Current economic thinking can be shown to be utter nonsense

Correspondents have told this columnist that these reviews are excessively pessimistic. Readers should know that no comments are disregarded.

Perhaps the good news about Canada’s economic position needs to be reinforced. Of course, it should be recognized that Canada’s financial position is among the best in the world.

Our federal budget deficits are quite reasonable, far below that of most nations, and, for the time being, justified. Our banking system is among the best in the world. We have an abundance of natural resources, which are in great demand, and our thriving agricultural sector will help to alleviate the distress of the burgeoning world population.

Nevertheless, despite all those positive factors, we are confronted by very serious problems; there are many reasons for concern.

Approximately 40 per cent of our gross domestic product is derived from exports to the United States. We, therefore, are beholden to events in the United States to a degree that must be taken into consideration.

The Barak Obama administration south of the border makes it clear that it thinks it can borrow and spend its way out of an ever-deepening hole. Government spending there exceeds 25 per cent of gross domestic product, with 43 per cent of that, some $1,164-trillion, to be borrowed. Overly optimistic revenue projections will entail even bigger deficits. Future debt service costs will be rising exponentially in coming years.

What is so startling is that many “bright” people have concluded that wealth can be created by merely expanding the money supply. Obviously, that is utter nonsense.

The people in charge of the U.S. Federal Reserve System and our Bank of Canada, who have great academic credentials, cannot honestly believe that money printing will revive the economy. Certainly, they must realize that is not sound economic theory.

The general public is complacent and has not thought clearly about the lack of logic here.

If increasing the money supply would lead to an economic revival, then a quick visit to Zimbabwe would reveal the hollowness of that approach, as that nation has printed so much money that its currency has been nearly destroyed; it has lost just about all of its value.

History is replete with examples of currency debasement such as France, in the 18th century, and Germany, with its wild inflation following the First World War. The total failure of money supply expansion has been demonstrated time and time again.

Perhaps, too, our financial authorities realize that – so they no longer publish data on money supply. The tragic consequences of an oversupply should awaken us all to the mess that is being created.

It should be no surprise then, that these columns have a negative bias.


Bruce Whitestone