Mr. Speaker, everybody is asking the same question. Whether it is 28-year-old couples living in their parents' basements because they cannot afford the $300,000 increase in the average house price that occurred since the government took office; or the single mother walking down the grocery aisle noticing that she cannot afford nutritious food for her kids; or the senior who is watching his savings disappear as inflation gallops through his bank account and vaporizes what he spent a lifetime storing away for his golden years, all are asking the same question. Why are prices rising so fast?
Even the finance minister has had the epiphany that there is an inflation crisis. In fact, just last fall, she said that the greater risk was deflation, not inflation. She ignored my warnings to the contrary. She was not alone in that false prophecy. The current and the former Governors of the Bank of Canada, a Liberal journalist and Liberal academics all laughed when I started warning about inflation back in May of 2020.
Before we can answer why prices are rising today, I have to answer the other question that I often get, which is, how did I get it so right when so many others got it so wrong? The answer is that the Liberal academics, journalists and the finance minister relied on ideology; I relied on empirical economic science.
The man who wrote the book on inflation, the empirical economy scientist who won the Nobel Prize for it, Dr. Milton Friedman, published famous graphs in which he demonstrated a nearly perfect correlation between the rise in inflation and the increase in money supply per unit of economic output. He showed in all five of those graphs, the U.S., the U.K., Germany, Japan and Brazil, that the correlation was nearly perfect. When there is more money chasing fewer goods, we always get higher prices.
When I saw the government beginning to print money to pay for exorbitant spending, I knew that inflation was just down the road. The Liberals said that those old rules did not apply, that history was over, that it no longer repeated itself and that they could ignore the thousands of years of economic history, which had demonstrated this correlation again and again, because they had reinvented the laws of economics. I was expecting the Liberals to introduce a bill repealing the law of gravity, given their penchant for thinking they could do away with the laws of economics.
Of course, history has not been repealed. Nor has economic law. The massive influx of cash as a result of a half-a-trillion dollars of deficits has, indeed, driven up prices. This is the funny part. The same people who said that COVID would give us deflation now blame it for inflation. The same doctors who misdiagnosed the disease now can tell us that the disease's cause has nothing to do with them.
What is the cost? Some people say it is supply chain kinks resulting from COVID. They point to the fact that other nations are also getting high levels of inflation, therefore it cannot be the government's fault here at home. The truth is other countries are getting inflation. Those countries that are doing the same stupid things our government is doing are getting a lot of inflation. and the correlation holds up even today.
For example, yesterday the minister pointed out that other G20 countries had high levels of inflation, and she is right about that. Argentina has 52% inflation. Why? It has increased its money supply by 80% in a year and a half. Turkey has 20% inflation. Why? It has increased its money supply by 43%. The Americans south of the border, the money-printing mammoths in Washington, have 6.2% inflation. Why? They have increased their money supply by 35%. In Canada, we have a two-decade-high record of inflation of 4.7%, after we increased money supply by 23%.
In fact, if we put the G20 countries on a graph, we see a near-perfect correlation between money supply growth and inflation. Those countries that have flooded their economies with deficit spending have high inflation and those countries that are also supply chain dependent but have kept their money supply in control have low inflation.
Let me give some examples. Japan's inflation is 0.2%. Why? Its money supply growth has been half of ours in relative terms. Saudi Arabia's inflation is 0.8%. Its money supply growth has been a third of ours. Switzerland has 1.2% inflation. Its money supply growth has been a mere quarter of ours, only 6.5%. In other words, those countries that are not printing money to pay their bills have maintained a low cost of living and an affordable life for their citizens. Those countries that are flooding their economies with cheap cash are driving up the cost of living for their people.
The Liberals will say they had no choice, that COVID made them do it. This will be their excuse for everything. Let us remember that the Prime Minister tried to give half a billion dollars to a group that had paid his family half a million dollars, and the Prime Minister said, “COVID made me do it”.
COVID required that we spend money, but we did not need to have the biggest deficit in the G20. All the other G20 countries had COVID too. COVID did not force the Prime Minister to give CERB cheques to wealthy families that did not need it; to people who could have been working, with over a half a million vacant jobs; to prisoners; to organized criminals; and even to people whom the public servants suspected of making fraudulent applications. He did not have to give wage subsidies to large corporations that had so much money they were simultaneously paying out dividends and bonuses to their executives.
COVID did not force any of that on the government. Those were decisions. The government knew it could not pay for those decisions by simply borrowing from the marketplace. There was not enough money in the whole world to lend the government enough to spend and fulfill its appetites. That is why it directed the Bank of Canada to create the cash out of thin air, which, unfortunately, the bank was all too happy to do, and now we see the consequences.
Now that I have demonstrated the correlation between money supply growth and inflation in the G20 countries, let me show another piece of incontrovertible evidence that our inflation problem is not just the result of supply chain quirks.
This evidence is that the biggest inflation in our economy has been in an area where there is no supply chain: land. Land is not waiting at a port. Land is not stuck on a ship. Land is not held hostage by a COVID outbreak in some faraway place.
Land was supplied to us by geological forces millions of years before we even arrived, it is right under our feet, and yet land prices are up 20%. How does the government explain that? Is it that the acreage of land caught COVID and all of a sudden became more expensive? Of course, not. Land prices started rising after the government started printing money.
Let us get very specific here. In the first two months of COVID, real estate prices actually started to drop, which we would expect. We would expect that when people's incomes fall, when a hundred billion dollars disappears from the GDP, when people are afraid about their ability to earn a future living and when we shut off immigration altogether thereby decreasing the demand for real estate, prices would go down. In fact, CMHC, our housing authority, predicted there would be a 14% reduction in housing prices. It made sense to predict that at the time. However, then, all of a sudden, in May, 2020 real estate prices started to rise. In the middle of a lockdown, when people cannot even go and see the properties they are buying, why would prices suddenly and supernaturally go up?
Mr. Kevin Lamoureux: Supply and demand.
Hon. Pierre Poilievre: “Supply and demand”, screams out an economic genius on the Liberal side of the House. From whence came that demand? Where did the money come from? When the economy had just lost $100 billion and everyone was locked in their basement, where did the demand come from? It came from the printers in the government money-making machine. The money-making machine started printing cash in the spring of 2020 and within weeks, real estate prices started to skyrocket.
I reiterate that all the land that was transacted in those real estate purchases has been here for thousands of years. That cannot be the result of a COVID supply chain quirk. The housing was already here before COVID came. About 96% of the houses in Canada today were built before COVID, and therefore it is chronologically impossible to blame the cost of their construction on the COVID phenomenon. In other words, it is not supply and demand, as my friend suggests, it is simply demand, demand driven by the massive creation of money, $400 billion of it, the biggest money supply increase since the first Trudeau caused runaway double-digit inflation in the seventies and eighties.
We now have incontrovertible evidence that it is decisions of the government, which, I grant, are being replicated by other irresponsible big-spending governments around the world, that are causing the inflation we see today.
What are the consequences of that inflation? We see them. First, there is a massive growing gap between rich and poor. People who are rich love inflation. Why do we think big banks have been so thrilled with the money-printing policies of the government?
Bob Fife went on CTV the other day and said that Bay Street was not happy with the member of Parliament for Carleton being appointed to finance critic. Of course, Bay Street is not happy, because I am the one who has been speaking out against all the free money the government has been pumping into the financial system, inflating their assets and letting them arbitrage a profit between the price of a bond the government sells them and the higher price for which the Bank of Canada buys it back. Of course, Bay Street does not like the fact that I am speaking out against that. The good news is that I do not care what Bay Street likes. I work for main street here in the House of Commons.
Yes, the financial elites are thrilled with quantitative easing. They have loved it in the United States of America. Both Washington and Wall Street love quantitative easing. It is the one thing that gets bipartisan support in Washington. Republicans love ballooning Wall Street and Democrats love ballooning Washington. Therefore, together, they both love seeing their central bank flood their economy with cash and balloon the assets of the super-rich in the urban centres, while eating away at the wages of working-class people.
The Prime Minister looks across the border at the growing gap between rich and poor, at the higher cost of living, and at the poor and the young who can never live where the jobs are because real estate prices are too high, and he says “Let us have some of that up here”, and replicates the same disastrous policies that have led to so much social and economic division south of the border.
Here on this side of the House of Commons, we do not believe in central bank money printing to pay our bills. During the great global recession, we rejected that approach. Governments around the world decided to do it.
Here in Canada, we did run modest deficits, the smallest in the G7, but we did it borrowing real money and returning quickly to a balanced budget. This meant we had low inflation, low unemployment and the fastest recovery from the great global recession.
It turns out that sound money does not just keep inflation low, but allows growth and job creation. We know inflation does not just eat away at paycheques; it kills jobs. For example, we now have among the highest unemployment in the G7 combined with one million vacant jobs. Can members imagine that: high unemployment and record-high job vacancies? Well, it is no wonder. When the government prints money to pay people not to work, what do we get? We get jobs without people and people without jobs. Of course, all the money that is going into the economy to pay people not to work means more spending with less making, which means higher prices. We need to do exactly the opposite.
We need to restore sound money. We need to stop printing cash, get the Bank of Canada focused on its real mandate, which is low inflation, bring government spending under control, cancel the hundred-billion-dollar slush fund the government has created for the post-COVID period, and return the cost of government to pre-COVID levels. Simply put, a more affordable government will mean a more affordable cost of living for Canadians, and that is what Conservatives support.
Instead of creating more cash, why do we not create more of the stuff cash buys? Why do we not unleash our energy sector to supply more affordable energy for consumers and more paycheques to our workers, approve pipelines to create jobs for western energy workers and eastern refinery workers, get the carbon tax and other red tape off the back of our farmers so they can produce more nutritious and affordable food, incentivize our municipalities to speed up building permits so we can build more houses rather than just pushing out more mortgage lending, and sell off 15% of the underutilized 37,000 federal buildings so there is more space for housing our young and our working class? Here in our nation's capital, we have massively underutilized real estate that could be used for private-sector affordable housing built in the free market to supply our youth with opportunity to live in an affordable place.
In other words, we need to move from a debt economy to a paycheque economy. We need to make more and cost less. We need to unleash the free enterprise system to supply our workers with paycheques and our consumers with affordable products and services.