shift the source of government revenue from taxes on income to taxes on non-essential spending: elective spending. This would make taxes more easily and economically collectible by giving them a somewhat voluntary status: people don’t have to buy luxury goods, or indulge themselves opulently. They sometimes choose to do so and are rightly less resentful of taxes on self-indulgent spending than they are of governments seizing the money that they have earned.

Cash payments to unemployed people who are capable of working should be converted to workfare programs where, when appropriate, the unemployed are trained up toward occupations where there is a shortage of qualified people. The private sector should be tax-incentivized to hire people, provided they are not simply replacing others who have been laid off at a reduced net cost to the employer. Tax incentives should be provided to those occupations that genuinely add value such as manufacturing, agriculture, and legitimate research and academic instruction. We need more plumbers and fewer graduates in gender studies. The federal government should withhold assistance to sections of the health care and education systems that do not meet reasonable standards of administrative efficiency and an internationally competitive level of service. Canada’s schools have to be liberated from the tyranny of the teachers’ unions, private medicine must be accepted, and the necessary incentives put in place to ensure that our ratio of doctors to population is adequate. When it is necessary to cool out the economy, we should have standby taxes on inflationary categories of spending and sharp reduction of taxes on savings and investment income before raising interest rates. The Bank of Canada inflation target should be reduced from two per cent to zero.

Any introduction of most of the foregoing program, based on pride rather than shame at our bountiful natural resources, would reduce the flight of capital that is slowly strangling Canada’s competitive position. There would be a flood of retained and incoming investment to the benefit of all Canadians.

 

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Economy

B.C.’s debt and deficit forecast to rise as the provincial election nears

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2 days ago

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September 10, 2024

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VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.

Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.

Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”

The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.

Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.

“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”

Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.

Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.

Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.

B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.

The election is expected to be called on Sept. 21, with the vote set for Oct. 19.

“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”

Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.

Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.

The premier said that now is not the time to reduce supports and services for people.

Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.

Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.

This report by The Canadian Press was first published Sept. 10, 2024.

Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.

The Canadian Press. All rights reserved.

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Economy

Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat

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2 days ago

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September 10, 2024

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NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.

But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.

He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.

Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.

Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.

Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.

This report by The Canadian Press was first published Sept. 10, 2024.

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Economy

Nova Scotia bill would kick-start offshore wind industry without approval from Ottawa

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2 days ago

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September 10, 2024

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HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.

Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.

The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.

Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”

Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.

Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.

This report by The Canadian Press was first published Sept. 10, 2024.

The Canadian Press. All rights reserved.

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