Far-right extremism is rising because Canada, the U.S., UK & Europe are making the same mistakes as Social Democrats in Germany after 1929 (2024)

Far-right extremism is rising because Canada, the U.S., UK & Europe are making the same mistakes as Social Democrats in Germany after 1929 (1)

There is plenty of hand-wringing, and not much else, about the rise of far-right extremism in “the West”. Of course, there have always been such elements, but there is genuine and bitter hatred as societies splinter into tribal factions, some of them blatantantly lawless violent criminals. Authorities like police are often unable to cope with these disturbances, because from a practical point of view, they are not equipped to. Governments and police forces in Canada are not prepared for massive surges in protestors who are also breaking the law.

While the factions blame each other, or government, the real problem is that the private economy is falling apart, after a series of massive shocks over many years, where the repairs to the economy kept setting us up for bigger crises down the road.

Those shocks to the economy could have been measured in over the last 30 years, including NAFTA; 1987 stock market crash, and a 1989-1990 recession in Canada and the U.S., and Japan, followed by austerity; The Soviet Union collapses and enters the world market; 1990s currency crises in Asia & Russia; the 1999 dot-com crash; the 9/11 attacks; China entering the World Trade Organization; the 2003 Iraq War; the 2008 Global Financial Crisis; the European currency crisis of 2010; the price of oil plummeting in 2014 because Saudi Arabia and OPEC started a price war; the 2020 pandemic.

Now, we’re seeing a rise in far-right extremism and ultranationalism around the world. I’ve written about this before - a study that showed that this is what happens after a “financial crisis” which really means “a mass private debt crisis,” where there is loss and deprivation.

To understand why and when that happens, the following five paragraphs by Mark Blyth from his book Austerity, the History of a Dangerous Idea, are perhaps the most important in economic history, because it shows how our understanding of the some of the most important events and ideas in history, are completely wrong.

It’s widely and wrongly believed that Hitler and the Nazis rose to power after hyperinflation in Germany. As I wrote earlier, the hyperinflation in Germany was caused by uncontrolled private money creation: under an agreement with the Allies, the German Central Bank was privatized, and when private banks extended people credit, it was legally considered the same as government money. Private banks were quite literally given a license to print unlimited money, which they did, with the result that in the month of October 1923, the inflation rate was 30,000%.

The hyperinflation ended immediately with the introduction of a new currency.

“Moreover, while the hyperinflations are seen these days as an uncontrollable phenomenon, this one at least was not only deliberately provoked, it ended rather quickly with the introduction of the renten-mark, which was tied to, of all things, real estate assets. The new stable reichsmark succeeded it within a year. The next four years saw the German economy perform rather well, so long as US capital flows kept flowing. When those flows turned off in 1929, the German government abandoned the countercyclical policies it had pioneered in the 192os, especially when its unemployment insurance scheme generated a large deficit, and reached for the austerity levers. * The Reichsbank raised interest rates to encourage capital inflows, but the flows failed to arrive given the general shortage of liquidity in Europe following the Fed's interest rate hike. The only thing that happened was that the economy tanked further. Official reserves fell precipitously, and so did the gold cover.+
In politics, the Social Democratic Party (SPD) abandoned the governing coalition that had been in power since 1928, and in response Center Party leader Heinrich Brüning was appointed chancellor in March 1930. Lacking parliamentary support, Brüning implemented austerity policies by decree to right the financial ship, which in the main took the form of extremely large budget cuts. Despite being out of the coalition, Brüning's policies undermined support for the Social Democrats still further since they saw no alternative to austerity and continued to passively support them. The National Socialists unsurprisingly picked up support in the 193o election on the back of this cross-party austerity policy, winning 18.3 percent of the vote and becoming the second-largest party in the process. They were, after all, the only party actively arguing against austerity. Indeed, perhaps the oddest thing about the entire German experience with austerity in the 193os was how it was ruthlessly implemented by the left and so quickly abandoned by the right.
As Sheri Berman brilliantly illuminates, the German Social Democrats of this period (the SPD) were intellectually Marxist but programmatically Ricardian: classical liberals in socialist clothing. Marx's economics were, apart from his view of the rate of profit and the pas-sibility of a general failure of demand, as much Ricardo's as they were his own, especially as they were interpreted by the leading "theolo-gians" of the German Social Democrats. Upon such a view, when the economy was in a slump, there was literally nothing to be done except Let the system melt down until socialism magically appeared.
In fact, for the SPD, good economic policy meant being more orthodox than the liberals they argued against. As SPD member and one time vice president of the Reichstag Wilhelm Dittmann put it in a speech to the SPD faithful, "We want the current situation [the crisis] to develop further, and can only follow in the general direction that these tendencies show us.", In response to this structuralist fatalism, the German trade unions began to agitate for an alternative "full-fledged Keynesian type assault on the depression" in direct opposition to SPD policies. This reflationary policy took form under the aegis of the so-called WTB plan (named after the formulators' initials), which the unions pressed hard upon the SPD and the government. Brüning ignored the plan and pressed on with austerity. But the SPD hierarchy set out to destroy it since it offended their faith.
The SPD's main economic theorist Rudolph Hilferding argued that not only was the WTB plan un-Marxist, it "threatened the very foundations of our program."* As Berman put it, the SPD, as good Marxists, still saw letting the business cycle run its course as the only possible policy. Like the Austrians that they opposed in every other way, the SPD thought that intervention would simply delay the inevitable and make matters even worse. This was hard-core austerity thinking, except it came from the heart of the putatively democratic left.”

There is an old saying, that the political spectrum isn’t a line, it’s a circle, and the far left and far right meet at the extremes. In fact, they meet in Karl Marx. Keynes is not, and never was the economist of choice of Marxists or socialists. Keynes is a liberal, and when his policies were implemented, it helped ushed in the “golden age” of capitalism and the creation of the middle class.

Their economics are still fundamentally fiscally conservative, and all of the parties of the left in the UK (Labour), Canada (the NDP) and the US (Democrats) rely on economic formulas that based on “classical” economic ideas, that are “fiscally conservative,” and because they are “libertarian,” the chaos caused by lawlessness justifies more investments in oppressive state interventions.

Governments and societies fail when their fundamental economics are too conservative, and too inflexible in responding to crises, and more than anything, they collapse under the weight of private debt. This has been the case for centuries - the Roman Empire collapsed because of debt. Then, as now, if people borrowed for a venture - including money to pay for seed for a year’s crop - they could be unable to pay their debt, and lose their land.

Gradually, instead of wealth and income being unequal, but more evenly spread, the wealth and property is in the hands of a few oligarchs, who are able to earn without working themselves, because they have loans and properties and earn interest and rent.

Moreover, the oligarchs can trade between themselves. Because they are so large, when interest rates are low, they can borrow astronomical amounts and can afford to pay prices many multiples of times higher than the vast majority of buyers can afford.

Whether it was the crashes of 1929, 1987, 2008, or historical incidents like the South Seas Bubble or the Mississipi Scheme, they all have one thing in common - the superhigh prices of property and assets are all being driven and paid for by a mountain of debt. That includes today’s stock market, which creates the illusion of a booming economy, as well as the real-estate crisis, which is where the real destruction is taking place.

In the 1970s, there was a fundamental shift in how societies looked at, measured and calculated economics, called “neoliberalism.” Franklin Delano Roosevelt and the Democrats in the 1930s were “liberals” in the old, 19th century “classical liberal” sense of the word. That meant government wasn’t supposed to intervene in the economy. As a philosophy, that’s all it ever really was - it’s really a set of moral values about the very punitive, cruel and callous way people think the world should work, as opposed to all the actual policies that actually created wealth in the first place.

The historical reality is that every single country that became wealthy did so with protectionist policies. Great Britain, Canada, the United States, Japan.

They also tended to have robust governments. It has to be said that one of the defining features of prosperous, lawful and peaceful countries - of liberal democracy and the rule of law is that there are institutions with the authority to legally rein in powerful and dangerous individuals and groups who are harming others. That is the purpose of government.

The problem is that all of mainstream economics for more than a century is still based around the same ideas that are based on how an aristocracy should work, and ideas on how debt should work left over from the Roman Empire.

As Blyth said, Marx’s economics are, fundamentally, far right. Stalin’s Soviet Union ran on the same principle of “supply-side” economics, except the state got to take all the surplus. So did China. So has Great Britain. In every case, it caused a disastrous famine that killed millions.

One of the reasons people turn to the far right is essentially that because people are attacking one another all the time, they figure they will get with the group that’s big enough to keep them safe from the others. This is why fear and division and polarization are both self-serving and self-perpetuating, because the premise of the politics is that the other side is out to destroy you. And it may be true.

We went from having “classical liberal” economics in the 1920s - which created the conditions for the 1929 Wall Street Stock market crash, and helped create and deepen the Depression, where people’s economic losses were truly shocking. Western Canada was one of the areas that was the hardest hit in the world. Unemployment of 75% in some areas, the price of wheat which had made so many so wealthy for so long, collapsed.

When FDR, brought in the “New Deal,” he created a new meaning of the word “liberal.” The classical liberals rebranded as “fiscal conservatives.”

However, Keynes never expressed his ideas in specific mathematical formulas or calculus. This has been the case with other economists, like Minsky, who describe complex interactions but don’t model them in calculus. That’s reasonable. Both Keynes and Minsky were writing at a time when economic data collection and statistics were often poor, and computers either didn’t exist or weren’t available.

Instead, people grafted old ideas onto Keynes - some simple formulas that aren’t realistic. The reason for challenges modelling Keynes’ vision of the economy was, again, that the project was incredibly complicated. The data gathering and mathematical calculations required were humanly impossible.

But grafting old, static ideas onto Keynes was also a problem, because there was a mathematical challenge for modelling Keynes, which was that there was always uncertainty. There were always going to be missing information.

In the 1970s, there was a counterrevolution against Keynesian policies, with “neoliberal” ideas, and neoclassical economics, which were the old ideas on steroids.

The point to all of this is that throughout this time, as inequality has gotten worse, as good jobs are hard to find, after crisis after crisis, the most important economic ideas and formulas that quite literally govern every aspect of our life do not remotely begin to describe how the economy and finance work.

In the last decade, more and more economists have been speaking out about how the rules by which governments, countries, banks, and businesses are running the economy are wrong.

There are many economists, especially Post-Keynesians, who are actually working on mathematical models that actually describe how the economy works, so that we can actually address the crisis we are in.

One of the most important things that makes a difference between Post-Keynesians and mainstream economics is the how money works and is created in the modern economy.

Mainstream economics 101 treats the economy as a balloon, and if the government spends more, it will inflate. This is wrong in multiple ways.

Modern Economics & Money Creation by Banks

This is one of the most important differences between modern economic theories and the mainstream economics that is being taught in universities and widely used by central banks, and central bankers, and major international institutions.

In 2014, The Bank of England printed a paper recognizing that most money in modern economies is not created by the government: it is created by banks when they extend credit, usually in the form of a mortgage. The paper opens with the statement:

“This article explains how the majority of money in the modern economy is created by commercial banks making loans.
Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.
The amount of money created in the economy ultimately depends on the monetary policy of the central bank. In normal times, this is carried out by setting interest rates. The central bank can also affect the amount of money directly through purchasing assets or ‘quantitative easing’.

That is the recognition that banks create money by extending credit.

While this might seem like a lot to wrap your head around, it is because money is, as I have said, digital, and an information technology. Just as the value and meaning of text in a book comes from the text itself, and the ways we interpret language, the meaning and value the words express has nothing to do with the intrinsic value of the medium the text occurs on. The words or numbers could be preserved in any medium a clay tablet, papyrus, a coin, a paper ledger, a rock face, or an electronic record.

That information can be created and erased, because its meaning and its value is based on the information.

“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower's bank account, thereby creating new money.”

“Broad money is made up of bank deposits — which are essentially IOUs from commercial banks to households and companies — and currency — mostly IOUs from the central bank.(4)(5) Of the two types of broad money, bank deposits make up the vast majority — 97% of the amount currently in circulation.(6) And in the modern economy, those bank deposits are mostly created by commercial banks themselves.”

So 97% of money in the economy is created by commercial banks who are extending credit.

“When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created. For this reason, some economists have referred to bank deposits as ‘fountain pen money’, created at the stroke of bankers’ pens when they approve loans.(1)”

The reason they can do this, and believe that it is sustainable. One is that the loan itself is being guaranteed by the borrower. A loan, or a mortgage is a promise, where the bank’s return is secured in multiple ways. First, the individual who is borrowing has signed a legal agreement promising to pay back all of the principal, plus interest. Second, the loan is secured against an asset, so if the invidual can’t pay, the bank can seize the asset, sell it, and get their money back.

The banks make money on the interest.

“Just as taking out a new loan creates money, the repayment of bank loans destroys money.(3) For example, suppose a consumer has spent money in the supermarket throughout the month by using a credit card. Each purchase made using the credit card will have increased the outstanding loans on the consumer’s balance sheet and the deposits on the supermarket’s balance sheet… If the consumer were then to pay their credit card bill in full at the end of the month, its bank would reduce the amount of deposits in the consumer’s account by the value of the credit card bill, thus destroying all of the newly created money.”

On the one hand, there is a continual process of lending and repayment, so that private credit money is continually being created.

This one change means a radically different economic picture than what we are generally told. “Supply side” or “trickle down” economics, where you have to “build wealth before you distribute it” makes no sense in this story. Banks do not lend from existing stores of money (your deposit is a loan to the bank), or reserves (which are used to pay other banks), they extend credit, and are able to do so in part by a complicated juggling act - of keeping all the financial balls in the air.

It also means that the entire story of government impacts on inflation through public money creation is dwarfed by the impact of private money creation.

If this seems like an inherently unstable way to run an economy, it is.

When we return to every financial and economic crisis of the last 30 years, listed above, the reaction after every one has generally been to blame the government, and to try to stimulate the economy with lower interest rates.

Lower interest rates are seen as lowering the price of money, and reducing the cost of borrowing, but this ignores the real-world dynamic that artifically lowering interest rates, degrades the quality of all loans being issued across the economy, because it creates a colossal gush of new money in the form of loans. Cutting interest rates in half can double the size of a loan that someone will qualify for, so dropping interest rates means that loans will get bigger.

The loans and new money will be based on the capacity of a person or an institution’s monthly debt-servicing capacity. Because we live in profoundly unequal societies, low interest rates mean that people can borrow more - in newly created private credit - than before. People with “bad credit or no credit” will suddenly qualify for loans, and people who qualified for loans before, can get much bigger ones.

In Canada and around the world, income and wealth is not a bell curve or a steady slope - it is a power law, where wealth starts to grow exponentially in the top 10%. This means that individuals and organizations - corporations, pension funds - with vast wealth can also tap into this lending.

The vast majority of this private credit-money creation is being secured against an asset - a property, or possibly investments, and this is why Canada and the world have a massive asset-bubble in “everything”, and the ownership of assets is massively concentrated. That’s what wealth inequality is: There’s a certain amount of property in the world, and a small number of individuals own more and more of it.

All of this has been fuelled by private credit money-creation, and because of the nature of the investment, where the loan is made against an existing asset, instead of investment going into the creation of new assets and new value - which is perceived as being risky, it goes into driving up the price of a “sure thing” - housing, or stocks.

In response to the 30 years of crises listed above, central banks’ response has been to “stimulate” the economy with lower interest rates.

The central idea behind fighting “inflation” has been the preservation of asset prices, even when they are inflated and the result of reckless speculation, paid for with debt.

That is why Canada has a housing crisis, just like New Zealand, the US, the UK and countries across Europe, where there is political unrest.

As Edward Chancellor wrote two years ago

By aggressively pursuing an inflation target of 2% and constantly living in horror of even the mildest form of deflation, they not only gave us the ultra-low interest rates with their unintended consequences in terms of the Everything Bubble. They also facilitated a misallocation of capital of epic proportions, they created an over-financialization of the economy and a rise in indebtedness. Putting all this together, they created and abetted an environment of low productivity growth.

Interest rates, and inflation are both a price on uncertainty. The more uncertain you are about getting paid back on a loan, the higher the interest rate. Conflict and crises create uncertainty about whether people will have money to either collect revenue or pay bills. This is self-evident.

In 2014 in Canada, the price of oil collapsed, plummeting from a sustained high of over $100 a barrel, to under $50. The impact was devastating and immediate - the cancellation and selloff of billions of dollars in investments (financed by debt) which would no longer be profitable. The entire cause of the crash is known, and public - it was a decision by Saudi Arabia and OPEC to put upstart shale oil producers, especially in North America “in their place”.

The Bank of Canada responded by dropping interest rates - which does nothing to stop the bleeding in the oil sector - including all the workers who were deep in debt because they were offered colossal mortgages based on oil boom incomes that had suddenly evaporated.

Dropping interest rates, once again, meant a massive gush of money into the economy in the form of newly-created credit money in the form of debt, being used to drive up the cost of assets - housing, stocks, vehicles, while new capital investment in innovation or productivity don’t happen.

When this house of card truly collapses, as it did in 2008 during the Global Financial Crisis, in 2010 in Europe after the Euro Crisis, and in 2020 during the Global Pandemic, central banks had often already lowered their interest rates so far that they couldn’t go farther (some countries actually started having “negative interest rates).

That’s when central banks would engage in “quantitative easing”. This is when central banks use their power to create money out of thin air, which is given to private institutions who are in crisis. The assets that people have bought, whose values and prices have been driven up by billions and billions of dollars in privately created credit money, are purchased by central banks in an effort to keep their value from collapsing.

This is a colossal economic intervention in economies, where the power of public money printing is being used to stabilize and bail out investors when their investments aren’t paying off.

It is called a “liquidity crisis” as if investors don’t have enough cash on hand. What is actually happening is an insolvency crisis. The economy has too much debt, created in the form of private credit, to ever be repaid, and because that debt also has interest attached, a collapse is inevitable - unless there is a continual injection of new money into the economy from some source. That is why austerity is doomed to fail: it isn’t “belt-tightening”, it’s a tourniquet that cuts off the flow of money.

Instead of letting the “free market” prevail, and allow a “correction” to happen, we have seen ever-growing interventions by central banks to the tune of hundreds of billions and trillions of dollars to support the high price of investments - which are owned by a fraction of the population.

This is not free-market capitalism, or socialism. It is, as one person put it “financial communism” where unlimited public resources are only available if they are being used to prop up the price of assets - and not for the creation of new value, or for rebalancing the system - and the long-term value of assets - by ensuring that the wider population has the capacity to pay its bills.

There’s a line in Keynes General Theory where he talks about the idea, based on the gold standard, that in a crisis people can make money by mining gold.

“It is curious how common sense, wriggling for an escape from absurd conclusions, has been apt to reach a preference for wholly 'wasteful' forms of loan expenditure rather than for partly wasteful forms, which, because they are not wholly wasteful, tend to be judged on strict 'business' principles. For example, unemployment relief financed by loans is more readily accepted than the financing of improvements at a charge below the current rate of interest; whilst the form of digging holes in the ground known as gold-mining, which not only adds nothing whatever to the real wealth of the world but involves the disutility of labour, is the most acceptable of all solutions.
If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.”

Keynes makes a point, which is being missed by our current economics: the current, massive interventions in the economy by central banks through interest maniupulation and through “quantitative easing” are direct interventions to drive up or prop up asset prices of a few - which are collapsing because the fundamentals of the private economy are not supporting their worth.

the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is.

Breaking out of the Trap.

There is a reason people believe that the value of these assets must be preserved, but the “inflation fighting” policies of central banks consists in both lowering interest rates and increasing debt, or hiking them and driving vulnerable borrowers into bankruptcy, in order to “bring down inflation,”

Part of the issue is the belief that people cannot lose their investments, which is at odds with the very nature of investments. The risk can never be zero.

As a matter of existential, scientific, and economic fact, we live in a world of uncertainty where the value of a property can be destroyed, by accident, by natural disaster, by competition, or because it is was overvalued.

This is not just a dilemma - it is a trap, and that’s true for Canada, the UK, the U.S. and other countries. There is a housing crisis which is making it impossible for people to buy a home they can afford.

And in every country, because housing, real estate, mortgages and other finance and insurance are such a colossal part of the economy, that shrinking those assets will mean more job losses, and of course, people will fight back, not just for lost profit, but because they don’t want to lose their jobs, pensions, and more.

It’s not just that people who counted on proceeds from the sale of their house. The housing bubble is an asset bubble, backed by mortages. In Canada, those mortgages are packaged up into investments that, by law, are guaranteed to be as certain to be repaid as if they were Government bonds. Canada’s banks and insurance companies and mutual funds and other major institutions that pension funds invest or depend on mortgages as a source of revenue.

That’s why the problem is much bigger than just retirement losses for individual homeowners. It’s more than just smashed nest eggs. Many Canadians have few or no other assets than their home to support their retirement - because the price of houses keeps going up.

This is a direct consequence of decades of policies where elected officials have not just been been urged to stay out of economic management, the power they have to intervene has been stripped from them, based on a 1970s model of the economy that is crude, simple, and wrong, though its fallacies are protected by a clique of economists whose perfect hermetic calculus is generally too baffling to challenge, despite the string of crises it leaves in its wake, because the entire model of money creation and inflation is incorrect.

No matter what elected governments have done, monetary policy is set by Independent central banks, using these crude monetary models, which do not model or include banks, debt, or money created through the extension of credit.

That is why, for decades, central banks response to stimulating or “cooling” the economy has been like a boa constrictor tightening its coils every time gradually squeezing the breath out of its prey with every breath.

How to avoid a Depression

Canada, the U.S. and the UK are all facing elections. While Labour is likely to win in the UK, it is doing so by deliberately abandoning all of its progressive policies, seeking to appeal to political conservatives. The U.S. and Canada, where the Biden Democrats and the Trudeau Liberals are governing, are being blamed for inflation and far-right Republicans and far-right Conservatives in Canada are promising to “fix” the problem by gutting government, with massive cuts and tax cuts.

Just as developing countries are acting like German Social democrats in the 1930s, conservatives are promising something even more harsh - a turn to libertarian politics when we are already at a time of record inequality, where that inequality is the result of the actions of private market that has crashed the world economy, with methods ranging from exploitive to criminal.

This is also why both the far left and far right can not and will be able to fix the problem - because they are both fundamentally opposed to government and the independent rule of law. The vision of the far left is essentially capitalism, but run by government. The vision of the far right is government, run by capitalism. Their political and partisan extremism is defined by a quasi-religious moral sense of economics and society (sometimes, explicitly faith based).

What will work is a “Marshal Plan” comparable to how Europe and North America were rebuilt and recovered after World War II.

The only time in history inequality ever got better in the U.S. and Canada was between 1938 and 1945. It stayed stable until about 1975, when the single minded focus on fighting inflation began .

What is required to escape the trap is a multi-year, post-pandemic recovery plan, with two fundamental components that were shared by the Marshall Plan and the reforms that created the conditions for greater shared prosperity and a properly functioning market in the 1950s.

The private economy is crumbling under the weight of overhead costs related to debt, housing, rent, and insurance, which in turn undermines competitiveness and drives up labour costs, because workers cannot afford a roof over their head because of debt-driven property speculation.

What is required to make it work is a colossal “debt for equity” swap across the entire economy. This can be achieved in a number of positive ways.

Reduce and restructure private debt. This has been the recommendation of William White, a Canadian economist who is a former economic advisor to the Bank for International Settlements, the OECD, and has written extensively urging developed nations and central banks to reform their monetary policy.
The reason this matters, and is so important on so many levels, is twofold. One, it provides real, genuine and long-lasting financial relief to the individuals. The excess debt that people are carrying is not just a matter of personal decisions, it is a direct consequence of economy-wide policy impacts by central banks and banks.
The importance of this action to the housing market, to future generations, to seniors, and to actually returning housing to affordable levels, cannot be understated. Debt levels are a liability, and the trillions in dollars of debt that Canadians have taken on create a floor on housing prices. By making it possible to reducing and restructuring debts, it means turning a liability into an asset.
An Industrial Plan
Countries requires a sustained investment and industrial plan in productive industries
These do not have to be publicly-owned or run, and in addition to ensuring that provincial and municipal governments are making essential investments in infractructure, education, and health care, Canadian entrepreneurs and businesses in the productive economy that need access to capital, especially “patient capital.” That is “equity” investment instead of loans.
Direct job creation through a federal job guarantee that provides “a job, at non-poverty wages, for all citizens above the age of 18 that sought one,” which can be administered by “member states, in conjunction with municipalities, localities, and community groups,” and in Canada, First Nations. The purpose is to ensure that people can work. It is not a private-sector subsidy, and can be used by “social enterprises”.
More competition through breaking up monopolies, and allowing for more domestic competition.

This is exactly how this was done, and succeeded in the past. This is how the U.S. and Canada got out of the Depression, and paid for fighting the Second World War, and created the conditions for a better post-war world that had been scarred and destroyed by the same basic lawless, reckless and punitive economic ideas that created hyperinflation, austerity, asset bubbles, crashes, depressions and war.

Financial crises are not new, and for centuries they have led to years and even decades of crises. The 30 Years War in the 1600s was preceded by a colossal financial crises across Europe, when the value of money was destroyed by uncontrolled private money creation. Austerity in Japan and Germany drove ultranationalism.

A study of 140 different jurisdictions showed that after financial crises, countries often become polarized - moving far right and far left at the same time, which solves nothing, and often makes the sitation impossible to resolve.

There is a better, more peaceful, reasonable and political way out of the crisis we all face.

There are a number of very prominent economists who are chiming in to say this needs to change. In 2016, Paul Romer said that modern macro-economics was so divorced from reality and the truth, it wasn’t just “post-modern” it was “post-real”. William White has called for fundamental reforms to monetary policy. Joseph Stiglitz has written a book arguing that free financial markets haven’t freed the rest of us, and Angus Deaton has also said it’s clear that economics isn’t working. Romer, Stiglitz and Deaton have all received medals named for Alfred Nobel, from the Swedish Central bank for economics.

This is not just urgent: it is a five-alarm fire. This is about democracy, and freedom, and shared prosperity, because what the far-right and the far left promise is “freedom from oppression” because the implicit promise is while you won’t be among the oppressed, someone else will be instead. That’s what makes it a revolution - it’s a subsitution, not a change.

This matters even more because - aside from the open lawlessness and criminality that is on view among the far right and far left - their economic views will result in more suffering and, if history is any guide, a Depression.

This does not have to happen, and should not happen. But this is why far-right conservatives are leading in the polls in the U.S. and Canada and why authoritarians are being elected around the world - they don’t care about or follow the rules, and the economic status quo that liberals and progressives are trying to defend was never liberal or progressive.

Our current crisis is *not* government overspending and debt: the private economy is crumbling, because of a series of massive shocks and ruinous monetary policy that has created an "everything bubble," with private credit being extended to inflating asset prices instead of investing in productive work.

“Athenian democracy” began under Solon. When he came to power, there was incredible inequality and unrest, the economy was stagnant and people were crushed by their debts. He created a debt reduction scheme, which didn’t please the radicals who wanted to see the rich stripped of their property, and angered the rich because they weren’t going to get all the interest on their debt back. Western democracy began with debt forgiveness. It was renewed after the Second World War, with debt forgiveness for Germany and in Canada.

There is a better path out of this, and a different choice available to governments, because this is also, fundamentally a question about responsibility and accountability in a democracy.

The 1970s ideology of Neoliberalism was that responsibility for intervening in the economy had to be kept out of the hands of elected officials, and that in order to reduce inflation it was necessary to cut taxes, balance budgets and avoid fiscal stimulus, and encourage “labour mobility” by undermining job security.

What this all missed was the key aspect of accountability - which is that the costs and harms of decisions made by non-elected or appointed officials - central bankers - are never borne by those individuals or institutions. Edward Chancellor has argued that pushing interest rates too low resulted in an “everything bubble” and William White says that Central Banks’ fixes keep making things worse in the long run.

That is because when central banks screw up - even though they have the exclusive right to create public money - the costs are borne by citizens, businesses, communities and their governments, never by the Bank itself. Part of the reason for the argument that central banks should play a role in fixing the problem, is that they caused it in the first place - and there is plenty of historical evidence that when they do it right, it works - in Canada, in the U.S. and elsewhere.

It can be done, and it should be. We are in a period of turmoil and transition, where the rules for governing and the economy are being rewritten. If it isn’t done by people with a commitment to democracy and the rule of law, it will be done by people who have none.

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