Is the Green Party Ready for a Shot-Gun Wedding of the Liberals and the NDP?
It’s beginning to look like something serious really is going on behind-the-scenes with the Liberals and NDP. Today, CBC News is reporting that talks are on regarding a possible merger: Liberal-NDP Insiders Talk Merger. Liberal insider Warren Kinsella, former advisor to Jean Chretien, is reported by CBC as saying, "The reality is that we (the Liberals) are in a bad position. Serious people are involved in discussions at a serious level." So, it really does look like the potential of a merger is being investigaed, as per Chretien’s "If it’s doable, do it" sentiment expressed last week.
The merger talks appear to be on, despite the apparent denial by both the Liberal Party and the NDP that talks are taking place. Michael Ignatieff, the Liberal Leader, apparently had slammed the door shut on the possibility of a coalition with the NDP, not to mention to a merger. Why should Ignatieff be honest with Canadians about what’s going on behind closed doors? These parties have never been truly honest with Canadians about what they would do if they formed government, so why start now?
I’m not certain that a merger between the Liberals and NDP would be in the interests of Canadians, but I’m leaving the door open to the possibility that it might be. Certainly, any party being led by Michael "Tar Sands Forever" Ignatieff is, in my books, a non-starter. The Liberal Party of Canada, as currently constituted, has nothing of value to add to the Canadian conversation about the future which we need to engage in...other than to pipe up and say, "We’re not the Stephen Harper Conservatives!", which might be the single valid point they bring to the conversation. Still, that’s not enough.
The NDP, however, occupies a bit of a different location on the spectrum of addressing many of the issues the Liberals and Conservatives both fail to acknowledge as important issues. Certainly the NDP have been far more pro-active on climate change; it was an NDP private-members bill which eventually became the Climate Change Accountability Act, which while still a very flawed piece of legislation (it says little about how Canada will actually achieve the ambitious CO2 reduction targets it sets), is still a step in the right direction. From a policy perspective, the NDP has a lot to offer in terms of framing a conversation about the future.
From an implementation perspective, however, the NDP has traditionally proven itself to be another woeful example of how a mainstream party talks the talk while in opposition, but once in power, all of its ambition goes out of the window. Now, I know that the Federal NDP has never been in power, however it’s Provincial Partners have formed governments in B.C., Ontario, Saskatchewan, and most recently in Nova Scotia. By way of example, all of these Provincial NDP parties say that they believe in democratic renewal and the need to assess changes to our electoral systems, some with a bent towards implementing proportional representation to better elect a parliament which reflects the true will of voters. However, in power, none of these parties have done anything to actually address the democratic deficit (Liberal parties in both B.C. and Ontario held lop-sided referendums, but the NDP hasn’t ever walked their talk).
Further, the NDP continues to be mired in the politics of yesterday. It continues to view our political reality as carefully segmented into discrete issues: the economy; the environment; housing; etc. Although it has started to move in a direction of addressing all issues holistically through interconnected policy proposals (linking housing and poverty, for example, to building better communities), the NDP can’t seem to adequately wrap its head around why it’s important for local solutions to be discussed and implemented around matters which affect individuals. Truly, the NDP remains a party of "big government", looking for big solutions to problems which might better be served by more local initiatives. In the year 2010, to me, this is further evidence that the NDP remains stuck in the politics of the brown economy.
And finally, the NDP is very good with production value. They are a slick political machine, excellent at staying on message. I’m not sure that any government run by Jack Layton would be all that different than Stephen Harper’s in terms of command and control from the centre. The NDP have invested heavily in the sound-bite politics of spin. While one can argue that they’ve also experiences some real electoral successes from such investment, I would suggest that this is not the sort of politics that Canada needs to address the very real issues facing us in the next several decades. Partisan rhetoric and politicking will do little to lay the necessary groundwork to move Canada from a fossil fuel-based economy to a green economy.
If the NDP and the Liberals get their collective acts together before the next election or not remains to be seen. I strongly suspect that they won’t, and I don’t even think that they will have a riding-by-riding agreement not to oppose each other. I do, however, suspect that if the numbers work out after the next election, we could be in for a Liberal-NDP government, likely supported by the Bloc, and potentially by other parties (like the Greens) on an issue-by-issue basis.
However, what might happen if a merger proves to be successful? And how might that impact the Green Party? Of course, the answer to these questions would depend on the resolution of two big issues: what sorts of policies would the "Liberal Democrats" adopt, and who would lead the Party.
Regarding policies, given issues related to timing, the new Liberal Democrats might have to ask Canadians to trust them, while putting out a hasty and vaguely worded platform which would appeal to centre-left voters. Details likely would be filled in later. In many respects, this is where the Liberal Party seems to be headed today anyway: "Trust us, we’ll do well by you. Oh, and we’re not the Harper Conservatives". The Liberal Democrats, however, would be able to add the post-script, "We’ll get our act together in short order, when there’s a little more time, after the election when we form government". Essentially, voters will be asked to cast their ballots based on hope, rather than ideas. Since it’s already been suggested that elections are notoriously poor times to have policy discussions anyway, the Liberal Democrats could certainly pull off winning without saying much about what, exactly, they might do with the power they’re asking Canadians to give to them.
The Leader question is much more relevant. A recent poll has suggested that Jack Layton, or even Bob Rae, would be a much better leader of a united Liberal/NDP government than Ignatieff. Since many Libs want to dump the underperforming Iggy anyway, I just could not see Ignatieff leading a new party. So...what about Jack Layton? I admire Layton, although I wish that he weren’t so slick and would actually address real issues rather than grandstanding. But I would have to think that as part of the Liberal concession, a leader would have to come from their ranks. So, what about Bob?
Now, I understand that Bob Rae has a lot of baggage, both with voters and in his own Party. He might even carry more baggage as a result of a Liberal/NDP merger, as I understand that there are many in the NDP who see him as a turncoat traitor (I wonder why). I don’t know if he would be palatable to a new party, but I think a Liberal Democrat party would be well-served.
Of course, outsiders should also be considered: how about Roy Romanow, or even Dalton McGuinty? McGuinty, in particular, would be well-suited to lead, given his more fiscally-conservative leanings.
Now, what about the Green Party? A Liberal-NDP merger would present both an opportunity and a threat to the Green Party. The threat comes from the notion that the "left" is uniting in an effort to dump Harper, so why should voters turn to the Green Party when the goal is to oust the Conservatives? Don’t discount this threat, as it’s very real. However, I believe that the opportunities for our Party are far greater.
Greens would be able to benefit by making a clear impression with Canadians that our Party offers an even more real alternative between a new form of science and policy-led democracy on the one hand, and partisan politicking on the other. With a platform which outlines what, exactly, voters could expect if they elected Greens, we would likely be ahead of an airy-fairy "vote for us, we’ll figure these things out later" Liberal-NDP merged Party. Further, we could use this opportunity to play up our fiscally-responsible approach to budgeting, including putting a price on carbon (and set out how, exactly, we would do that). Canadians, I would hope, would be able to compare our approaches to that of the other Parties: where we’ve given some thought to doing things, and doing them well and differently, the other parties continue to offer vague promises with little or nothing tangible attached.
Greens need to star thinking about how we would strategically place ourselves should the federal political landscape suddenly shift. As a first priority, we should engage in significant outreach to disenchanted NDP and Liberals, especially those currently in parliament. I’m not suggesting that Stephane Dion would be one of the disenchanted, but his personal politics have always appeared to me to be much closer with our party’s ideology than that of his own. At the very least, we should start courting him and others. And then there are the "blue Liberals" who might not feel at home in a merger with the NDP, and who could see the financially sound policies our Party has on offer.
To take advantage, though, we’ll need to have our Leader due the bulk of the work with sitting MP’s. We need to start outreach at lower levels right now, including at the EDA level in those areas like Sudbury where one or the other of the Liberal or NDP currently have an MP. If those two parties merge, there will be a few upset locals, including some currently nominated candidates, who may have to give up their dreams of parliament in favour of an incumbent from the "other side". Nominated NDP candidates with an environmental bent in particular might make excellent acquisitions. We need to start thinking ahead.
Now, some in the Green Party might think that ending up in bed with the Liberals and NDP would benefit Canada and the environmental movement. They may rationalize that if we added our 10% of the vote share to a United Left movement, the anticipated benefits from ousting Harper would outweigh our lack of involvement, so let’s jump on the bandwagon. To those Greens, I really want to point out that a united Liberal-NDP party would still represent the old way of thinking about politics, and more importantly, thinking about "big government" solutions to the many issues facing Canada today.
A Liberal-Democrat Party would surely remain beholden to the interests of corporate Canada at the expense of being able to move forward with real reform in areas where its needed. The "environment" (whatever that is) would remain a secondary afterthought, while the "economy" (whatever that is) would continue to be placed at the fore-front of policy and legislative initiatives. Instead of looking at the environment and the economy as parts of a wider system, the political culture of both of these to-be-merged parties would continue to lead Canada in a direction which is ultimately not beneficial for Canadians.
In short, if Greens want a green government, we need to encourage voters to cast their ballots for a Green Party. And right now, that’d be us: the Green Party of Canada. It won’t be the Liberal-Democrats.
While I agree that getting rid of the Conservatives would be a wonderful, liberating, and sublime experience, I’m not sure that there is a lot of real benefit with believing that a merged Liberal/NDP would take the real step which need to be taken to address the many issues Canada is facing. Both the Liberals and the NDP are part of the current problem with democracy in this country. I just don’t see how a shot-gun wedding of these two parties could truly be part of a solution.
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Comments
The Solid Centre
If the Liberals and the NDP Merge they will try to portray themselves as "center left" but the reality is they will more likely be "left of Center", and the conservatives are so far right, they are almost making a U turn, that means that we have to strike hard and fast to take over the middle ground where we fit naturaly anyway, since I have always believed the Greens are a "best practices" party, meaning if something works or can be proven to work we'll do it no matter the percieved political leanings, in the end if it's good for Canada and Canadians we're there.
Merger
Well, today's statement by the two clowns was quite unambivalent, there will be no merger... Although just wait for a coalition government anyway, because that's going to happen.
We're where?
Drastically reducing inequality, raising taxes for high income earners, scrapping NAFTA, and nationalising the banks would be good for Canada, but I think if we championed all those policies we'd be labelled as "left".
Why only the "left" policies?
But we are also championing:
Just to name four.
Our costed budget also plans to close the deficit and pay off debt faster than that of any of the other parties, which is pretty far from the supposed leftist "tax and spend" mentality.
Emphasizing these policies (as we plan to do) will help counter the "left" label, at least among those who bother to actually look at our platform. Those who don't aren't going to vote for us anyhow.
I have had many, many former or current Liberal and Conservative supporters (including volunteers) tell me they have read and respect the Green platform for being pragmatic rather than left or right ideological. Sooner or later the media will catch up.
BTW, I don't think we have a policy of nationalizing the banks (nor do we need to), although we tend to support nationalizing the debt, which is not the same thing.
Erich Jacoby-Hawkins, Barrie ON - although I'm on Cabinet (Nat'l Rev. and Ecol. Fiscal Reform), views here are my own and may not reflect official GPC positions. Please visit www.ErichtheGreen.ca
right or left?
Tax shifting is a hard left tax because we are suggesting to selectively tax energy sources based on whether they pollute the air. Air is considered a free resource by conservatives and libertarians, so taxing its use as a "commons-resource" is left-wing. We need to be honest with ourselves about this.
And despite the obvious conflict, "CPC" conservatives seem to love multinational corporate welfare and legal inequity. The only thing conservatives don't like about bailing out the auto companies is that they weren't also allowed to fire their unions. Had the bailout included provisions to release the auto companies from union obligations and outsource assembly, you would have seen the right-wing dancing in the streets. We need to figure out how better to tar and feather the CPC with their inconsistencies.
Friendman is hard left?
Bram, that is not correct. The left view would be to strongly regulate and increase the size of government to deal with pollution. The right view would be to minimize the role of government and the percentage of economy and income that goes to taxes.
Milton Friedman:
"And in general it’s only where there are serious externalities where you can really make a case for government involved. And in general also where ever possible government should be involved by setting a fee on the activity concerned. And that is something else that has increasingly developed. You have a markets now in pollution abatement. So that for example in the case of the stream where somebody is putting something in. Your best procedure is to try to impose a charge on the disposition of the garbage rather than to try to regulate the details of how the garbage is disposed of."
The issue would be if people do not believe CO2 in the air has a negative effect or that energy usage is detrimental. Some genuinely do not feel that pollution has any costs, and therefore no justification for government. Or if you put a higher tax on something than is shown to be justified then they would see it as punitive.
Carbon tax shift is NOT "hard left"
Canada's first real carbon tax was brought in by the centre-right Liberal Party of BC, who successfully defended it in an election against strident attacks from the NDP.
France introduced a carbon tax last year under their centre-right Sarkozy government.
The UK introduced their carbon tax in 1993 under Major's Conservative government.
Netherland's 1990 carbon tax came in under a centre-right Christian Democrat-led government.
Denmark's carbon tax was brought in in 1990 by a Conservative prime minister; after leaving office, he founded Denmark's first free market think tank.
Carbon taxation is preferred (over cap-and-trade) by conservative economists like Nobel laureate Gary Becker and the American Enterprise Institute, just to name two.
Of course, other European countries have brought in carbon taxes under centre-left social democratic parties, too.
In general, the carbon tax shift approach is a textbook "right-wing" or market-based approach. The only reason it's seen as "hard left" in Canada is because our "hard right" oilpatch Conservative party is deathly opposed to ANY form of carbon pricing or mandatory GHG reductions, so will spuriously brand ANY such policy as "leftist". And since we have such pitiful mainstream media coverage on policy and economic issues in this country, whatever Harperbots say gets repeated ad nauseum until everyone believes it. (Including perhaps you).
Carbon taxation in general is a right-of-centre approach; a carbon tax shift, which prevents an overall increase in tax revenue, is even further right, in common political-economic thinking. The left opposes carbon taxes on several grounds, including a sense that it is a regressive tax (which is true, but can easily be countered as was the case for the Liberal's Green Tax Shift and is also still true of ours).
Erich Jacoby-Hawkins, Barrie ON - although I'm on Cabinet (Nat'l Rev. and Ecol. Fiscal Reform), views here are my own and may not reflect official GPC positions. Please visit www.ErichtheGreen.ca
Re: Why only the "left" policies?
Because the left is right and the right is wrong! :) Seriously though, what I'm getting at and as I've mentioned a few times (sorry if I'm getting boring), is I'd like to see the Greens as a party that, as a significant part of their platform / policies, intends to tackle the present inequality we have in society. I live in a riding where the differences between rich and poor are probably the highest of anywhere in Canada. Present levels of inequality are unfair and unhealthy for rich and poor. Look at the CCPA studies and whatnot. It's pretty clear that for the Liberals and Conservatives this isn't high on their agenda, so when people say the Greens are naturally in the middle of the political spectrum, to me, that means status quo.
About the banks, I still can't figure out why the interest on my mortgage should go to private investors rather than the government. I'd rather that interest money contributed to public services rather than multi-billion dollar bank profits.
interest to the government?
The reason interest goes to a private company and not the government is due to something called "agency risk", the definition of which everyone should look up and appreciate. We have a $500B federal debt because of agency risk. People who dispense state wealth are not an interested party for its misappropriation.
Secondly, no one, other than perhaps people here, believes taxing CO2 is anything but left-of-centre policy. It is folly to believe we should be selling it that way, or using it as an example that we politically centred. This issue is important enough that I'd actually suggest we conduct a poll to figure out whether or not people think we might be perceived as disingenuous for saying the tax shift is politically centred.
Federal Debt
Isn't the primary reason we have a huge federal debt that the government decided to borrow from private banks with significant interest instead of using the Bank of Canada? E.g. see http://www.michaeljournal.org/appenB.htm
You cannot borrow from yourself.
The short answer to your question is "no." Ask yourself this, "can someone borrow from himself?" The obvious answer is that it makes no sense. So why do think it's possible for the federal government to borrow from itself?
Investigate the mechanism by which the government would borrow from the Bank of Canada. The Bank of Canada has no stored wealth to lend. The only thing the BoC can give the federal government is banknotes whose value is derived by fiat.
If the federal government can acquire additional banknotes without restriction and without interest liability, it is effectively just printing more money. The consequences of printing more banknotes is also known: devaluation of all banknotes, which leads to inflation.
When a government has no external control on inflating its money supply, you will eventually get a government that lacks the discipline necessary to prevent an uncontrolled inflation cycle. We have two very vivid test cases where governments simply inflated their currencies even though it was obvious that it was the wrong course of action: Germany and Zimbabwe. Both cases were detrimental.
If you ever wonder how fiat currencies remain acceptable to the general public, it is precisely because the availability is scarce, and such scarcity is guaranteed by self-interested parties who will only risk lending wealth if it appears possible to reclaim it later -- just like any lender relationship. It is therefore up to those who have stored wealth to decide if the government can be trusted to borrow it. This is in contrast to inflating the currency supply, which effectively penalizes holders of the currency and transfers wealth to the state at times and rates it sees fit.
When the government borrows wealth from someone else, the money supply does not increase, so uncontrolled inflation becomes only a secondary effect related to the ability to repay rather than a primary effect related to the ability to print money.
I cannot explain this any better. You can't borrow from yourself, it makes everyone's savings worth less, and is therefore a tax on people who are not wealthy enough to invest their savings abroad. Allowing a state to borrow from itself will also inevitably lead to the complete collapse of its currency.
Using Bank of Canada
My understanding is that banks create money when one borrows, which increases the money supply.
"Commercial banks and other financial institutions provide most of the assets used as money through loans made to individuals and businesses. In that sense, financial institutions create, or can create money." - Bank of Canada
I've also read that the Bank of Canada has a lot of room to increase the money supply without causing excess inflation.
About the debt, see: Borrowing Trouble: Why not use the Bank of Canada to carry government debt?
BoC
When the government borrows from a bank, the bank has less money to lend to someone else. So private lending to the government does not increase the money supply. The government also borrows from individuals via CSBs, which you can purchase if you think banks get such a great deal. It is true that the federal government pays interest on borrowing, but it gets a very good rate, almost the same rate as inflation.
Also, I'm not sure what economist would say we have plenty of room to increase the money supply without causing excess inflation, because once you create a cycle of excess inflation the government has little control to end it. You would be advocating for a game of economic chicken. The best way to avoid runaway inflation is to keep it low at all times. I suspect there's some misunderstanding here. It is true that we can inflate the money supply without excess inflation, but it is also true that any increase in inflation is troublesome, kind of like being addicted to only a little bit of heroin.
We CAN borrow from ourselves
Right now the BoC makes 5% (or less, really) of our money supply, while the other 95%+ is lent into existence, at interest, by private banks.
But there are other, better ways that we actually followed in the past. The BoC used to create up to half our money supply through printing money and loans to government. After this ENDED - by the 1970s - was when we saw the closest Canada has ever seen to hyperinflation.
Inasmuch as the BoC is a private bank owned by Canada (citizens or government), we can in fact "borrow from ourselves" and then pay the interest back to ourselves. And we have done just that in the past without disaster - the BoC largely financed our rather successful effort in WWII. It could likewise finance a "war against climate change" or a massive transformation to sustainability, if we chose.
Printing so much money as to cause hyperinflation is a bugaboo - we can have sufficient controls to prevent that, yet still use the BoC (rather than truly private banks) to finance our (temporary) deficits or debt without it causing economic catastrophe or harm.
There are lots of resources you can access on this topic - here's an interesting video, which even has a clip of Elizabeth May speaking to the issue. You can also access info through the Toronto-based Committee on Monetary and Economic Reform (COMER). A good primer is here. It will help clear you of some of the disinformation you have been propagating on this blog.
Erich Jacoby-Hawkins, Barrie ON - although I'm on Cabinet (Nat'l Rev. and Ecol. Fiscal Reform), views here are my own and may not reflect official GPC positions. Please visit www.ErichtheGreen.ca
Tutorial on using BoC
This a great tutorial. You have to navigate through the pages using the links on the left.
Erich Jacoby-Hawkins, Barrie ON - although I'm on Cabinet (Nat'l Rev. and Ecol. Fiscal Reform), views here are my own and may not reflect official GPC positions. Please visit www.ErichtheGreen.ca
That's my understanding as
That's my understanding as well. Smells of corruption to me - the manner and extent to which government borrows from private banks. Especially when you consider what money is - a promise to pay. Isn't that right?
What stops the creation of liquid assets (currency) for debtors?
The runaway inflation cycle argument is justified in a physically growing economy, but we are at the stage of steady state limiting of energy resources for the conceptual and human development growth. Therefore, borrowing directly by banks from the base rate principle of the national bank may have some sense. But who, what economic sector should have the incentive for such borrowing. The local banks should have the established land deals OR perhaps essential well on human capital, reliable working educated troubled action. Undone, but our, the Green's view, is about focusing taxes in a different economic development.
I theory (of steady state) the national money supply should not create too much problems for the local initiatives; as long people are able to risk one way as the other.
I don't know. Does macro-scarcity make sense?
You cannot borrow from yourself.
Money is intended to represent a store of wealth. Printing new money does not create wealth, it simly creates inflation. The value of money at any instant in time is simply the total sum of all money divided by the total value of all assets.
The question then is what is the best way for the government to acquire the wealth necessary to perform it's duties. There are four options, (a) print more money, thereby transferring a fraction of the value of the current money supply back to the government; (b) taxation, thereby acquiring wealth held by others; (c) borrow it from others; (d) compulsion, thereby forcing people to do things for the government.
Let's take for granted that we don't want the government to act like a fiefdom, and we can discredit option (d).
The question then is what is the difference between the first three choices. Borrowing from others is intended to address short-term operational deficits, whereas taxation is intended to address ongoing operational requirements.
What is the purpose of printing more money on a short-term basis, only to pledge to destroy it later, which is what you are doing when you borrow from yourself and then "pay it back." You are temporarily transferring wealth from holders of the currency to the government, and then pledging to transfer the wealth back to holders of the currency at a later time. I don't understand why this has value.
You mistakenly believe that there is no cost to printing and destroying money ad hoc. Printing money is the equivalent to implementing a capital tax that affects only those who keep their wealth stored in money. It is also dangerous because there is no external control to protect against a rogue or incompetent government.
The state cannot borrow from itself. You are simply getting lost in the abstract. What it is really doing is taxing currency holders. This mechanism is entirely different from people willfully lending their wealth to the government with the small risk that the government might default. If you compare government borrow rates compared to inflation there is in fact very little spread, meaning the government in fact borrows for almost nothing. The real cost of a loan is the spread between the borrow rate and the inflation rate, something which your tutorial neglects to point out.
this thread is off topic...
We're discussing merger here...
"People of good faith, figuring out where we are, not falling victim, making choices, based on our values, with the best available information." These views are my own and do not represent the official position of the Green Party of Canada.
Money
Your description of what money is doesn't sound right to me. See e.g. "Money as Debt": http://www.youtube.com/watch?v=vVkFb26u9g8
Yes we can and do create money
Money is currently created into existence by assuming debt. But money represents a promise to expend energy to accomplish an objective (the spender of the money decides what the objective is).
Balance sheets distinguish between; goods verses services, cost of materials verses labour. But in truth there is no such thing as raw ‘goods’ or ‘materials’ as they all come into being by the expending of energy in the form of ‘work’. The only natural resource which does not require transformation by exerting labour to be individually consumed, is breathable air. Even water needs physical labour to be collected, purified, stored in a fabricated container or distribution system. Work is needed to transform all natural resources (including energy) that exist into a form and a location where they can be used.
Our physical and/or mental labour now can be multiplied many times over by the combination of: energy + ingenuity / inventions. “Time is money” is not completely accurate, because money is; an amount of work accomplished within an agreed-to time limit. Money is analogous to the physics definition of ‘power’ (below). Money is also power in the political sense.
In some cases we are paid by the ‘hours of work’ but in other cases by the amount of work we accomplish regardless of the time elapsed as long as it is within a time limit. That’s because with tools, inventions, ingenuity, design and the harnessing of forms of energy, we can do more and more work, over shorter periods of time. (In physics: energy = work = force x distance. And Power = energy / time, or Work /time.)
Therefore, money is work/time, which is the exerting of energy against the inertia of the physical world to effect a wanted transformation. As thought precedes action, work can also be the energy expended to change minds, to create a plan, but which eventually is expressed as an action which would not have otherwise occurred.
The first step is to recognize what money actually represents and then devise a system to create and exchange it fairly. Print or digitally create enough to prevent deflation and not so much as to cause inflation. Ensure that it continues to circulate and be re-distributed widely, and is not concentrated, hoarded or diverted from the real economy. Money is the blood of exchange and needs to circulate freely to all parts of the body of the world. Not coagulate in a few locations.
Borrowing from the Bank of Canada
In know it’s off topic on the original thread but for discussion purposes, here’s another take on lending from the Bank of Canada.
Almost half the email I receive as shadow cabinet member from general inquiries to the GPC has to do with the question “why doesn’t the government lend from the Bank of Canada instead of from private banks?” The argument goes that we could save Billions in yearly interest payments because instead of paying this interest to private banks we’d be paying it to the Bank of Canada. And because Canadians own the Bank of Canada, we’d effectively be paying it back to ourselves.
I’m highly sceptical. The most valuable lesson I’ve ever learned in finance and economics is that “there’s no free lunch”. The Canadian Action Party (CAP) is the only party I know of seriously championing this idea. The CAP candidate I was running against in 2008 had the same answer for almost all questions about how he would find money for new programs and help solve Canada’s financial and economic problems: save $30 Billion annually by financing the national debt through the Bank of Canada at no interest.
Borrowing from the Bank of Canada where no borrowing existed before would cause an increase in the money supply and cause upward pressure on inflation. At a minimum, to not be inflationary, the government would have to pay at least the inflation value in interest payments. That alone would wipe out almost half the potential $30 Billion savings my CAP friend was trumpeting. If private banks don’t decrease their lending by the same amount that the Bank of Canada increases theirs, there would be further upwards pressure on inflation. So, there would have to be regulations put in place to ensure that private Banks couldn’t lend as much as they can now. Doing that comes along with other implications that would need to be sorted out.
The other question that needs to be answered is how much national debt is actually held by private banks? My CAP opponent would have had us believe that all of it is. In fact, national debt to a large part is held by ordinary Canadians already. Savings bonds held by individuals are one example. Marketable government bonds probably make up about half the government debt and many are held by individuals, businesses like insurance companies and pension funds like CPP, Caisse de Depot and Teachers. The interest paid by the government on its national debt is already rock bottom. These days especially, it’s seen as a bit of joke that Canada Savings Bonds are now at a record low, offering only a .4% return this year. This is actually a loss when taking inflation into account.
There’s an organization called COMER (Committee on Monetary and Economic Reform) that advocates lending from Central Banks. They are pretty good I must admit when judged by the consistency of their messages and persistency in asking the GPC (and other parties I presume) to champion their cause. One of the consistencies of COMER advocates is that they invariably lead you into a discussion where you find yourself on the defensive. You find yourself in a position where you have to prove that $30 Billion cannot be saved, kind of like having to prove that 9/11 was not a CIA conspiracy.
Speaking of conspiracies, another aspect of what makes me very sceptical about the COMER’s position is that you need a conspiracy theory to justify why it would work. COMER themselves speak of an ‘epistemological hoax’ on their home page. If there’s truly a multi Billion dollar potential savings to be had by borrowing from the Bank of Canada without nasty side effects, why haven’t the Conservatives, the Liberals before them and the Department of Finance seized the opportunity? The answer that comes shimmering through when talking to COMER’s advocates is that there’s a conspiracy among government and banks (and maybe economists and mainstream media are in on it too) to rob tax payers and enrich banks. It’s an appealing narrative but a very unlikely one.
The discussion that COMER’s is trying to champion is happening at the fringes of politics. There will probably be a policy suggestion or two about lending from the Bank of Canada at our upcoming BGM. I would encourage members to vote against these resolutions even if we take away the bulk of their promise by adjusting them to neutralize inflationary influences. They will take us a small step closer to being associated with financial fringe issues. The electorate doesn’t warm up to parties who position themselves at the vanguard of finance.
Ard Van Leeuwen (Dufferin-Caledon, ON)
The views I express on this blog are purely my own and should not be construed to represent the official position of the Green Party of Canada.
Re: Borrowing from Bank of Canada
Interest payments as a wake up call
What I would say is that your facts are right. But, are you implying that this government overspending wouldn't have happened had the government borrowed from the Bank of Canada? Or that if interest payments hadn't run up to $63 Billion a year that Canada's finances would have been in better order? If anything, the opposite might be more true.
There's an argument that says the only thing stopping governments from borrowing ever increasing sums of money is the fact that at some point the interest payments get so ridiculous that they are actually forced to address the problem. Canada got serious about tackling the federal deficit in the 90s partially because almost 40 cents of every tax dollar collected was going to finance the national debt. Something had to be done.
Ard Van Leeuwen (Dufferin-Caledon, ON)
The views I express on this blog are purely my own and should not be construed to represent the official position of the Green Party of Canada.
Our Debt: Compound Interest
My understanding is that most of our debt is the result of compound interest that we agreed to pay to private banks, which we didn't need to do. It's using taxpayer dollars to subsidise the banks - transfering money from poor to rich. Not good policy. I encourage members to vote in favour of this: http://greenparty.ca/motion/G10-p24
Ideally yes but
Another solution may be to increase taxes on banks; windfall profits as well as a sales tax every time they sell a debt or security. We pay sales tax on almost everything we buy or sell, whereas the banks pay nothing on their sales. Claw back excessive profits.
Do you really trust politicians to borrow responsibly from the Bank of Canada when the government appoints its head? If they overreach themselves borrowing from private banks, risking bankruptcy and the wrath and power of the IMF, how much more will they abuse a system where they can borrow an infinite amount without any consequences for defaulting? What would keep them in check?
Checks
Wouldn't our economy keep the government in check? Wouldn't voters? If the government vastly increased spending as a result of this change in policy, surely there'd be economic consequences.
If it became apparent that
If it became apparent that the Cdn. Govt. was borrowing irresponsibly at will, with no chance of ever paying it back, the Cdn. dollar would be dumped/sold-off internationally and become worth nothing. It would be too late for the electorate to do anything. Greece is an example of what can happen.
I don't support the current banking system, it needs massive reform. I just think there's a much greater chance of this happening if politicians are borrowing from the BOC where the head is appointed by them.
Imagine all the principle and interest Canada owes to private banks right now was owed instead to the Bank of Canada; on their books was a number on a ledger line. Other than an emotional good-feeling, what difference would it make? It doesn't create more jobs. Its not available for circulation. As its paid back, this number decreases and moves to another line. The BoC can now lend more money to Cdn. banks, if... they need it. Its all artificial.
Canadians don't grow their own food, make their own clothes, manufacture their own goods. Our natural resources are harvested by foreign corporations, sold to foreign manufacturers who transform them into products we buy. The natural resource industries employ only a few percent of the population due to advanced technology. We have sold out everything and wonder why there's not enough jobs and not enough money to fund our social programs.
It is a critical topic. As
It is a critical topic. As we’ve seen in ‘Money as Debt’, you can borrow from anybody, even when they have no money. So why couldn’t our government borrow from the central bank of Canada rather than private banks? The promissory note which is the borrowing agreement is what creates the expectation that the money will be, over time paid to the lender with interest - this allows the creation of new digital money in the borrower’s account at the lender bank. The government invests the borrowed money in the economy, the economy grows, tax revenue increases and the government pays back the Bank of Canada with interest. Sounds great.
The problem with lending to yourself may be that there is no consequence for defaulting. If I default on a loan, the lender seizes my assets, or in the case of a country, the IMF imposes strict operating conditions before lending money on new terms so that the country can eventually repay the debt. But if Canada lends to itself, then defaults, there are no real consequences. Can the Bank of Canada seize assets or even dictate operating terms to the government that appoints it? There may be no incentive to pay off the loan.
The argument that lending 'in itself' would be inflationary is perhaps poorly stated. All lending is potentially inflationary because it is lending that creates 95% of all new money. Inflation is a result of too much money chasing too few goods. The main lever to control inflation is setting the interest rate – the cost of borrowing. The higher the cost, the less borrowing occurs and the growth of the money supply is hopefully controlled.
But uncontrolled borrowing/lending is dangerous, as we’ve seen. And that’s more likely to happen if an entity borrows from itself with no real consequences for defaulting. There’s no incentive for fiscal discipline by the government of the day.
Alternatively, a case in point; you can set-up your own mortgage where you borrow from your own self-directed RSP?!
(Just my thoughts here, I’m as mystified by the money system as anybody.)
Not until post election.
Under the current minority, there is no opportunity for a merger even if there was a desire. Both parties have an extensive ratification process (as do the Greens) and all know this Prime Minister is perfectly inclined to call a snap election.
There may be discussions on election tactics to minimize Conservative authority, targeted spending or limited campaigning in ridings where either has a chance of knocking off a Conservative. In 1984, the Conservatives purposely decided to cancel their GOTV campaign in Vancouver Quadra to ensure John Turner got elected, and remained head of the Liberals.
Much better for the two to gang up and change the system allow for the alternative vote or proportional representation.
After next election, I can see scenarios.
a) Conservatives get majority. NDP + Liberal = merger, unless the NDP is wiped out.
b) Conservatives get minority about same as now. Unless Bloc denounces separatism..???
c) If Liberals + NDP get more seats = coalition. Probably with electoral reform on the table.
d) Liberals get majority. No coalition, no merger.
Lets all work to make sure A doesn't happen.
Merger unlikely
Personally, I'd hope option A or D don't become a reality, but A would be far worse than D.
I find talks of a Liberal-NDP merger unlikely, as I don't see NDP (and some Liberals) accepting it. But, I see a coalition happening as long as the Liberals and NDP (and possibly Greens) can collectively win more seats than the Conservatives.
Now that we seem to be moving out of constant majorities, and Canadians seem to be accepting the notion of minority governments, we really have to push for the implementation of proportional representation. If we get a coalition government after the next election, we should push for it to be part of the deal.
Not as unlikely as you may think!
The people who appear to be behind the merger talks are the Godfathers of their parties and have immense influence within their spheres. The way I see it the rumors are a trial balloon, I am sure you will see in the coming days polls that will indicate which of the following are more palatable to the masses.
a) Running selected candidates in the ridings where conservatives can be defeated
b) Run on a campaign that indicates if no clear majority is reached by the Liberals that they will form a coalition with the NDP if enough seats could be gained to form a government, thereby removing the "It wasn't voted on" tory talking point.
c) Outright merger between the liberals and NDP, with a possible overture to the Greens as well.
Here is how I think it would play out. I'm fairly sure the ringleader is Chretien and he's no fool, if the polls indicate the public wants a united progressive party, he and his group will have already figured out who of the major players are in both parties that will support the merged party, and if he has a critical mass he will wait until the house rises for the summer and simply found a new party(bypassing the need for ratification), his first members will join very publicly and they will be a majority of the biggest and most influential from both parties, all will encourage the rest of their parties to move with them, starting with sitting MP's and moving right on down the line to individual members, many will jump ship to the rising star, and the balance will leave the sinking ships lest they go down with them. Before the house sits again they will have a rabbit quick leadership and policy convention and probably have enough MP's to bring down the Harperites at the first opportunity. I think Chretien and his contemporaries are very concerned by what they see the Tories doing and I think there is a bit of panic setting in that might just make this possible, that said I think the most likely course will be "A" the selective riding model, as I think this will gain the most support overall, and the timetable to form the new party without going through an actual merger is really ambitious, because if they fail to get it done all three parties(Liberal, NDP, and United Progressive) would be in total disarray when the house sits again and Harper would most assuredly leap to a snap election while his competitors are at their weakest!