Austerity and kitchen table politics

Nobel-prize winning economist Joseph Stiglitz describes austerity as a suicide pact; a deal between the powerful business elite and government to reduce public spending. That leads to a slowdown in the economy which leads to a “vicious cycle of spending cuts and slumping growth.”

austerity

Dinyar Godrej elaborates in the New Internationalist magazine: “Austerity is being used as a tool for ever-increasing privatization, either with the collusion with moneyed-elite in government (as in Britain), or by the imposition of it on crisis-hit countries. . .”

Canada was on that path until the election of a new Liberal government. The intention of the Harper government was to reduce the size of government and reduce taxes; code words for reducing the effectiveness of democracy by starving government of cash.

The politics of austerity hit home in what I like to call “kitchen table politics” where some imagined family sits around the table and has frank discussions about their finances. Former Prime Minister Harper liked to play these politics. In a desperate bid to show the cost of Liberal promises during the last election, he turned to game-show tactics. Harper, sleeves rolled up, shared the stage with a family. Each took their turn peeling bills from a stack of cash and laying them on the table as a comical “ka-ching!” sound effect filled the room supposedly illustrating the cost of government spending.

Bad theatre aside, kitchen table politics ring true because voters confuse the government finances with their own. If families must tighten their belts then so should governments. In that light, Canada’s spending spree seems to defy logic: the Liberal government has promised to spend billions just when our economy is going through tough times.

When times are tough, so goes the rhetoric, hard choices have to be made. Austerity is the bitter pill that we all must to swallow to return the economy to health. Business confidence will only be restored when governments tighten their belts. Tax breaks for corporations will provide an incentive to invest more and create jobs.

The austerity of kitchen table economics seems to make sense. “The reason is clear,” says Dinyar Godrej, “In a depressed economy with increased job insecurity and worsening welfare provision, people want to hang on to their savings and not spend, prolonging the stagnation.”

Of course, it would be foolish not to manage spending when you lose your job. But austerity acts like a dark cloud hanging not over just the unemployed but everyone. Reduced spending perpetuates the downward cycle. Families need reasons to feel confident about the future.

Governments can create that confidence. Blind faith in corporations to stimulate the economy got us into this mess in the first place. Take Harper’s plan to make Canada an “energy superpower” as an example. It was a colossal mistake on two fronts. Emphasis on the exportation of our resources was at the expense of our manufacturing sector. His emphasis on small government left us with an infrastructure deficit.

Canada faces tough times but austerity would have made it worse. Government jobs carry the economy when the private sector can’t.

How to make money

Banks make money by creating it. By making money, I don’t mean that they earn it through fees and interest. And I don’t mean that they print it either  –that’s the job of the Canadian Bank Note Company.

The words How to Make Money on a chalkboard

No, I mean they literally create money: all 97% of it now in circulation. Author Peter Stalker exposes the trick: “Nowadays almost all money is created out of thin air when they make loans,” he explains in the New Internationalist magazine. It’s not how I thought it worked.

I thought that banks loaned out money that others deposited. It turns out that cash is only about one-tenth of the supply. In 1992, the Bank Act was amended to allow banks to keep only as much cash on hand as they deemed necessary.

This sleight of hand is best explained by an example. If I go to my bank and make a loan of $5,000, I don’t usually walk out with a wad cash. If I did, no money would have been created. Instead, an entry is made to my bank account; no cash is deposited to my account, simply an entry.

Suddenly, and with a stroke of a key, money that didn’t exist is there in my account. I can now write a cheque for $5,000 to buy a car from Fred. Fred can take my cheque and deposit it.

Now I owe the bank $5,000 (plus interest) and the bank owes Fred the same amount. All seems fair except for two things. The bank must keep $5,000 in reserve to pay Fred. Unless Fred withdraws the deposit as cash, the bank can do with it what it wants. If Fred uses the money for on-line bill payments, the newly created currency is passed around. And the bank collects $5,000 from me.

Pierre Parisien doesn’t think that’s fair because the $5,000 collected from me represents untaxed capital gains. He calls this bank reflux. A fairer system would be for the Bank of Canada to create all currency regardless of whether it’s banknotes or book entries.

“I suggest that the federal government be granted the exclusive right to create new money, whether in the form of currency, book entry, or even computer data. The Bank of Canada would be mandated to accommodate the chartered banks in the granting of credit, create the necessary funds, and loan them at zero interest to the banks. The banks, however, would have to repay this capital, thus giving the government the full benefit of the reflux.”

Another problem with banks creating money is that they encourage debt. When they can create money, why not persuade people to borrow in order to collect interest? However, as we found out in the Great Recession of 2008, too much easy money can drive borrowers into bankruptcy and the whole facade comes crashing down like a house of cards.

The profit motive is not the best way to create money. Switzerland recently considered a proposal to have the Swiss National Bank become the sole creator of money. Leonid Bershidsky suggests in Bloomberg that such a plan would reduce the money supply but that might be a good thing.

So many memories and dreams placed on tiny plot of land  

“When the angels had left them and gone into heaven, the shepherds said to one another, ‘Let’s go to Bethlehem and see this thing that has happened, which the Lord has told us about (Luke 2:15). ‘”

    inholyland.blogspot.com

The shepherds are part of a long list of visitors who have been interested in the birthplace of Christ. Believers of many faiths have been interested in the Holy Land for thousands of years. Too much attention by too many people.  Too many conflicting blueprints for this tiny patch of earth.

Christians want to turn back the clock in the Holy Land to the time when Christ was born – – to a time when their Lord and Savior walked the earth and spread his Gospel.  It’s long ago in a land far away.

If modern shepherds tried to get to Bethlehem and the Holy Land using a map, they would have trouble finding the place.  There is no place on the map called Holy Land and the name for the town of Bethlehem is uncertain.

Not to worry.  The shepherds could simply hop aboard a tour of the Holy Land and the tour guides would find the place. For example, a U.S. tour agency called Four Winds Bibleland Tour has a nine day, seven night, tour of the Holy Land.

On Monday, you arrive at Ben-Gurion airport in Israel. On Tuesday, you visit Jerusalem.  On Wednesday morning it’s Mount Zion and in the afternoon, Bethlehem.  You get the picture – – it’s a whirlwind tour.  The little town of Bethlehem, how they welcome the nativity industry.  There’s not much else.

Tourists might be surprised to find that Bethlehem is in the territory of Palestine, home to 32,000 Arabs and Christians who live there.  After the tourists are gone, the Arabs will call their town Bayt Lahn.

Jews want to turn the clock back even further than the beginning of Christianity.  They prefer golden times before that troublemaker came along 2,000 years ago, rumoured  to be the Son of God, the Messiah.  Jews dream of a return to ancient glory where “the king made silver and gold as common in Jerusalem as stones (2 Chronicles 1:15).”

Dreams and daily experience are as different as day and night for modern Jews and Palestinians.  Not only is it a land of unfulfilled dreams, it’s a place where “the other” is a plague upon the land.

Names, like designs for the Holy Land, have power.  Words and language are a way of calibrating thought.  For some Israelis, “Palestinians are like cancer. There are all sorts of solutions to cancerous manifestations.  For the time being, I am applying chemotherapy,”  says Moshe Y’alon, Israeli Chief of Staff.

Understandably, Palestinians have a problem with this point of view.  The Palestinian poet, Mourid Barghouti, calls it “verbicide.”  As someone whose uses words in his craft, he feels “attacked by the apartheid hate language of Israeli generals.”

Palestinians want to turn the clock back too, but only a few decades.   They prefer the way things were before the Jews descended on the land to carve Israel out of Palestine in1948.   Barghouti still remembers that time as a child growing up in the eastern hills of Palestine.

When fellow Palestinian arrived from afar, running for their lives, Barghouti asked his father what they were running from.  His father told him that their homes had been destroyed by “Zionist brigades that declared the State of Israel.”

“The battle for language becomes the battle for the land,” says Barghouti in the August, 2003, issue of New Internationalist magazine.  As far as Israelis are concerned, he no longer lives in his childhood home of east Palestine, they call it the West Bank or the Territories.   The Israelis propose changing the name again to Judea and Samaria, to evoke the biblical entitlement of Jewish suburbs.

The Holy Land is tiny -one-half the size of Nova Scotia, one-fortieth the size of B.C.  You need a magnifying glass to see it clearly on a globe.  But it’s also magnified by conflicting visions and realities.

The focus of so many conflicting dreams and truths on this tiny bit of land has heated it up -as happens when sunlight catches a magnifying lens and the subject catches fire.