First time i've ever subscribed to a substack, or anything online for that matter. I have read your works for years at all your publications. I think I'll be getting good value for my dollar here. looking forward to seeing what you have in store!
Perhaps it could be pointed out to Minister Freeland that a more effective method of attracting some percentage of those trillions of dollars in private capital would be to reset the blue algae of regulations that are sucking the oxygen out of any incentive for said private capital to invest in Canada.
So if interest rates keep climbing, and if the government is further back in line in terms of lenders, can it be assumed that the $1,510 millions is an optimistic scenario? More to the point, will the government have projects in this scheme that force good money to follow in after bad? Could it be that every Fund investment has hidden triggers that we don't know about that commit even more funds especailly if private sector funds don't materialize? Also, how is this different from what happened with TMX?
Apr 19, 2022·edited Apr 30, 2022Liked by Paul Wells
Great work Paul. This looks like an amalgam of stuff I first covered back in the first CTF corporate welfare report. You may recall it was acronym-palooza from established programs like IRAP and SR*ED to more murky stuff like DIPP, TPC, and a host of regional development agency sub-initiatives. While not based on "investor" schemes (not pejorative, using the UK form of scheme that is more neutral), a variety of repayment or ROI schemes were never to be ... they were programs designed for a political/public policy purpose as direct transfers to organizations or classes of individuals (employment-trade, geographic, other). I sense much of the same here under the guise, legitimate from a policy perspective as some objectives may be, of the CGF.
You and I have seen the same wine poured into many differently-labelled bottles over the years. No one seems interested "Domestic Capital Market Failure Fund" as a moniker. I think we are converging on a better suite of programs since 1995.
Macleans was my absolute favourite years ago. Wells, Coyne, Wherry, Maher, Kingston, Marie-Smith, Markusoff and, of course, Scott Feschuk. He punched so hard that my ribs still hurt from laughing.
I'm sure I have forgotten some in the Macleans Hall of Fame. Maybe the Rogers family will donate to a foundation to establish a future museum in Bermuda or the Cayman islands.
Macleans made mistakes, like publishing Barbara Ameil screeds or the Jim Pattison hagiography. My comment on the latter was spiked soon after I posted my opinion on billionaires. They even spiked the article on Pattison (Canada's Warren Buffet?). At this point I decided against subscribing even though I could read everything for free. I did not press the red button. It was a good decision.
You're worth $50 CDN a year Paul, even if I don't live there anymore. I still have family and friends. I like to visit. I like to know what is going on. Success to you and anyone who follows.
I forgot Stephen Maher and Scott Gilmore. And I'm embarrassed to admit that Mark Steyn made me laugh even though he is a complete f**king a**hole, filling in for Tucker Carlson when Tucker is too embarrassed by his own comments. Maybe that's what made me laugh.
Ah, the Foth. I even have one of his books. I used to enjoy waiting for my appointment at the doctor's office because every doctor's office subscribed to Macleans. Flip to the last page. There it was.
I saw you on True North today. Congratulations on your new venture, I applaud your choice to leave legacy news. It is disconcerting to know news is biased; once trust is lost, it is hard to regain. I looked you up on Macleans after watching True North and saw this article, “News from Canada’s Critical Digital Business Revolution” Paul Wells, March 3, 2022. In it, you wrote, “It was a surprise to see the Prime Minister making an announcement on e-business on Thursday, since his government and most others around the world are properly preoccupied with events in Ukraine. Surprising but encouraging.” My first thought was, yes, surprising, maybe because they want it to be hidden underneath Ukraine news. Because I watched Ng in parliament being questioned on this very subject, stalling and misdirecting to avoid answering questions about a possible conflict of interest because, I understand, she awarded the contract to Magnet. If I am wrong, just hit delete now, but if she did award the contract to Magnet, as a former employee, working in the Executive Director Office of the President at Ryerson University, for years, that is sketchy. Did she award Magnet, a not-for-profit platform, like a charity, linked to Ryerson, the contract for the Canada Digital Adoption Program, “Grow Your Business Online”? Is Magnet actually getting a 4-billion-dollar hand out to encourage small business to hire students? “The call for applications is now closed.” How many other companies did Magnet beat out, or did Mary Ng gift it to Magnet? If it’s true, isn’t this yet another conflict of interest, in yet another student work placement program when the first thing I do is wonder how many politicians’ families might benefit? Who is policing how the 4 billion is actually spent? Once again billions out of taxpayer’s pockets, to pay students, when thousands of Canadians are facing escalating prices on everything and our military could use that $4 Billion. There is lots of work out there for everybody, students included, without giving billions to yet another “charity” the Liberals are connected to. They already broke the debt clock once. On March 3, 2022, Justin Trudeau wrote, “This investment, which will provide $4 billion over four years, will support up to 160,000 small businesses and create good middle-class jobs across the country, including thousands of jobs for young Canadians.” If Magnet won the bid, no wonder they announced it under cover, and it just raises my hackles when I see Ryerson is also associated with the meddling World Economic Forum. Thanks for listening to my conspiracy theory because often it’s a conspiracy theory until it isn’t. Thanks. Congratulations, good luck.
I am very happy to support this new endeavour. Paul is one of the most objective, intelligent and readable journalists currently writing in Canada. However, the fact that he needs to publish in this manner is troubling. He was one of the primary writers for the last remaining paper published news magazine in Canada. Are we heading to a future where we are patrons to our favourite journalists and not of general interest publications? Who will be the provider of primary news? What filter will be placed on this news and who will apply it? Coyne and Geist are speaking to some of this on the attempted Liberal party control of news, but where will it end? All these voices need to be heard by the general populace and hopefully someone will listen. Otherwise, I fear for our democracy, and, indeed, our society.
There is a big one currently under construction...remember? the TMX pipeline...Alberta bitumen to tide water. Our Liberal government bought and paid for it.
Correct.... at several times the price than it would have cost if they had let foothills build it in the first place. This is a prime example what governments should not do.
Foothills had said they they were NOT going to do it...they walked. The feds saved the project...no one wanted it. At current oil prices it will be sold probably to the indigenous peoples along it's route at or near it's break even point.
In the post-war era, the federal government used central bank financing to build highways, airports, schools, and hospitals. Prior to 1975, the federal government also introduced Canada-wide Medicare, universal pensions, the modern unemployment insurance system, and cost-sharing with provinces for higher education and welfare.
The federal government did not go cap in hand to global asset managers then, and should not today. Big money managers seeking maximum returns will charge monopoly rents but if things go sour, the government will inherit a mess.
Accountability and transparency are unlikely when private participation provides a pretext for confidentiality. The Canadian public will have far better powers with full ownership of infrastructure than as tied customers footing jacked-up bills.
Larry, I agree with your commentary. Now, for some further comments along the same lines.
You say "Prior to 1975...), well, as I recall, it was actually the Pearson government that did ever so much of the heavy work in these areas. I make the distinction because I really think that any suggestion that PET was involved in that really good work is inaccurate. Apologies; I don't mean to criticize.
Now, for the "... cap in hand to global asset managers ..." point, again, I agree that the quoted areas were pretty much self financed here in Canada. On the other hand, the governments of the day were pretty financially responsible from about 1945 to about 1968. Since that time, we have pretty much been a debt creation machine in Canada and have allowed our dollar to become much less valuable through inflation. As a result, who else? Certainly Canada cannot self finance these sums.
On the other hand, the "... cap in hand to global asset managers ..." presupposes that the current government actually will seriously try to do what it says it will do. Personally, I simply a) don't believe that they are truly serious; and b) even if they were serious, I don't believe that they are sufficiently competent to truly attract "serious" money; please take "serious" in a couple of ways: magnitude and amount. Oh, you can be sure that the will get some third party "investment" money but significant amounts? I think not; global asset managers are too shrewd and this government, at best, inept.
As for accountability and transparency: please, Sir, you joke; this government?
As for full ownership? Again, where is the money coming from? I refer you again to not serious, incompetent, inept.
So, to summarize, I don't think you need to worry about the global money management folks nearly so much as you need to worry about the idiots running things in Ottawa who know only how to spend money. Heck, they cannot even supply clean drinking water to natives and they have had seven years to figure that one out; why do you think they can manage this file any better?
"By recording new and equal amounts on the asset and liability sides of its balance sheet, the Bank of Canada creates money through a few keystrokes. The federal government can spend the newly created bank deposits in the Canadian economy if it wishes."
***
".....there is no external limit to the total amount of money that the Bank of Canada may create for the federal government."
***
"The Bank of Canada's money creation for the Government of Canada is an internal government process. This means that external factors, such as financial markets dysfunction, cannot cause the federal government to run out of money."
Larry, I made no comment about private sector managers being superior. Smarter than the Prime Idiot of Ottawa and his Finance Minister? Absolutely. Superior? I suspect smarter but superior? I really don't think so.
As I recall, I said that I thought that the global investment folks would be too busy and uninterested in the type of investments that this new Fund would undertake.
You reference two scams (Enron and Bre-X) and one insolvency (Nortel) that is variously attributed to bad management and/or Chinese sanctioned theft of IP. I absolutely agree that the two scams that you mentioned were just that: scams; I can list for you a multitude of other scams and I can point to various of the "trusted gatekeepers" who should have been able to stop those scams but, frankly, who cares at this point? As for Nortel, that is certainly a very sad story and it caused ruin to many, many unsuspecting people.
My point is that any attempt to bring in "global investment managers" or whatever name they might be called, will be unlikely to be with the like of Enron or Bre-X. That is, I do not foresee that they will be with individual companies such as Enron or outright frauds such as Bre-X. One certainly hopes!
What I can see happening, however is that the Government of Canada decides that it will "invest" [a fancy word appropriated by governments to cover up foolish spending] in highly speculative ventures all described in green ink with "sunny way" assurances of virtue and success, only to promptly sink beneath the waves. I foresee the GoC simply developing incompetent schemes themselves. I actually think that any self-respecting global investment manager will stay clear of this abomination. Put differently, if self-respecting global investment types stay clear, what does that tell you about those folks who flock to offer "good ideas"? Charlatans, you can be sure.
On the other hand, perhaps I am even more naive that the Prime Idiot of Ottawa. Perhaps.
A just transition will require large investment in communication, transportation and energy infrastructure. I would not categorize this as "foolish spending in highly speculative ventures" but as urgent and sensible investments necessary to combat climate change. I hope you are right that global asset managers will not be interested in partnering in these initiatives. My point is that while the government might contract the actual development to private enterprise who have technical expertise, the projects should be financed and owned by the public to minimize the construction and on-going operational costs that the end-users - you and me - will pay. If the global asset managers do not go in, it is because they do not perceive they will receive their hefty return on investment and executive bonuses that they require. But that's good - the projects should be run with the public benefit as the top priority, and not the enrichment of the corporate class (which the main political parties are happy to do).
"The real problem with the PPPs in this regard is that is a falsehood that the risk shifts from the public to the private sector. Who ultimately bears the risk? The risk premium in private financing is based on the fact that a private entity can become bankrupt with its product and service exiting the market. With an essential public service it is a fantasy to say that the PPP contract transfers risk to the private sector.
If the private partner defaults, the public always has to pick up the pieces. There is no real risk transferred."
Larry, I wish that I could depend on the current gang in Ottawa to actually undertake a coherent transition. Please note that I have ignored the word "just" simply because I don't think this current group could manage anything "just" without absolutely bankrupting the country.
Any of the suggested "transitions" will require vast amounts of money and an unrelenting willingness to undertake massively hard work. This crew? Not at all possible.
I wish that I had confidence in this group to do more than run a lemonade stand but I truly don't. I wish you well in your optimism on public ownership and competence.
Thank you, Ken, for making your points graciously. We can certainly disagree on public ownership and competence and no doubt we can each offer evidence to support our differing views. I would like to point out though that the belief that the federal government can go bankrupt (in Canadian dollars) is counterfactual since the Minister of Finance owns all the shares of the Bank of Canada which can never run out of money.
BANK OF CANADA
FINANCIAL STATEMENTS (YEAR ENDED 31 DECEMBER 2014)
"As the nation’s central bank, the Bank is the ultimate source of liquid funds to the Canadian financial system and has the power and operational ability to create Canadian-dollar liquidity in unlimited amounts at any time. "
The appropriate amount for the gov't to spend is a separate issue, but a gov't of Canada cheque will never bounce.
Thank you for the discussion, Ken, and best wishes. Larry
By creating money through " a few keystrokes" the increased money supply leads to an increase in inflation. The increased inflation results in less earning power for the citizens. Hence printing money while making the government look good in the short term results in poorer outcomes for the citizens in the longer term.
William Mitchell is a Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW, Australia
"When QE was first introduced in Japan in the 1990s, mainstream economists rushed to predict that the massive expansion in central bank reserves would be inflationary.
Students in every mainstream macroeconomics class, and that means almost all students, would have predicted, based on the nonsense they were learning, that the high deficits and high public debt ratios in Japan at the time, should have driven interest rates sky high, that bond markets should have stopped buying government bonds, that the government should have run out of money, and all the time that these disasters were unfolding, that inflation should have been be galloping towards hyperinflation.
Nothing like that happened.
Neo-liberal economists wrote off their mistakes by claiming that Japan is ‘so strange’ that it is a ‘special case’ and therefore not generally applicable.
Their ad hoc defense was convenient because the Japanese experience with sustained high fiscal deficits, the world’s largest public debt to GDP ratio, close to zero interest rates, and deflation, was totally at odds with their economic theories.
It was a mind-boggling failure to explain reality."
I fail to see how the experience of Japan in 1990 is relevant to our experience now. Last time inflation was 7% interest rates were 9%. We are in a totally unprecedented situation
"By creating money through " a few keystrokes" the increased money supply leads to an increase in inflation." The statement above is yours. Japan created new money for decades without inflation. Obviously your statement is a simplification. The situation in Canada today is different since there are supply chain disruptions because of a pandemic, and a war in Ukraine. But the Japanese experience shows that an increased money supply alone does not necessarily cause inflation and there is no proof it has done so today. That is why that my excerpt is relevant. You may wish to read Bill Mitchell's expanded explanation as per the link included above. If new monies (publicly or privately created) are used appropriately to mobilize unused resources, then there is more production and a likelihood of lower inflation.
You are absolutely correct. The people of the country would inherit the mess.
As I have said - habitually, continuously, tirelessly (and, I am quite sure, tiresomely) - elsewhere, I don't trust this government to be competent or, for that matter, honest. Ultimately, if they spend the 15 B then we are really hooped.
The good news is that, between smoke and mirrors and their attention getting attracted to the next shiny popular, Greta approved thing I don't expect this government to get anywhere near that "goal" of 15B. They are simply too incompetent to accomplish that - thankfully!!! I refer you to the Canada Infrastructure Bank aspect of the column.
I would further refer you to how they plan to fund this turkey - they will take the money from "existing" commitments and programs which, I expect, is likely in a few years to be the fate of this program, i.e. cannibalized to fund yet other programs.
So, as much as I dislike, despise, abhor, etc. government incompetence, in this case I have to rely on it to save us from a 15B boondoggle.
Thanks to all the commenters on keeping the discourse on topic and respectful. The comments sections are often as enlightening and informative as the article in question. However, this only occurs when commenters refrain from overt partisanship and ad hominum attacks.
I would love to see a column that deconstructs those trillions of dollars of private capital. Who are the private persons who possess such vast amounts of money? How did they accumulate it? What do they do with it? How much do they pay in taxes?
Most of the private money the feds hope to attract isn't personal fortunes, it's pension funds. The list of investments the Ontario Teachers' Pension Fund holds is always impressive (the Brussels Airport Company?) and it's similar to the holdings of any number of Norwegian, Emirati, Japanese and other pension and retirement funds.
The only problem is that these funds, which can invest anywhere, are harder to lure than governments might hope. Even the Ontario Teachers', which is pretty adventurous, mostly just buys bonds.
"Concessionary" is a term of art from international economics and Official Development Assistance. Financing is usually "non-budgetary;" the creditor gets a new asset to match the borrower's new liability. The budgetary impact is the difference between what creditor could have earned on that asset and what (they guess) they will collect from the borrower.
About that McKinsey report -- Bill McKibben makes the point that in return for that annual spending increase of $US 3.5 trillion, we save about two trillion dollars a year on fossil fuel rents (the money that goes from consumers to those, like Saudi Arabia, who control the supply) forever.
First time i've ever subscribed to a substack, or anything online for that matter. I have read your works for years at all your publications. I think I'll be getting good value for my dollar here. looking forward to seeing what you have in store!
Perhaps it could be pointed out to Minister Freeland that a more effective method of attracting some percentage of those trillions of dollars in private capital would be to reset the blue algae of regulations that are sucking the oxygen out of any incentive for said private capital to invest in Canada.
Hello Paul: Congratulations on your first day of entrepreneurialism. We are cheering you on at the Thompson/Boulet household. Well done! Rosemary
So if interest rates keep climbing, and if the government is further back in line in terms of lenders, can it be assumed that the $1,510 millions is an optimistic scenario? More to the point, will the government have projects in this scheme that force good money to follow in after bad? Could it be that every Fund investment has hidden triggers that we don't know about that commit even more funds especailly if private sector funds don't materialize? Also, how is this different from what happened with TMX?
Great work Paul. This looks like an amalgam of stuff I first covered back in the first CTF corporate welfare report. You may recall it was acronym-palooza from established programs like IRAP and SR*ED to more murky stuff like DIPP, TPC, and a host of regional development agency sub-initiatives. While not based on "investor" schemes (not pejorative, using the UK form of scheme that is more neutral), a variety of repayment or ROI schemes were never to be ... they were programs designed for a political/public policy purpose as direct transfers to organizations or classes of individuals (employment-trade, geographic, other). I sense much of the same here under the guise, legitimate from a policy perspective as some objectives may be, of the CGF.
You and I have seen the same wine poured into many differently-labelled bottles over the years. No one seems interested "Domestic Capital Market Failure Fund" as a moniker. I think we are converging on a better suite of programs since 1995.
Macleans was my absolute favourite years ago. Wells, Coyne, Wherry, Maher, Kingston, Marie-Smith, Markusoff and, of course, Scott Feschuk. He punched so hard that my ribs still hurt from laughing.
I'm sure I have forgotten some in the Macleans Hall of Fame. Maybe the Rogers family will donate to a foundation to establish a future museum in Bermuda or the Cayman islands.
Macleans made mistakes, like publishing Barbara Ameil screeds or the Jim Pattison hagiography. My comment on the latter was spiked soon after I posted my opinion on billionaires. They even spiked the article on Pattison (Canada's Warren Buffet?). At this point I decided against subscribing even though I could read everything for free. I did not press the red button. It was a good decision.
You're worth $50 CDN a year Paul, even if I don't live there anymore. I still have family and friends. I like to visit. I like to know what is going on. Success to you and anyone who follows.
I forgot Stephen Maher and Scott Gilmore. And I'm embarrassed to admit that Mark Steyn made me laugh even though he is a complete f**king a**hole, filling in for Tucker Carlson when Tucker is too embarrassed by his own comments. Maybe that's what made me laugh.
Don't forget Fotheringham.... that is going back awhile.
Ah, the Foth. I even have one of his books. I used to enjoy waiting for my appointment at the doctor's office because every doctor's office subscribed to Macleans. Flip to the last page. There it was.
I saw you on True North today. Congratulations on your new venture, I applaud your choice to leave legacy news. It is disconcerting to know news is biased; once trust is lost, it is hard to regain. I looked you up on Macleans after watching True North and saw this article, “News from Canada’s Critical Digital Business Revolution” Paul Wells, March 3, 2022. In it, you wrote, “It was a surprise to see the Prime Minister making an announcement on e-business on Thursday, since his government and most others around the world are properly preoccupied with events in Ukraine. Surprising but encouraging.” My first thought was, yes, surprising, maybe because they want it to be hidden underneath Ukraine news. Because I watched Ng in parliament being questioned on this very subject, stalling and misdirecting to avoid answering questions about a possible conflict of interest because, I understand, she awarded the contract to Magnet. If I am wrong, just hit delete now, but if she did award the contract to Magnet, as a former employee, working in the Executive Director Office of the President at Ryerson University, for years, that is sketchy. Did she award Magnet, a not-for-profit platform, like a charity, linked to Ryerson, the contract for the Canada Digital Adoption Program, “Grow Your Business Online”? Is Magnet actually getting a 4-billion-dollar hand out to encourage small business to hire students? “The call for applications is now closed.” How many other companies did Magnet beat out, or did Mary Ng gift it to Magnet? If it’s true, isn’t this yet another conflict of interest, in yet another student work placement program when the first thing I do is wonder how many politicians’ families might benefit? Who is policing how the 4 billion is actually spent? Once again billions out of taxpayer’s pockets, to pay students, when thousands of Canadians are facing escalating prices on everything and our military could use that $4 Billion. There is lots of work out there for everybody, students included, without giving billions to yet another “charity” the Liberals are connected to. They already broke the debt clock once. On March 3, 2022, Justin Trudeau wrote, “This investment, which will provide $4 billion over four years, will support up to 160,000 small businesses and create good middle-class jobs across the country, including thousands of jobs for young Canadians.” If Magnet won the bid, no wonder they announced it under cover, and it just raises my hackles when I see Ryerson is also associated with the meddling World Economic Forum. Thanks for listening to my conspiracy theory because often it’s a conspiracy theory until it isn’t. Thanks. Congratulations, good luck.
I am very happy to support this new endeavour. Paul is one of the most objective, intelligent and readable journalists currently writing in Canada. However, the fact that he needs to publish in this manner is troubling. He was one of the primary writers for the last remaining paper published news magazine in Canada. Are we heading to a future where we are patrons to our favourite journalists and not of general interest publications? Who will be the provider of primary news? What filter will be placed on this news and who will apply it? Coyne and Geist are speaking to some of this on the attempted Liberal party control of news, but where will it end? All these voices need to be heard by the general populace and hopefully someone will listen. Otherwise, I fear for our democracy, and, indeed, our society.
I agree. Very good points. The liberal party attempts to control online content is very troubling. Free speech is the cornerstone of a free democracy.
If only we had pipelines to export our current resources that would generate the capitol required.
There is a big one currently under construction...remember? the TMX pipeline...Alberta bitumen to tide water. Our Liberal government bought and paid for it.
Correct.... at several times the price than it would have cost if they had let foothills build it in the first place. This is a prime example what governments should not do.
Foothills had said they they were NOT going to do it...they walked. The feds saved the project...no one wanted it. At current oil prices it will be sold probably to the indigenous peoples along it's route at or near it's break even point.
In the post-war era, the federal government used central bank financing to build highways, airports, schools, and hospitals. Prior to 1975, the federal government also introduced Canada-wide Medicare, universal pensions, the modern unemployment insurance system, and cost-sharing with provinces for higher education and welfare.
The federal government did not go cap in hand to global asset managers then, and should not today. Big money managers seeking maximum returns will charge monopoly rents but if things go sour, the government will inherit a mess.
Accountability and transparency are unlikely when private participation provides a pretext for confidentiality. The Canadian public will have far better powers with full ownership of infrastructure than as tied customers footing jacked-up bills.
Larry, I agree with your commentary. Now, for some further comments along the same lines.
You say "Prior to 1975...), well, as I recall, it was actually the Pearson government that did ever so much of the heavy work in these areas. I make the distinction because I really think that any suggestion that PET was involved in that really good work is inaccurate. Apologies; I don't mean to criticize.
Now, for the "... cap in hand to global asset managers ..." point, again, I agree that the quoted areas were pretty much self financed here in Canada. On the other hand, the governments of the day were pretty financially responsible from about 1945 to about 1968. Since that time, we have pretty much been a debt creation machine in Canada and have allowed our dollar to become much less valuable through inflation. As a result, who else? Certainly Canada cannot self finance these sums.
On the other hand, the "... cap in hand to global asset managers ..." presupposes that the current government actually will seriously try to do what it says it will do. Personally, I simply a) don't believe that they are truly serious; and b) even if they were serious, I don't believe that they are sufficiently competent to truly attract "serious" money; please take "serious" in a couple of ways: magnitude and amount. Oh, you can be sure that the will get some third party "investment" money but significant amounts? I think not; global asset managers are too shrewd and this government, at best, inept.
As for accountability and transparency: please, Sir, you joke; this government?
As for full ownership? Again, where is the money coming from? I refer you again to not serious, incompetent, inept.
So, to summarize, I don't think you need to worry about the global money management folks nearly so much as you need to worry about the idiots running things in Ottawa who know only how to spend money. Heck, they cannot even supply clean drinking water to natives and they have had seven years to figure that one out; why do you think they can manage this file any better?
1. Nortel, Enron, Bre-X - Why do you assume private sector managers are always superior?
2. Re: "where is the coming from"
How the Bank of Canada Creates Money for the Federal Government: Operational and Legal Aspects
Penny Becklumb,Mathieu Frigon, Economics, Resources and International Affairs Division, Library of Parliament
10 August 2015 https://lop.parl.ca/sites/PublicWebsite/default/en_CA/ResearchPublications/201551E
"By recording new and equal amounts on the asset and liability sides of its balance sheet, the Bank of Canada creates money through a few keystrokes. The federal government can spend the newly created bank deposits in the Canadian economy if it wishes."
***
".....there is no external limit to the total amount of money that the Bank of Canada may create for the federal government."
***
"The Bank of Canada's money creation for the Government of Canada is an internal government process. This means that external factors, such as financial markets dysfunction, cannot cause the federal government to run out of money."
______________________________
Larry, I made no comment about private sector managers being superior. Smarter than the Prime Idiot of Ottawa and his Finance Minister? Absolutely. Superior? I suspect smarter but superior? I really don't think so.
As I recall, I said that I thought that the global investment folks would be too busy and uninterested in the type of investments that this new Fund would undertake.
You reference two scams (Enron and Bre-X) and one insolvency (Nortel) that is variously attributed to bad management and/or Chinese sanctioned theft of IP. I absolutely agree that the two scams that you mentioned were just that: scams; I can list for you a multitude of other scams and I can point to various of the "trusted gatekeepers" who should have been able to stop those scams but, frankly, who cares at this point? As for Nortel, that is certainly a very sad story and it caused ruin to many, many unsuspecting people.
My point is that any attempt to bring in "global investment managers" or whatever name they might be called, will be unlikely to be with the like of Enron or Bre-X. That is, I do not foresee that they will be with individual companies such as Enron or outright frauds such as Bre-X. One certainly hopes!
What I can see happening, however is that the Government of Canada decides that it will "invest" [a fancy word appropriated by governments to cover up foolish spending] in highly speculative ventures all described in green ink with "sunny way" assurances of virtue and success, only to promptly sink beneath the waves. I foresee the GoC simply developing incompetent schemes themselves. I actually think that any self-respecting global investment manager will stay clear of this abomination. Put differently, if self-respecting global investment types stay clear, what does that tell you about those folks who flock to offer "good ideas"? Charlatans, you can be sure.
On the other hand, perhaps I am even more naive that the Prime Idiot of Ottawa. Perhaps.
A just transition will require large investment in communication, transportation and energy infrastructure. I would not categorize this as "foolish spending in highly speculative ventures" but as urgent and sensible investments necessary to combat climate change. I hope you are right that global asset managers will not be interested in partnering in these initiatives. My point is that while the government might contract the actual development to private enterprise who have technical expertise, the projects should be financed and owned by the public to minimize the construction and on-going operational costs that the end-users - you and me - will pay. If the global asset managers do not go in, it is because they do not perceive they will receive their hefty return on investment and executive bonuses that they require. But that's good - the projects should be run with the public benefit as the top priority, and not the enrichment of the corporate class (which the main political parties are happy to do).
_________________________________________________________________________________________
The glorious gouging of the public purse
William Mitchell is Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), University of Newcastle, NSW, Australia
http://bilbo.economicoutlook.net/blog/?p=23811
"The real problem with the PPPs in this regard is that is a falsehood that the risk shifts from the public to the private sector. Who ultimately bears the risk? The risk premium in private financing is based on the fact that a private entity can become bankrupt with its product and service exiting the market. With an essential public service it is a fantasy to say that the PPP contract transfers risk to the private sector.
If the private partner defaults, the public always has to pick up the pieces. There is no real risk transferred."
Larry, I wish that I could depend on the current gang in Ottawa to actually undertake a coherent transition. Please note that I have ignored the word "just" simply because I don't think this current group could manage anything "just" without absolutely bankrupting the country.
Any of the suggested "transitions" will require vast amounts of money and an unrelenting willingness to undertake massively hard work. This crew? Not at all possible.
I wish that I had confidence in this group to do more than run a lemonade stand but I truly don't. I wish you well in your optimism on public ownership and competence.
Thank you, Ken, for making your points graciously. We can certainly disagree on public ownership and competence and no doubt we can each offer evidence to support our differing views. I would like to point out though that the belief that the federal government can go bankrupt (in Canadian dollars) is counterfactual since the Minister of Finance owns all the shares of the Bank of Canada which can never run out of money.
BANK OF CANADA
FINANCIAL STATEMENTS (YEAR ENDED 31 DECEMBER 2014)
http://gazette.gc.ca/rp-pr/p1/2015/2015-05-09/html/notice-avis-eng.html
"As the nation’s central bank, the Bank is the ultimate source of liquid funds to the Canadian financial system and has the power and operational ability to create Canadian-dollar liquidity in unlimited amounts at any time. "
The appropriate amount for the gov't to spend is a separate issue, but a gov't of Canada cheque will never bounce.
Thank you for the discussion, Ken, and best wishes. Larry
By creating money through " a few keystrokes" the increased money supply leads to an increase in inflation. The increased inflation results in less earning power for the citizens. Hence printing money while making the government look good in the short term results in poorer outcomes for the citizens in the longer term.
Japan
William Mitchell is a Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW, Australia
http://bilbo.economicoutlook.net/blog/?p=31021
"When QE was first introduced in Japan in the 1990s, mainstream economists rushed to predict that the massive expansion in central bank reserves would be inflationary.
Students in every mainstream macroeconomics class, and that means almost all students, would have predicted, based on the nonsense they were learning, that the high deficits and high public debt ratios in Japan at the time, should have driven interest rates sky high, that bond markets should have stopped buying government bonds, that the government should have run out of money, and all the time that these disasters were unfolding, that inflation should have been be galloping towards hyperinflation.
Nothing like that happened.
Neo-liberal economists wrote off their mistakes by claiming that Japan is ‘so strange’ that it is a ‘special case’ and therefore not generally applicable.
Their ad hoc defense was convenient because the Japanese experience with sustained high fiscal deficits, the world’s largest public debt to GDP ratio, close to zero interest rates, and deflation, was totally at odds with their economic theories.
It was a mind-boggling failure to explain reality."
I fail to see how the experience of Japan in 1990 is relevant to our experience now. Last time inflation was 7% interest rates were 9%. We are in a totally unprecedented situation
Brian MercerApr 24
"By creating money through " a few keystrokes" the increased money supply leads to an increase in inflation." The statement above is yours. Japan created new money for decades without inflation. Obviously your statement is a simplification. The situation in Canada today is different since there are supply chain disruptions because of a pandemic, and a war in Ukraine. But the Japanese experience shows that an increased money supply alone does not necessarily cause inflation and there is no proof it has done so today. That is why that my excerpt is relevant. You may wish to read Bill Mitchell's expanded explanation as per the link included above. If new monies (publicly or privately created) are used appropriately to mobilize unused resources, then there is more production and a likelihood of lower inflation.
And if the government inherits this mess, who pays for it? Not the people in the government from my experience.
You are absolutely correct. The people of the country would inherit the mess.
As I have said - habitually, continuously, tirelessly (and, I am quite sure, tiresomely) - elsewhere, I don't trust this government to be competent or, for that matter, honest. Ultimately, if they spend the 15 B then we are really hooped.
The good news is that, between smoke and mirrors and their attention getting attracted to the next shiny popular, Greta approved thing I don't expect this government to get anywhere near that "goal" of 15B. They are simply too incompetent to accomplish that - thankfully!!! I refer you to the Canada Infrastructure Bank aspect of the column.
I would further refer you to how they plan to fund this turkey - they will take the money from "existing" commitments and programs which, I expect, is likely in a few years to be the fate of this program, i.e. cannibalized to fund yet other programs.
So, as much as I dislike, despise, abhor, etc. government incompetence, in this case I have to rely on it to save us from a 15B boondoggle.
Thanks to all the commenters on keeping the discourse on topic and respectful. The comments sections are often as enlightening and informative as the article in question. However, this only occurs when commenters refrain from overt partisanship and ad hominum attacks.
Saw your wonderful interview with Candace Malcolm. Looking forward to reading someone with journalist integrity.
I would love to see a column that deconstructs those trillions of dollars of private capital. Who are the private persons who possess such vast amounts of money? How did they accumulate it? What do they do with it? How much do they pay in taxes?
Most of the private money the feds hope to attract isn't personal fortunes, it's pension funds. The list of investments the Ontario Teachers' Pension Fund holds is always impressive (the Brussels Airport Company?) and it's similar to the holdings of any number of Norwegian, Emirati, Japanese and other pension and retirement funds.
So, here's a list of Ontario Teachers' investments (they own all of a few dozen Canadian shopping malls, for instance): https://www.otpp.com/en-ca/investments/our-advantage/our-performance-and-track-record/major-investments/
And here's a list of the world's largest retirement funds. Ontario Teachers are 20th on this list (behind the CPP, way behind a few others) https://www.pionline.com/interactive/worlds-largest-retirement-funds-2021
The only problem is that these funds, which can invest anywhere, are harder to lure than governments might hope. Even the Ontario Teachers', which is pretty adventurous, mostly just buys bonds.
"Concessionary" is a term of art from international economics and Official Development Assistance. Financing is usually "non-budgetary;" the creditor gets a new asset to match the borrower's new liability. The budgetary impact is the difference between what creditor could have earned on that asset and what (they guess) they will collect from the borrower.
I'd like to hear what you think of the Great Reset?
About that McKinsey report -- Bill McKibben makes the point that in return for that annual spending increase of $US 3.5 trillion, we save about two trillion dollars a year on fossil fuel rents (the money that goes from consumers to those, like Saudi Arabia, who control the supply) forever.