Covid 19-Free Money-Why Didn't Anyone Think of That Before

[Ken Gigliotti]

Free Money & Magic Money -  Why Didn't Anyone Think of it Sooner? Covid 19

Economic equality is a serious thing and logic says that, if the developing world rises, then the developed world should fall and a new balance of economic equality would be achieved. I think we have seen this over a few decades now. A gig economy is near the bottom. Job losses and opportunity extinction have gone about as far as they can go. The inability to access PPE for health care workers and the general public during the first wave of Covid 19 was a wake up call to Canadians.

Here is where the bad news of income equality comes in. Instead of raising people from poverty, the middle class is moving down a few notches into a near poverty line circumstance with their permission. It seems like $2000 a month is the price. There have been at least two generations of graduates who have not found anything but gig work anyway and are struggling with expectations they cannot meet. Government money is attractive but also a slippery slope.

That is not the Canadian way. We have become a country that props things, we are good at propping. Nature is telling us there are too many people  in the world using too many resources and Covid 19 is a force of nature to be reckoned with. Our ways can be changed and those human forces are waiting to be put to good use. We can challenge the world to find a vaccine or cure and money is no object, saving lives of millions ,a noble act. The never ending wars of the far east made the same commitment and spent the same amounts for an equal but opposite outcome. There is a parallel in these opposites of extreme thinking and action. Propping things up results in delays that lead to rushed decision making. I think people feel trapped by propping up an unsustainable system.

It is time to take a breath and think.

Canada and the US have an opportunity to reshape the future through government financial intervention using not the bureaucratic model that creates dehumanizing, planned, life long and inter generational welfare,but instead a well thought out benefit program that actually benefits the users and also asks something from them.  Help should  give the feeling usefulness and contribution for those who seek it, and  is a strong psychological benchmark of a healthy society. Benefits need to benefit the people who receive them to recreate a feeling of  well being , structure and usefulness of work for pay, life planning, earning, faith in future  and wealth building ,one keeps at the  center of ones existence. A life lived, not the dreary bureaucratic waiting for the next monthly check can be a goal.

The old Soviet system of a lethargic cradle to grave welfare was a failure and could only be supported by a brutal state run by secret police. Any system that makes it's governed dependent on government creates eventual lethargy that leads to an easy transition to authoritarianism. Weak leadership and dependency on government has seen many democracies flip to authoritarianism in recent years.
We are seeing something different in the United States in the last few years. When the Statue of Liberty was given to the United States it was said that France was a country with too little democracy was giving a gift to a country that had too much. The too much part has it's problems to.

The Covid 19 pandemic is forcing a re-think of democracy in ways of life and our economic systems that rely on wasteful spending and dangerous credit.
A new economic system is being formed, it has already started and we the people have a chance to plan where it will go. The economic system has already changed and it is best described from an American perspective in this months The  Economist Magazine,the whole edition is devoted to many angles of the response.

So paraphrasing the Economist July/Aug 2020 this new economic shift is a “once in a generation,” event.
To me, living in flood prone Manitoba where once in a generation floods were happening every ten years or less,I and others in hurricane and wild fire zones really hate that term.

Anyway the Economist describes this new “epoch... by the jaw dropping scale of today's government spending...the whirring of the printing presses (money printing)... the states roll as capital-allocator-in -chief...most important:low inflation,...deficits and money-printing may well become the standard tools of policy making for decades.”

 Now the warning, the “if” that big “IF”,as long as inflation stays low, well, we really hope that happens. Hope is not really a financial plan in my dad's books,he would say do  you  have a plan “b.” The Economist goes on to say, “if inflation jumps unexpectedly the entire edifice of debt will shake.”

They say “if ” inflation rises, instead of why should inflation  not rise. In order for  Covid 19  reopening of an economy that can only seat less than half,or sell far less than half all the while creating social distanced spaces and added extra cleaning and precautions , prices have already began to rise and it is only the first wave. Travel is closed and will anyone ever go to a movie, these two industries have huge economic implications. It is true most unions except for government unions are in no position to ask for yearly raises and gas prices have been up and down. But personal incomes have be shrinking and credit cards have to be in play. This doesn't look like a wash.

This stuff is complicated and I am not an economist, the part  especially about more magic money as described the The Atlantic magazine July /Aug 2020 titled The Worst Case by Frank Partnoy,is potentially very scary, it is the repeat of the 2008 mortgage  scandal but with commercial business properties,(instead of residential) the kind that are likely to go out of business en mass due to the shutdown due to Covid 19. This involves CLO's or collateralized loan obligation, these are loans to “specifically troubled businesses... loans made to companies that have maxed out their borrowing...”

I have heard talk about loans to business in the news but not this angle.

There are at least two financial potential risks in play caused by the pandemic and the resulting shutdowns. This is mostly a US story with banks having some of this risk in offshore / off the books transactions. It is exactly like the mortgage crisis Americans are just recovering from.

The Covid 19 crisis is forcing the issue with the crumbling of an over built and fragile consumer/service, tips and commissions  system that requires no one to save (most will say cannot save) and the dangerous and causal credit card borrowing keeps everyone afloat. Everyone afloat until it doesn't. We have a culture that cannot pay a mortgage but is actually paying someone else mortgage by paying rent. This is the culmination of the race to the bottom where everyone but the rich are hit hard, and everyone else hits bottom. The smartest billionaires are apparently heading to Mars.

In Canada government has done a good job of handing out money quickly to Canadians and a program expiry date time was an especially smart idea. I have the feeling that extended families would have played a bigger roll in the first, two to six weeks of the shut down. I can still hear my parents saying, “nothing is free.” It is still  not clear if everyone  deserved what they got. This is billions of dollars we are talking about in the first half year. The expiry date did  give the government the option to shut it down or extend the program as needed. Every new tax and program should have a time limit so they just don't go on indefinitely.

The one good idea is corrupted but could lead to a much bigger and better idea. I can see how the WE Foundation connection to youth was an attractive idea because students have to actually do something to enter their events. Paying for volunteer work may create an unintended side effect in the future but in the short term a good idea. It may even be a model for a just and new way of doing welfare. Unfortunately politics gets in the way,but no organization should be discouraged from coming up with good ideas during this unusual catastrophe.
“We can help,” shouldn't need a lobbyist license. I know it is much more complicated. In a sense I am talking about a much greater good. One that entangles liberalism,but time have changed, so can ideas.
The expectation that the government will bail everyone out, has is itself an unintended side effect for the future. The WE group gets people earning rather that feeling entitled and the hold back on the money insures the money  would not be wasted on party weekends. This plan is worth looking a for next year or this years holiday breaks. Sadly the WE group should not be bankrupted by partisan politics. It is only money, they are printing it everyday, have been for years.
Regardless, the money may not be finite and another big shutdown could be very dangerous for Canada as a country.

De-industrialization and the age of automation and robotics is upon us.
The ability for governments to save the day in  high cost of living countries means that every social rescue project involves billions of dollars in places like Canada and trillions of dollars in the US. Canada and the US embraced the first billions and the US is  rejecting the trillions. The WE plan was costed at less than a billion.
The question is can governments create new social programs in this high cost environment? Most of the social programs in Canada where created in times of financial crisis, but the costs to government were low as wages and material were minimal. Canada rolled out it's first old age pension payment when the life expectancy of the average Canadian was just 67 years of age. That plan was flush with cash  for the longest time, no one bothered to save. No one bothered to save surpluses at the government nor corporate levels because the decline was slow steady and unstoppable. At the beginning of the first Gulf War and Afghanistan war most western counties had a surplus of tax dollar cash that made going to war,(wars) easier. The trillions spent ,and hundreds of thousands of casualties ,in far away, never ending desert warfare would have created wonderful social safety nets in the US and not bled North America and the EU and causing the added trauma of the needless mass migration of millions of war refugees.

Several Canadian political parties are committed to making Canadians dependent on government through various programs that started decades ago and for good reasons. The  Covid virus has presented new ways to increase this aim with mixed results. People were paid to stay at home from work to fight the virus. Now it seems they may have to be paid to go back to work.

But that taste of $2000 a month to stay home,tasted pretty good.Many would be satisfied with $24,000 a year then cruise into the untaxed  underground economy. The government portion would be the poverty level for the working poor.

Covid can certainly change expectations to a global balance of wealth it was already heading to. The rich have solidified their position and the got richer the poor have risen slightly and the middle continues to fall with the help of government propping.

Getting back to the billions and trillions of dollars already spent and the next future debt trajectory with very near future shocks from the environment, artificial intelligence, robotics, and joblessness for humans . This was a past situation of the 1950'sand 60 for most of what we now call the middle class. Everyone was in the same boat back then, poor in a low wage low cost economy but with a boat that included an affordable home and one car, few kids went to university and there were unskilled mostly resource and manufacturing  jobs for everyone who wanted to work. This near future group will not be so lucky without help and tax dollars from people receiving benefits that truly benefit.

Today,economists are already looking at the money, in particular the amount and creating new economic policy models. The Bank of Canada and the Fed in the US sets interest rates but their is little room there. This isn't the first financial rodeo and borrowing and bailing out is tapped out too. Been there, done that since 2008. This new model is kind of sketchy. Zero interest policy means the public pays the banks to hold it's money instead of the other way around.

There is a famous saying that journalism fallows the money.

Governments live on tax dollars and there will be little of that in 2021 and possibly beyond. (For the past past few decades education, health care, infrastructure and welfare have been dangerously under funded. Even for the most optimistic,the condition of the streets should be enough of a warning things are not right.)

What happens if  there really is no money. We have been in the era of no money for some time. People don't even carry money or wallets, money is seldom seen nor  handled and the smartphone seems to the a favoured alias for currency. Real estate prices reflect a non money fantasy. In this age of Covid money handling is discouraged.Could anyone actually display a trillion dollars for people to see. It does seem to be pocket change the way it is promised.

In our monetary system there are only two countries that can print money (the US and Britain) the rest have to borrow. Canada has to borrow,good thing that money doesn't seem to exist and deficits take care of themselves. Lets build a better more thoughtful plan for this age of change. opinion by Ken Gigliotti Aug 2020