Canada’s “Enron-style” Economics: Most Wealth Redistribution Occurs Off the Books
The Trudeau Administration’s reappointment of Bill Morneau as the country’s Finance Minister last week was by far its most important.
During his first term, Morneau managed to hold together a shaky Canadian economy, which for the past three decades has relied on driving borrowing and spending increases at a pace faster than economic growth just to keep the system afloat.
It’s a Ponzi scheme, and insiders know it.
The question is whether Morneau—whose education, financial background, and previous work at the C.D. Howe Institute position him as one of the brightest lights in a weak Trudeau cabinet—can keep the game going.
Morneau’s biggest challenge will be operating in an environment in which estimated off-the-books annual wealth transfers* caused by the federal government’s suppressed interest rate policies are twice the size of his official budgets.
“Taxes on idiots”
The challenge is that it is hard to manage off-book wealth distribution, because so few people know that it exists.
That’s no accident. Economists figured out long ago that voters would never pay for bloated public spending if they knew its true cost.
Over the years, governments have thus developed a variety of revenue sources that voters can’t see. Corporate and payroll taxes are one example. Lotteries and casinos, which have been described as “taxes on idiots”, are another.
Supressed interest rates, which rob pensioners and retirees of the benefits of a lifetime of thrift, act much the same way.
Yet while economists distinguish between fiscal (overt) and monetary (off the books) policy, few have ever tried to quantify the difference.
In truth, as we noted last week , the process is complicated.
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