We found his house and his farm at the top of the croche coast, on the dirt road leading to the chalets. Her face had been sculpted by decades of sunlight. His hands testified to innumerable roots torn from stubborn soil. He seemed to be perpetually chewing on a lump attached to the inner wall of his cheek. Monsieur Cloutier was ageless: 55? 84? Maybe 103.
Stopping one day on my bike, I found him in his studio. He had little conversation, but I asked him, on the off chance, if he had made his choice for an upcoming election. “Créditiste,” he said firmly. For what ? “Because with the Creditistes, the government bank will give money to the little people. Thinking of being clever, I asked him about the source of this money. He deigned to inform me of it. “Money is paper. Paper is wood. Worse wood, he said, pointing with his hand to the forest that bordered his field and stretched as far as the eye could see, we don’t have! »
He had integrated a central aspect of Social Credit theory: it was possible for a central bank to produce much more money than it claimed to be able to make. British economist Clifford Hugh Douglas coined the concept, arguing that recessions would be avoided by distributing a “social dividend” to citizens to balance supply and demand. The aim was to prevent a vicious circle of falling consumption and production from setting in during an economic downturn. This dividend would come from the creation, by the central bank, of additional money, up to the value of national production.
Taken up in Canada by the Social Credit parties popular in the countryside, the theory was ridiculed by economists, including John M. Keynes, and by the mainstream parties, arguing that the indiscriminate use of the printing press could only cause a galloping inflation. Everyone still had in mind the images of German peasants who, in the interwar period, had to transport in a wheelbarrow the sum of German marks needed to buy a loaf of bread.
For city dwellers, the Social Credit theory seemed too good to be true, and despite surprise successes in the 1960s, particularly in Quebec, the Social Credit parties would experience a slow death in the early 1980s.
Too bad, because if they had survived the economic crisis of 2008, they could have seen that at least part of their theory would come true. With the subprime lending crisis (subprime) and the bankruptcy of Lehman Brothers, the American financial edifice would crumble under the weight of the incalculable risks taken since its deregulation by governments that had served as bootlickers for the financial lobby.
Faced with the immediate risk of a massive destruction of stock market value, the Fed — the American central bank — decided to create money, ex nihilo, to make it available at zero cost. This had never been done, and was rarely considered (except by Social Crediters). The sums thus created reached, in 2008, 1000 billion dollars, to grow gradually to more than 7000 billion American dollars this year, without counting the efforts of European and Japanese banks (and the few billions pumped here by the from Canada).
Without this money creation, the global economy would have crashed far more than it did — 300 million people thrown into poverty, according to the UN. But the central banks were only half-creditists, and that’s a shame. The sums were lent to the banks, at zero cost, in the hope that they would lend them back to companies and individuals at reduced costs. But banks know how to do the math. It was more profitable to take that free money, buy US treasury bonds, which offered interest, and pocket the difference. And granting itself bonuses along the way, the technique has become a pump for income inequalities.
Several have proposed changing the recipients of these billions. Milton Friedman had, in 1969, evoked the possibility of loading helicopters with wads of banknotes that would be launched on cities, hence the expression “helicopter money”. Of course, the state knows how to mail checks to its citizens if it wishes. Several, including a former Fed chief, Ben Bernanke, and the star columnist of the
FinancialTimesMartin Wolf, demanded that we stop fattening the banks and their managers — guilty of having dragged the world into the crisis — in order to return these billions to consumers, who would in no way be tempted to buy bonds of the Treasury, but would pay their loans
mortgages and consume goods.
Nobody wanted to “credit” Douglas and the Social Crediters for this excellent idea. No government has implemented it, which private bankers have greatly appreciated. Nobody, of course, apologized for declaring the idea that central banks could create so much liquidity without causing spectacular inflation completely stupid. (It may be thought that this policy created the conditions conducive to the current inflationary surge, but it was not the trigger.)
I think back to a Social Credit assembly I had attended, in the poorly lit semi-basement of La Salle College, in Thetford, for the 1973 elections. I was amazed by the liveliness of the speakers. One of them announced such a major success for his party that he made this prediction: “The Social Credit scourge will soon spread throughout the province! I don’t know if it’s wave or curse, but from 2008 until today, a Social Credit belief that was derided yesterday has become financial dogma and has spread across the entire planet.
Father, columnist and author, Jean-François Lisée led the PQ from 2016 to 2018. | [email protected] / blog: jflisee.org