Do deficits matter?

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RYAN   By Guest Blogger Ryan Lewenza
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I recently had a heated discussion with one of my ‘left-leaning’ good mates over whether deficits really matter. His view is that with interest rates so low we would be stupid not to take advantage of this and load up on cheap debt to support new government programs like early childcare, investments in renewables and money for those hurt by this terrible pandemic.

While I agree that our government should be helping those impacted from this downturn, I completely disagree that we should rollout new billion dollar programs and leverage our future by racking up hundreds of billions in new debt. Essentially, government can’t be all things to all people and we need to pick and choose which government programs are most needed, all the while, focusing on our out-of-control deficits, which one day could come back and bite us in the butt.

Let me explain why I believe my good friend is wrong.

First an update on where things stand with the Federal government deficit. Get your Tylenol and warm blanket out. The last estimate from the Federal government (April budget) is for last year’s deficit (fiscal 2020/21) to be an eye-popping $354 billion, give or take a few billion.

This would be $315 billion higher than the previous year when the deficit was still a very high $39 billion. Even crazier, last year’s deficit was 6x the previous record high deficit of $56 billion during the financial crisis. These are numbers no one even dreamed about before the pandemic.

The deficit is being largely driving by a massive increase in new spending as the government rolled out emergency programs to help individuals and businesses. For example, the Federal wage subsidy is estimated to cost $110 billion by the end of this year. As a result of these new programs, government spending surged by $272 billion last year to a record $634 billion. That’s how you get a record $354 billion deficit!

Last Year’s Deficit to Hit a Record-High of $354 Billion

Source: Bloomberg, Turner Investments

My issues with the government programs to deal with the fallout from Covid-19 are: 1) they were too large and generous; and 2) they were poorly structured. On the second point, it’s coming out that many large and profitable companies received the wage subsidy when they really didn’t need it. According to G&M analysis, 388 publically traded companies received more than $3.6 billion from the wage subsidy including companies like Air Canada, BCE Inc., Canadian National Railway and Suncor. These companies did nothing illegal but probably some should not have been eligible for this government handout in the first place.

The chart below speaks to my concerns over Trudeau and the Federal government’s largesse. It shows the increase in deficit from last year over 2019 as a result of all the spending from different G20 nations. You can see that Canada experienced the largest deficit increase (as a percent of GDP) over all other G20 nations as a result of our very generous support programs.

Anecdotally I’ve heard numerous stories of people turning down jobs or simply stopped looking for work since they are receiving government support. These are all examples of how these programs we’re poorly constructed and need to be changed or wound down in the coming months.

Estimated Change in Deficits Between 2019 and 2020 – Canada Tops the List!

Source: NBF Economics

As a consequence of all this spending and deficits, our total Federal government debt has doubled over the last few years to record high of $1.1 trillion. And we’re not done yet! In the April budget, the Federal Libs announced new spending of $100 billion over the next three years, including, for example, a new national daycare program to the tune of $30 billion. This new spending is over above the $272 billion already spent related to Covid-19.

Our Federal Government Debt has doubled to $1.1 Trillion

Source: Bloomberg, Turner Investments

In reviewing the April budget the government is forecasting additional deficits of $333 billion over the next five years. So let’s have some fun with numbers.

If we add the forecasted deficits of $333 billion to the current $1.1 trillion in debt outstanding, we’re looking at total Federal government debt outstanding of roughly $1.5 trillion by 2026. Here’s where it gets interesting.

Where will interest rates be in five years from now? Currently they are at record low levels around 1%, which is why my good friend is saying it’s a good time to load up on debt. The problem with this is that the debt doesn’t just magically go away. It gets ‘rolled over’ as the bonds mature at current market rates. What happens if interest rates rise from the historically low levels of 1% to 4 or 5% over the next five years? Then the interest expense on the debt will surge to $60-$75 billion per year. Last year the Canadian government incurred $20 billion of interest expenses so if rates rise materially the interest expense could easily double or triple over the next decade. The point is that the current government is gambling our future on interest rates staying low, using this to justify their out-of-control spending. If they are wrong and interest rates rise materially, then as Garth likes to say ‘we’re pooched’!

Today I tried to show what could happen if our government keeps spending money (our money by the way!) as recklessly as they are. In my opinion, we could be up ‘shits creek’ if interest rates ever normalize from the current record low levels. This is a huge gamble that Trudeau and the current government is taking and I worry deeply that this could come back and hurt us, either through significantly higher taxes or dramatically lower future government spending. Which one do you think is most likely? But hey, as Trudeau keeps parroting, he’s making ‘investments’ in Canada and our future, the problem is, they may end up being crappy ‘investments’ leaving us holding the bag in the years ahead.

The Future Cost of our Government Debt

Source: Bloomberg, Turner Investments
Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.
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About the picture: Police service dog Jago was born in 2016 and served with the RCMP for four years. His handler, Cpl. Scott MacLeod, has about 10 years of experience as an RCMP police dog handler. Jago was killed in the line of duty Thursday during exchange of fire in the arrest of a fugitive in High Prairie, Alberta. He was a hero, the police service said. Jago gave his life in the protection of his partner. – Garth

137 comments ↓

#1 LewenzaCountry aka Prince Polo on 06.19.21 at 9:56 am

Deficits don’t matter up until they do, at which point, the country faces a massive “wreck”ning of:
A) higher taxes
B) lower services/handouts
C) massive howling/teeth gnashing from the financial dolts

Or maybe we just print for eternity and houses end up with $1B price tag?

#2 Flop… on 06.19.21 at 10:03 am

Happy Charturday!

I like to bag myself about how dumb I am sometimes, maybe there is still hope for me.

I was looking at the soccer scores this morning and the number one question below was “Is Canada in Euro 2020?”

No, Canada is not in Euro 2020, and it has nothing to do with geography, and more to do with lack of under the table payments.

How else do you explain Australia’s inclusion in the annual Eurovision Song Contest…

M47BC

——————————————————————

“These Countries Suspended Their External Debt Payments Due to COVID-19 (Interactive Map)

COVID-19 decimated balance sheets for the world’s poorest countries. That’s why the International Monetary Fund (IMF) teamed up with the World Bank to create a Debt Service Suspension Initiative (DSSI), allowing debtor countries to pause payments on externally held debt. Here’s an interactive visualization highlighting countries opted to participate in the program in 2020, and which countries ultimately own the underlying debt.

* China is the single biggest creditor under the DSSI for several countries, controlling the largest amount of debt for Pakistan ($2.92B), Angola ($2.99B) and Kenya ($849M) among several others.

* In comparison to China, the U.S. has lent relatively little money to the rest of the world under the DSSI, with the highest total going to Ghana ($146M).

* In total, the poorest countries paused payments on some $17.68B in sovereign debt under this program in 2020.

* China’s participation in the DSSI is strongly aligned with its strategic interests, suggesting that some alternative motivations are in play.”

https://howmuch.net/articles/the-state-of-external-debt

#3 Guy Man on 06.19.21 at 10:22 am

Ive made the exact same argument with friends in that the interest expense will get out of control and instead of spending money on services, that money will be spent on interest payments. However I feel that the way the world is going, nobody ever seems to “collect” on government debt and they can simply keep running up the debt to pay for current expenses with no consequence. Look at the US- $29 trillion in deficit and still going strong. Its not like a country can go bankrupt or have any consequence of going further down the hole – they just keep borrowing.

#4 Bezengy on 06.19.21 at 10:22 am

For decades I’ve been warning anyone who will listen that deficits will lead our country to eventual ruin, no one wants to listen. Their priority is making the country fairer, greener, and getting a lot more free stuff. I cannot understand how people can think a country that is in financial ruin can afford to improve anything for anyone in a sustainable manner, diddo for the provinces. The problem is most politicians will say or do anything to get votes, shame on them, and shame on Canadian’s for believing them.

As for the pic, the dog’s a hero. I’ll be making a contribution to a humane society in his honour.

#5 TurnerNation on 06.19.21 at 10:26 am

New book: “How to talk to a Leftist – if you must”.
Let em go they are living in La La Land.
——

Did you know Toronto has a growing Hobo camp?
(Or in NewSpeak we call them Freelance Self-Motivated Transportation Consultants.)

There I was in the city’s gritty East End, dropping off the Haz. Waste from my home Math Lab (dirty calculations).
The streets all around the Transfer Station, lined with dilapidated (and occupied) cars, trucks, camping trailers. Makeshift tent apparatuses too; the city helpfully left a Porta Potty.

Circle back to that fateful cold week in March 2020 when we became fully occupied, and every downtown park large and small became filled with brand new tents. Like magic, they appeared. Who did this? When you find out you find our occupier.
For a spell they even were on city hall property (for the media photo ops – who brought them there?)

To this day it continues. The city provides trash and sanitation service for free. But as a homeowner if you park 1″ outside your parking space, or put a no-no into your recycle bin, or even hold a backyard BBQ, the Bylaws will come down on you in full force. Right up to house/property confiscation. Why? Because you have Money.
We’re being shaken down. All the new contracts signed with Big Pharma salesman. Years, decades of profitable ‘boosters’. Now you know why all the ads are up around your city. Paid by your tax dollars natch.

We are living the biggest shakedown, reset, war-time spending (WW3) since GFC 2008. Same old same old.

#6 Ian on 06.19.21 at 10:26 am

Let’s be honest, even 4% to 5% is historically low and likely! Good analysis. I think one area Government can curtail spending is PS Pension plans. There was movement to start moving the future liabilities to a Target benefit from a Defined benefit. You’ll certainly see programs cut, but only after Trudeau leaves office. That way the liberals can state ” We would have kept them!” Without regard for how!

#7 Habitt on 06.19.21 at 10:38 am

Oh oh. Gulp

#8 Dolce Vitaa on 06.19.21 at 10:39 am

I think today must be Liberal Largesse Spending Rant day.

By the MP for Carleton:

https://twitter.com/PierrePoilievre/status/1406205116437258251

Agree with you completely Ryan and Poilievre’s “5 easy tricks to get rich quick” above.

And I’m a Liberal.

———————-

In your “Estimated Change in Deficits Between 2019 and 2020 – Canada Tops the List!”

divide by population.

But Trudeau will get re-elected because Canadians want more money shoved down their throats and that’s about it.

Simple.

What a country!

#9 Joseph R. on 06.19.21 at 10:51 am

About time:

Quebec Superior Cort approves class-action lawsuit against RESP providers for abusive enrollment and sale charges:

https://globalnews.ca/news/7928367/quebec-group-resp-class-action-lawsuit

#10 Armpit on 06.19.21 at 10:57 am

“the commitment needs to be a commitment to grow the economy and the budget will balance itself.”

No more to say… Ha!

#11 DON on 06.19.21 at 10:59 am

Let’s not forget about the massive bond buying programs to plug holes from the last ten years that are getting bigger. The last crisis was papered over and forgotten as memories are short…it was never really resolved and now it is a compounding open wound. Prior to the pendemic finances ans economies were facing trouble. The pendemic provided the cover to deal with all shortcomings of the past.

#12 Marcia M on 06.19.21 at 11:12 am

It is striking how clearly those charts show that the biggest spikes in deficits always have been created as a result of Conservatives being in power. Mulroney, then Harper, and more at the provincial levels.

How? Conservatives pander to their less intelligent bases, pretending to be more efficient, cutting taxes and favouring the elites, while kicking the bigger debt can down the road.

Rinse and repeat.

Unless we stop being so stupid and electing these Conservative idiots, we’ll never escape the consequences.

#13 Dogman01 on 06.19.21 at 11:13 am

No expert here: but you just described why Interest rates cannot go up.
Those that set the rates cannot pay back higher rates, so Inflation will roar.
They are devaluing the currency vs raising Interest rates. Cash is trash buy assets.

#14 $moneyfromA$ia on 06.19.21 at 11:19 am

This thread is worthless as there’s no mention of inflation and how it relates to increases in interest rates.

Also, nothing stated that the current minority gov is hog tied with regards to bringing in new stress tests or instruments to combat the uncontrolled rise of real estate.

Enjoy the higher fuel and food costs along with everything else.

1 year from now will be another crisis.

Then y’all can send in your doggy style pic’s to Garth and ask him why he continues to wear cowboy boots and pack pepper spray. LOL

#15 BoC on 06.19.21 at 11:24 am

Bank of Canada will buy the debt and keep rolling it forward.

No worries!

Friends help friends out…and they are all friends for quite some time now.

#16 Rates on 06.19.21 at 11:26 am

Higher Interest Rates?

Like 0.5% higher?

Like 1% higher?

More than that is…never…gonna…happen!

#17 Deebpter Deebpter! on 06.19.21 at 11:27 am

These things seem to run in 10 year cycles.

GFC was record spending to bail out the mess. Those emergency rates stayed on over the whole decade pretty much.

Pandemic looks to be 6x the bailout to bail out the previous mess. Rates even lower.

Since there is no way the debt decreases it is obvious. Next one will have to be 2 trillion add on to deficit and negative rates…or BUST!

#18 Ponzius Pilatus on 06.19.21 at 11:28 am

#88 NSNG on 06.19.21 at 1:58 am
If you think the Delta covid variant is bad just wait until we get to the Surrey one.
————————
That’s actually a funny one.
But there is a vaccine against it:
Major Doug McCallum

#19 Sail Away on 06.19.21 at 11:30 am

#12 Marcia M on 06.19.21 at 11:12 am

It is striking how clearly those charts show that the biggest spikes in deficits always have been created as a result of Conservatives being in power.

How? Conservatives pander to their less intelligent bases, pretending to be more efficient, cutting taxes and favouring the elites, while kicking the bigger debt can down the road.

———-

Haha, very good. Sarcasm, I assume?

An analogy would be that by driving my Tesla, I am creating a pent-up need in myself for gasoline, so will fill this need after the Tesla with the biggest, gassiest fleet of trucks available.

Tesla’s fault. Non-gas leads to excess gas consumption.

#20 Quintilian on 06.19.21 at 11:34 am

I think Ryan is just pacifying the political junkies.

Given the unparalleled situation, the government did the right thing. Was it perfect? No, but you can’t react that quickly and not leave some loop holes that some people will exploit.

If the government had not gone all in, we might have ended up in a depression for years, and the deficit would have exploded from lack of revenues.

The government had not choice and it prevented a flood of personal bankruptcies, record unemployment, crime and suffering.

#21 FREEDOM comes to OILBERTA July 1 on 06.19.21 at 11:34 am

#12 Marcia M on 06.19.21 at 11:12 am

It is striking how clearly those charts show that the biggest spikes in deficits always have been created as a result of Conservatives being in power. Mulroney, then Harper, and more at the provincial levels.

How? Conservatives pander to their less intelligent bases, pretending to be more efficient, cutting taxes and favouring the elites, while kicking the bigger debt can down the road.

Rinse and repeat.

Unless we stop being so stupid and electing these Conservative idiots, we’ll never escape the consequences.

Eh not quite…

T1 started it … and now we have T2 on steroids who aims to achieve their socialist wet dreams…………

#22 Rogerhomeinspector on 06.19.21 at 11:38 am

Great post Ryan.

I don’t believe this is a phenomenon just at the government level. Individuals too are loading up on debt. My understanding is total outstanding mortgages has risen by around 40 percent over the last year and a half.

I think everyone is betting on “the government will never let interest rates rise” but I often wonder to what extent they can control that?

I can quite possibly see rates at 3-5 percent in the next 4-5 years. What are people going to do when they renew and their mortgage payments double?

#23 ImGonnaBeSick on 06.19.21 at 11:38 am

#14 $moneyfromA$ia on 06.19.21 at 11:19 am
This thread is worthless as there’s no mention of inflation and how it relates to increases in interest rates.

Also, nothing stated that the current minority gov is hog tied with regards to bringing in new stress tests or instruments to combat the uncontrolled rise of real estate.

Enjoy the higher fuel and food costs along with everything else.

1 year from now will be another crisis.

Then y’all can send in your doggy style pic’s to Garth and ask him why he continues to wear cowboy boots and pack pepper spray. LOL

—–

Are you done? Did you get your little gripe off your chest little champ?

#24 Dogman01 on 06.19.21 at 11:42 am

Bought an RV on HELOC Credit, rate of 3.3%
Bought an equivalent amount of ETF ZEB.
ZEB pays Div of 3.32%

Inflation rate at like 3-5% now.
Banks will raise Dividends.
Central banks unlikely to raise Interest faster than my DIVS get raised.

What a wonderful society we live in, post Material World.
Perhaps – Yes I technically own nothing but I am Happy. – OMG FREE TRAILER!!!!

#25 Ponzius Pilatus on 06.19.21 at 11:43 am

Ryan Lewenza,
For Leader of the Conservative Party of Canada.
Has a good ring to it.

#26 Ryan Lewenza on 06.19.21 at 11:52 am

Marcia M “It is striking how clearly those charts show that the biggest spikes in deficits always have been created as a result of Conservatives being in power. Mulroney, then Harper, and more at the provincial levels.”

I don’t agree with this. Yes deficits rose during the financial crisis under Harper but that was due to the recession and that all G7 nations agreed to increase government spending at 3% of GDP to help turn the economy around. By the end of his term they were back to balanced budgets. My analysis shows the bulk of our debt was incurred under the Trudeau’s. – Ryan L

#27 Richard L on 06.19.21 at 12:01 pm

Well said Ryan. Unfortunately trying to convince people on the left of this future possibility is futile.

I know of an aircraft hobby club which was able to obtain $20 000 as a government grant.

#28 Michael in-north-york on 06.19.21 at 12:03 pm

We will get toasted if the interest rates go higher. We will get toasted even if the interest rates stay at 1%, it will just take longer to accumulate the critical amount of debt. More and more debt = more and more interest payments even at today’s low rates. They will become unsustainable, and a fiscal meltdown will follow.

Not too worried by the current huge deficit, nor by the fact that the Covid relief programs are poorly structured. Governments are not known for efficiency. When a government hastily creates a massive spending program, it will be poorly structured. There was no other choice during the pandemics. In the absence of government handouts, people would keep working illegally rather than starve, and the virus would keep spreading.

Worried much more by the idiotic mentality that deficits don’t matter and the day of reckoning will never come. It will come, and then the poor and working-poor people will be hit the hardest. Affluent people will lose some of their assets but most of them will not starve.

A responsible government would spend liberally at the height of pandemics, but then would quickly chart a course back to balanced budgets. How that’s done, by cutting the spending or hiking the taxes, is a secondary matter. Instead, the Libs are rolling out permanent programs like the national daycare, that are unrelated to pandemic response, and have no credible plan to boost the tax collection.

People who refuse to learn from the mistakes of others, are bound to learn from their own mistakes.

#29 We will see! on 06.19.21 at 12:05 pm

I get a kick out of the people that think interest rates “can’t” go up, must be the ones gambling their wealth on that hope. We could be on the cusp of a generational cycle of higher rates, it is not different this time.

#30 My Body My Choice on 06.19.21 at 12:12 pm

In the 1970’s in Canada, Trudeau 1.0 went on a reckless spending spree and racked up obscene amounts of debt. He put Canada on the road to financial disaster. After he quit and rode off in the sunset, it took Canadians about 15 years to fix all the damage and restore some level of sanity to Canada’s economic outlook.

Now his son, Trudeau 2.0 is doing the same thing, probably even worse. Spending and debt to the moon like there’s no tomorrow. What do you expect from a trust-fund multi-millionaire who has no real-life experience in the real economy making, creating, building, fixing, repairing, living within a budget, living frugally, saving, making prudent spending decisions, living with one’s means. He thinks the Canadian government is an unlimited source of cash flow just like his inherited wealth.

It makes me so angry and sick to the stomach that I endured and survived all the economic hardship created by 1.0 and will spend the next decade or two bearing the economic train-wreck that is caused by 2.0.

#31 DON on 06.19.21 at 12:13 pm

#13 Dogman01 on 06.19.21 at 11:13 am
No expert here: but you just described why Interest rates cannot go up.
Those that set the rates cannot pay back higher rates, so Inflation will roar.

***************

Factor in “those” does not have to worry when ‘We’ will cover the tab by default.

We need some form of direct democracy or at least an overhaul of the current one.

#32 Yukon Elvis on 06.19.21 at 12:30 pm

Most countries and central banks are in the same boat. Heavily indebted. They work together to keep interest rates low. High interest rates would crush economies so they will continue to coordinate their efforts to keep rates low. Any rate hikes will be small and mostly for show. And they will all endure the consequences of keeping rates low. Inflation. That is the present and the future.

#33 just a dude on 06.19.21 at 12:33 pm

Ryan,

Excellent, sobering post. Thank you.

Methinks we are indeed pooched as this myopic government is strictly focused on the next election and clearly does not have the courage and integrity to do what’s best for this country and its good people in the long term. Sad, arrogant, condescending, self-interested and incompetent bunch.

Jago’s story left me with a lump in my throat. RIP Jago.
Deepest sympathies, Cpl MacLeod. Thank you for your service.

#34 Faron on 06.19.21 at 12:37 pm

A lot of debt post corona was unavoidable. Have a looksee south of the border where a conservative govt oversaw similar. Definitely true that conservatives cry deficit hawk while cutting revenue via tax breaks.

W/re PDX police. “Accidentally hit him with my baton”. Yeah, my arse. Between that, the growing white nationalist presence in police forces (read up on the social construction of Oregon and northern Willamette Valley), and the continual gush of police attrocities being committed, a few dudes refusing to serve sounds great. I don’t think ACAB, but SCAB is about right. Enough, and growing, that there’s a problem. I’ll drop a steady, daily stream of the garbage police commit to niggle if not convince anyone here.

#35 An invasive species on 06.19.21 at 12:42 pm

Hi. My wife and I are in our early 60 and would like to know when we can retire .

Neither of us have managed to save a dime our entire lives due to our profligate spending habits. He worked in the oil patch in and bought lots of RVs and boats. Thats just what us Albertans do. We did have some savings from my commuted government pension but my husband said that disappeared a few years back….something called Krypto I believe he said. One more thing … Should we take our CPP now or wait until we become eligible for OAS supplement?

#36 G on 06.19.21 at 12:47 pm

re: our government keeps spending money (our money by the way!)

Isn’t it more accurate to say the ‘government’ is taking our hard earned money(made with time and sweet) as taxes to pay the interest charges on the money they have already borrowed. And spending even more using an unlimited credit card with the Canadian peoples name and the unborn children’s names on the card.

So we can buy stuff made other places more often than not.

PMT, ‘ the budget will balance it’s self’, is setting us up to be a deter 3rd world deter country it seems.

And didn’t PMT with the G7 just slap on another 15% corporate tax on everything, making it less attractive to move or set up companies here and other G7 countries, with accompanying jobs. In addition to the ‘for the planet of course carbon tax’, no fossil fuel “energy” for you, so you can freeze in the dark.

The ‘plan’ that the CCP will not fallow BTW. Our so-called leaders have become …
We are so hopped it seems, by design ???
(The emperor has no clothes comes to mind.)

Remember the ‘it’s just two weeks’ …
Biden let split that there is a ‘C19 program’ ???

the drought this years isn’t looking great either.
Hoping for some rain were they need some in time and not all at once.
The cost of food and stuff seems more than the official stated inflation rate as it is.

What a world we live in. Better than the past in many ways and in some others ways your guess …

#37 saskatoon on 06.19.21 at 12:47 pm

the kicker is that the Canadian government shouldn’t have any interest payments at all.

they have the power (and obligation) to issue debt-free money, but instead they borrow it.

#38 Pythagorean theorem on 06.19.21 at 12:51 pm

“left leaning” and “good friend” are incongruent.
Sorry to tell you there’s no such thing!
Choose better friends.

#39 Dr V on 06.19.21 at 12:55 pm

Total federal government debt instruments

https://www.bankofcanada.ca/stats/goc/results/en-goc_tbill_bond_os_2021_05_31.html

I notice the following descriptor

“Domestic Marketable Bonds Outstanding”

How is this defined, and accordingly what is not included? Bonds issued in foreign currency?

According to this, almost all federal debt is issued in $Cdn.

https://www.bankofcanada.ca/rates/banking-and-financial-statistics/bonds-outstanding-by-currency-of-payments-and-issuers-formerly-k8/#graph

By forex reserves, the Canuck buck is the 6th most held
currency (5th sovereign currency) in the world after the $US, Euro, Yen, Pound and Renminbi
(China), and ahead of the $Aus. The $Cdn is also the 6th most commonly traded currency, ahead of the
Renminbi but behind the $Aus. No other currencies come close. Nobody trusts Russia, India, Brazil etc. NZ,
Sweden and even the Swiss franc are small bit players.
A few regional currencies do trade in relatively large amounts. China gets it status simply by economic
size. Nobody trusts them either.

#40 Eco Capitalist on 06.19.21 at 12:57 pm

What do you mean I don’t pay my bills?
Why do you think I’m broke, huh?

Song: Peace Sells
Artist: Megadeth
Album: Peace Sells… but Who’s Buying?

I don’t think first world governments care anymore about the money they owe, they only care about the money they are owed.

#41 Sarah Porier on 06.19.21 at 1:00 pm

So basically the interest rates dropped from 10% in the 1990’s when Chretien, Martin Federal Liberals got in power to now 1% to 1.80%. The federal Canada debt was roughly $600 Billion in 1993 and now it is $1.1 trillion.

So all the interest we saved by really lower to lower interest rates say on average 6% a year over the last 28 years on $600 billion which totals $1.008 trillion ($36 billion per year*28 years), is gone now. I know this is a very simple calculation and it is probably much higher since it is not putting compound interest into account over 28 years.

Since it is father’s day this weekend, junior Justin Trudeau is passing on a Liberal tradition to create massive debt, deficits and increase taxes, prices, inflation. Father like son.

#42 Reality bites on 06.19.21 at 1:05 pm

Seriously, very few people care about the debt, let alone understand it, aside from a small percentage of the population.

Do you think the average Canadian voter, like your left leaning friend cares about anything other than their own short term self-interests or how cute and woke little Justin is?

Personally, I could care less since I will have checked out way before this monster rears it’s ugly head! In the meantime, I will have deferred all of my taxes indefinitely.

#43 Roial1 on 06.19.21 at 1:06 pm

Not sure that there is a correlation, BUT Mexico survived a default.

Just sayin”.

#44 T.H on 06.19.21 at 1:07 pm

This entire argument is specious. “This value is LARGE therefore it is SCARY. Larger than it’s ever been! think of the children!” Please.

A debt by the government is not like a debt by you or me
or anyone else. It is denominated in something it can create out of thin air at any time. Since we dropped pegs it simply has never mattered. These days it’s only purpose is to inflame people like Garth and the author and give them an excuse to browbeat down programs that would help people in their daily lives, with false insinuations of profligacy.

#45 PBrasseur on 06.19.21 at 1:13 pm

What makes this absolutely catastrophic is the fact that provinces and households are also in the red up to their necks!

All this printed money has been driving this economy for years, this is reckless and unsustainable.

#46 Joe on 06.19.21 at 1:15 pm

NO WONDER THE STOCK MARKET BOND MARKET CRYPTO AND REAL ESTATE IS SO FROTHY!

#47 crowdedelevatorfartz on 06.19.21 at 1:28 pm

@#12 Marcia Marcia Marcia
“It is striking how clearly those charts show that the biggest spikes in deficits always have been created as a result of Conservatives being in power. Mulroney, then Harper, and more at the provincial levels.”

+++

And in ONE YEAR Trudeau blew all those other deficits COMBINED out of the water.

Or did you miss that part…?

Trudeau has RUINED this country with this massive debt.

It will take generations to dig us out through punitive taxes and govt service cuts……
IF can ever get uot of the hole he has dug twice as deep IN ONE YEAR.
Trudeau will be long, long gone laughing at all those fools that believed in his Leftist crap.

https://www.youtube.com/watch?v=-yZHveWFvqM

#48 R.I.P. Jago! on 06.19.21 at 1:32 pm

More importantly, capital punishment for Jago’s murderer!
Oh right … indigenous… no story here folks! Move along. It’s just a dog!

In Utah … “The bill makes it a second-degree felony for intentionally killing a police dog. It would raise the punishment from a third-degree felony.

Someone guilty of killing a police canine could spend up to 15 years in prison and be forced to pay $10,000 fine if they’re caught.”

#49 Marcia, Marcia, Marcia! on 06.19.21 at 1:38 pm

Marcia. …you are a genius!
Would you mind sending me your address?
I have a little something I’d like to send you as a token of my appreciation.

#50 Sara on 06.19.21 at 2:00 pm

Poor Jago. What a beautiful dog. :(

#51 Barb on 06.19.21 at 2:03 pm

Kudos to Ryan for honouring Jago’s courage in protecting his partner. Tragic loss.
Grateful the RCMP caught the creep; throw the key away.

#52 Sail Away on 06.19.21 at 2:11 pm

#34 An invasive species on 06.19.21 at 12:42 pm

Hi. My wife and I are in our early 60 and would like to know when we can retire .

We did have some savings from my commuted government pension but my husband said that disappeared a few years back….something called Krypto I believe he said.

———–

Wow, you have both a husband and a wife?

So progressive!

#53 TurnerNation on 06.19.21 at 2:24 pm

The world is laughing at this T2 Dictatorship.

John Adams
@johnadams51677
U.S. politicians fume over Canada’s extended border restrictions: “bull$hit” Rep. Brian Higgins, a Buffalo Democrat. “It’s arbitrary. It doesn’t follow the science, it doesn’t follow the facts…”https://cbc.ca/news/world/us-canada-border-closed-reaction-1.6071737?__vfz=medium%3Dsharebar


— Same script in each country. Never endling lockdowns as the New System is rolled out (Call it what you wish: WW3, New Green Deal, New Global Order, Great Reset)
No for now, but the seed is planted. Into your Mind.

And house arrest lockdowns have been normalized now right? As prisoners soon learn – solitary or lockdown.

.Biden Says It’s ‘Unlikely’ Delta Variant Will Cause U.S. Lockdown but Won’t Rule It Out (msn.com)

.Canada’s COVID-19 lockdowns have lost all touch with reality(nationalpost.com)


(Your mind is the target of this WW3. Fact: I mean it’s got some junior scientists in the steerage section mixing and matching MRNA and Viral Vectors things. Did you consult your Doctor? Or CBC?)

#54 Felix on 06.19.21 at 2:27 pm

#33 Faron

“ACAB + SCAB”

Free Translation:

1. All Cats Are Beautiful

2. Seriously, Cats Are Brilliant

#55 Millennial 1%er on 06.19.21 at 2:28 pm

I get it, we’re pooched.

Inb4 increased taxes on the “rich” (AKA t4 cucks like me who are pulling the 55% tax bracket, instead of the actual rich with LLCs who make a million and pay 20% in taxes).

Oh wait, let me ask the company I work for and get my L1-A/H1B/TN-status visa and move gtfo to Seattle/Austin. Screw this irresponsible government, screw the housing prices, and screw the lack of opportunity.

Bye. Enjoy servicing all your debt.

#56 Barb on 06.19.21 at 2:29 pm

#19 Quintilian

“The government had not choice and it prevented a flood of personal bankruptcies, record unemployment, crime and suffering.”

———————————————-

The government simply kicked ALL those down the road.
Stay tuned.

#57 Wrk.dover on 06.19.21 at 2:31 pm

Tory Premier John Buchannan elected in NS in about 79? There was 500 million in the cheque book. He got re-elected plenty, by doubling teacher pay and coating Cape Breton Island with 24 carat gold rain. Left office after about a decade, 10 billion in the hole. Tory.

#58 Dogman01 on 06.19.21 at 2:33 pm

#30 DON on 06.19.21 at 12:13 pm

You hit the nail on the head, no long term vision, no long term cares, no long term plan. Children at play.

Worst Government ever……

That is why China will eat our lunch, they play the long game.

Our “leadership” looting the future so they can have it good now.
https://www.youtube.com/watch?v=jQvvmT3ab80

—————————————-

#39 Eco Capitalist on 06.19.21 at 12:57 pm

“If there’s a new way, I’ll be the first in line
But it better work this time”

#59 Keith on 06.19.21 at 2:33 pm

There are very few deficit hawks in Canadian politics, federal or provincial. By the time they pay the price of rewarding their voter base, it’s pretty difficult to balance the budget.

A practical measure, would be to expand the scope of the Auditor General function. There are tales of ministries spending unused budget room at the end of the fiscal year, among dozens of other government financial waste urban legends. Improved oversight of spending, deep into the ministry level could really make a difference.

#60 Quintilian on 06.19.21 at 2:46 pm

#54 Barb:

“The government simply kicked ALL those down the road.
Stay tuned”

Barb, you might find it counter intuitive but I agree with your view.

It’s just that the government will spread the pain over a longer period of time, and will inflicted it on more people thereby diluting the impact.

Yes the credit card statement will come.

#61 Ponzius Pilatus on 06.19.21 at 2:48 pm

I always stand between my left and right leaning friends.
That’s why I’m so balanced.

#62 Ponzius Pilatus on 06.19.21 at 2:55 pm

#41 Roial1 on 06.19.21 at 1:06 pm
Not sure that there is a correlation, BUT Mexico survived a default.

Just sayin”.
—————-
Right.
It’s the old saying: if you owe the bank 1,000 pesos, the bank owns you, but if you owe the bank gazillion pesos, you own the bank.

#63 IHCTD9 on 06.19.21 at 3:02 pm

#25 Ryan Lewenza on 06.19.21 at 11:52 am
Marcia M “It is striking how clearly those charts show that the biggest spikes in deficits always have been created as a result of Conservatives being in power. Mulroney, then Harper, and more at the provincial levels.”

I don’t agree with this. Yes deficits rose during the financial crisis under Harper but that was due to the recession and that all G7 nations agreed to increase government spending at 3% of GDP to help turn the economy around. By the end of his term they were back to balanced budgets. My analysis shows the bulk of our debt was incurred under the Trudeau’s. – Ryan L
— ——

Yep. IIRC, Harper had the deficit to just under a billion prior to getting booted. Now we’re headed for 1.5 TRILLION in federal debt.

If rates ever rise, the increase in debt servicing costs will rise to exceed the largest deficit ever logged in Canada prior to T2 – and we’ll get to pay it every year.

Hopefully I can get retired before they have to raise the age to 70, and cut CPP/OAS in half.

#64 IHCTD9 on 06.19.21 at 3:09 pm

#59 Ponzius Pilatus on 06.19.21 at 2:48 pm
I always stand between my left and right leaning friends.
That’s why I’m so balanced.
——-

Regular run of the mill right and left folks have always got along pretty good. It’s the extremists that can’t get along with anyone. That’s what happens when you are angry and stupid every day, same deal right or left. I know a couple of each, they’re tough to chill with.

Extremism, anger, and stupidity are three peas in a pod.

#65 IHCTD9 on 06.19.21 at 3:14 pm

#56 Dogman01 on 06.19.21 at 2:33 pm
#30 DON on 06.19.21 at 12:13 pm

You hit the nail on the head, no long term vision, no long term cares, no long term plan. Children at play.

Worst Government ever……

That is why China will eat our lunch, they play the long game.

Our “leadership” looting the future so they can have it good now.
https://www.youtube.com/watch?v=jQvvmT3ab80

—————————————-

#39 Eco Capitalist on 06.19.21 at 12:57 pm

“If there’s a new way, I’ll be the first in line
But it better work this time”

—- —-

Ahh, memories of my youth. We played that album to death :).

#66 cuke and tomato picker on 06.19.21 at 3:17 pm

The best post ever. We believe in helping those who are
mentally ill, physically disabled and single mothers with children. However we are burdened with THOSE WHO ARE TO COOL FOR SCHOOL AND TO LAZY TO WORK. Classic
example cherry growers in the Okanagan are needing pickers. I guess its better to be cerbing in Tofino. We get
enough socialism without voting for it in Canada.

#67 Property Accountant on 06.19.21 at 3:18 pm

Great article Ryan, presents dangers of higher interest rates, but your post question “Do deficits matter? ” shall deserve at least an attempt to answer it straight on.
There is significant evidence that country budget deficits DO NOT REALLY MATTER. Lets look at Japan, since 1993 constant budget deficits, exceeding 250% GDP last year. For comparisons, we are at 110-120% according to various sources. There is USA and more countries running permanent deficits.
Point is, central banks can print more funds in case needed, even buy out entire government debt (BOC on his way to do that, currently owing 40% of Canada Bonds).
BEWARE, I AM TELLING YOU – One day, BOC will announce “debt foregiveness has COME” and POOF! – erase Bonds from his books and Government will erase DEFICIT from his books. They will even sign a pact on TV, exchange papers. Bravo, VOILA! What a relief, that deficit was a real burden on our Canadian minds.
Canada may even get into international deals where some countries will buy our debt (Like China – US deal with bonds or Japan-US deal)

So DEBT is not a problem , it seems, it can be bought, forgiven, devalued by inflation (after all if everything goes up 5% and debt costs 1.25%, deficit just devalued by 3.75%) What really matters is how this extra money stimulus affects our economy (will it spur growth?) and currency exchanges. For now, currencies are controlled internationaly by BIS (www. bis.org) and it keeps our currency in line as long as other countries are printing money (nowadays over 100 countries print money so its OK). But that’s a topic for a different discussion.

I may be wrong, trying to be devil’s advocate here. In any case, it does not really matter anyway.

#68 Danien Sandowski on 06.19.21 at 3:19 pm

Canadians are suckers liking their Liberalism. They always will and will always be this way in Canada. Canada is the world’s welfare state for the world.

#69 IHCTD9 on 06.19.21 at 3:20 pm

#50 Sail Away on 06.19.21 at 2:11 pm
#34 An invasive species on 06.19.21 at 12:42 pm

Hi. My wife and I are in our early 60 and would like to know when we can retire .

We did have some savings from my commuted government pension but my husband said that disappeared a few years back….something called Krypto I believe he said.

———–

Wow, you have both a husband and a wife?

So progressive!
— —

Polygamy is the new way to afford life in Canada. Dual incomes don’t cut it anymore.

#70 Steven Rowlandson on 06.19.21 at 3:21 pm

“Do deficits matter?”
Only to honest and patriotic citizens. Everyone else is on the take.

#71 left or right on 06.19.21 at 3:34 pm

It seems to me that people generally think they are slightly left or slightly right and that it’s other people who are extreme? Try it out…ask someone where they are on the political spectrum….does anyone say “oh, I am extreme left/right”?! Yet we all can identify I am sure an extremist…but it’s never ourselves.

Signed by someone who self-identifies as left-of-centre but likely considered extreme left by someone who identifies as right-of-centre!

#72 Ponnaps on 06.19.21 at 3:52 pm

With deficits at record levels why is the CAD still so strong …especially against developing economies .. just gives credence to the theory that the house lust engulfing the nation is driven funds pouring in from overseas thereby driving up demand for the Canadian dollar ..
again not to be mistaken with foreign buyers, but local residents bringing money from their home countries..

Look at the currency graphs..The rise of CAD neatly coincides with rise in property prices beginning of this year, as against Garth’s analysis that the strong CAD was driven by forecasted demand for commodities, which markets started factoring in only around end April

#73 Ryan Lewenza on 06.19.21 at 4:03 pm

Danien Sandowski “Canadians are suckers liking their Liberalism. They always will and will always be this way in Canada. Canada is the world’s welfare state for the world.”

Well that’s an extreme and inaccurate view. Despite many of our weakness, Canada remains an incredible place to live and we’re lucky to live here. – Ryan L

#74 Joe Schmoe on 06.19.21 at 4:06 pm

Oh Ryan, you just don’t understand.

When things get rough just reach back into your unethically attained family trust fund. Nothing to worry about.

Sure the peasants won’t get ahead, but when did the Liberal governments ever care about the peasants?

#75 Don Guillermo on 06.19.21 at 4:26 pm

#70 Ponnaps on 06.19.21 at 3:52 pm
With deficits at record levels why is the CAD still so strong …especially against developing economies .. just gives credence to the theory that the house lust engulfing the nation is driven funds pouring in from overseas thereby driving up demand for the Canadian dollar ..
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Price of oil. Your theory’s funny tho …..

#76 Sail Away on 06.19.21 at 4:30 pm

#69 left or right on 06.19.21 at 3:34 pm

Signed by someone who self-identifies as left-of-centre but likely considered extreme left by someone who identifies as right-of-centre!

———–

I am always available to weigh in with my reasonable centrist views.

#77 Eco Capitalist on 06.19.21 at 5:02 pm

#63 IHCTD9

Ahh, memories of my youth. We played that album to death :).


Memories of your youth? You don’t listen to it anymore?

“That’s my secret Cap, I’m always angry.”
– Dr. Bruce Banner

#78 Danien Sandowski on 06.19.21 at 5:10 pm

Ryan, stick around in 5 to 10 years it will get much worse and we will be at least the top 5 socialist basket cases in the world.

#79 Grunt on 06.19.21 at 5:15 pm

The deficits terrifying. My guess is they’ll tax the hell out of non renewables.

#80 Faron on 06.19.21 at 5:33 pm

#74 Sail Away on 06.19.21 at 4:30 pm

#69 left or right on 06.19.21 at 3:34 pm

I am always available to weigh in with my reasonable centrist views.

You seem to regurgitate those views after suckling them out of Tucker Carlson’s teat. Centrist? Nyoooo. Libertarian with mostly right, but sometimes left accoutrements when they suit you.

#81 Albert uh! on 06.19.21 at 5:43 pm

#50 Sail Away on 06.19.21 at 2:11 pm
#34 An invasive species on 06.19.21 at 12:42 pm

Hi. My wife and I are in our early 60 and would like to know when we can retire .

We did have some savings from my commuted government pension but my husband said that disappeared a few years back….something called Krypto I believe he said.

———–

Wow, you have both a husband and a wife?

So progressive!

_________________________

What part of “we are from Alberta” didn’t you understand?

#82 Ponnaps on 06.19.21 at 5:50 pm

#73 Don Guillermo on 06.19.21 at 4:26 pm

Funny you chose to cut out my second para…

#83 Gen Z on 06.19.21 at 5:51 pm

CERB prevented a rental crisis and maintained property prices, even increasing it.

#84 truefacts on 06.19.21 at 6:02 pm

#65 Property Accountant

“There is significant evidence that country budget deficits DO NOT REALLY MATTER.”
_________________________________________

I don’t think you can look at the US as an example, as they have the world reserve currency (so far), so they can get away with it but…

…deficits mattered in Greece, Venezuala, Zimbabwe, …
Singapore has no gov’t debt.

Given the choice, where would you want to live?

#85 Flop… on 06.19.21 at 6:06 pm

Rhino, I put this footage up of our last Greaterfool meetup a little while ago.

If you want to meet up on Parliament Hill and crank this tune, I will bust my best white man dance moves like in this video to send a message to Mr Trudeau.

Ponzie is the guy in the cardigan.

Watch for the two heavy-set guys at around the 2 minute mark, that would be myself and Uncle Crowdie.

Mr Trudeau.

Stop Making This Hurt…

M47BC

https://www.youtube.com/watch?v=hQE0TrJbPAk

#86 Kurt on 06.19.21 at 6:23 pm

#3 Guy Man on 06.19.21 at 10:22 am

“Its not like a country can go bankrupt or have any consequence of going further down the hole – they just keep borrowing.”

I hope you’re being facetious – virtually all countries need to borrow externally to fund on-going operations. If an international sentiment develops that a given country may stop paying interest, that funding dries up, which has the same effect as going bankrupt does for an individual.

#87 Figus Makum on 06.19.21 at 6:36 pm

#52 Felix
Are you aware of any “guide cats for the blind”, or “police cats”?
No, me neither.

#88 Kurt on 06.19.21 at 6:44 pm

#12 Marcia M on 06.19.21 at 11:12 am

“It is striking how clearly those charts show that the biggest spikes in deficits always have been created as a result of Conservatives being in power. Mulroney, then Harper, and more at the provincial levels.”

Just hang on there, I remember the time around Mulroney. I remember PET running up deficits to fund consumption, interest rates skyrocketing as Paul Volcker “wrestled inflation to the ground” and PET losing power just in time to stick Mulroney with deficits driven by the *interest payments* on the money borrowed by PET, and having to trim programs. It took until Martin/Chretien to fix, and they took advantage of the hugely unpopular GST and raided the EI piggy-bank to do it. I did and still do deeply dislike Mulroney, but the existence of those deficits was the direct result of the recklessness of PET, and Mulroney did the right thing in replacing the manufacturer’s sales tax with the GST and paid dearly for it politically. This is Garth’s blog, so I can’t tell you to take your revisionist partisanship somewhere else, but I can certainly call you out on it. Understand your history or, if you can’t understand it, at least learn it.

#89 cuke and tomato picker on 06.19.21 at 6:44 pm

We got our second shot today at the Mary Winspear Center in Sidney BC. Also this was the first day of a
fruit stand set up in the parking lot selling Okanagan cherries. There were at least 6o plus people lined up
to buy. We have fond memories of harvesting our 100,000 pound cherry orchard in the south Okanagan for 37 years.

#90 Concerned Citizen on 06.19.21 at 6:57 pm

This is not the Liberal Party of Chretien and Martin. They are socially mega-woke, and fiscally they make the other parties look good. While they focus on identity politics and splurging on programs, big issues like housing affordability go totally unaddressed. Talk about a lack of perspective and priority…

What this government needs – among other things – is a strong fiscal conservative like Paul Martin or John Manley around the cabinet table. Right now I don’t think they have that voice, and the consequence of that is likely to haunt us for years to come.

The only thing keeping things together is that other countries have been spending and printing money like crazy, as well. As long as we’re not the only smelly shirt in the hamper, we can carry on like this…

#91 other guy in Vancouver on 06.19.21 at 7:34 pm

Given the grim future here, it looks like a good time to renew my passport for my other country.

#92 Don Guillermo on 06.19.21 at 7:34 pm

#80 Ponnaps on 06.19.21 at 5:50 pm
#73 Don Guillermo on 06.19.21 at 4:26 pm

Funny you chose to cut out my second para
*****************************************
Sometime in spring of 2020 oil prices briefly went negative. CAD hit a low of around 68.9 USD. Chart the USD/CAD between then and now and the trend is clear.

https://www.xe.com/currencycharts/?from=CAD&to=USD&view=2Y

#93 baloney Sandwitch on 06.19.21 at 7:35 pm

It’s not like anybody is buying the bonds Trudeau & Co. are selling – they are being bought by BoC. You can think of it as transferring debt from one pocket to another. Also, the money given to Canadians is not “free” — it’s a loan. It can be “taxed” back and it will, when the time is right. The government’s actions saved millions of lives; you cannot put a price on that. Sure, some money was “wasted” but when you trying to save millions, you don’t sweat the small stuff. I am proud to live in this great country (I am an immigrant) where human life is valued so highly. The glass is 3/4th full as far as I am concerned.

#94 Nonplused on 06.19.21 at 7:40 pm

Deficits do matter.

As I wrote at length about yesterday (#51) borrowing causes money creation in a fractional reserve banking system. The money is borrowed into existence. Yes, there is a mortgage or a bond that means the loan must be repaid with interest in the future, but the timing of the receipts is important. Now matters more than later.

A huge surge in the money supply now will create inflation now. That is what is happening. Paying back the loans in the future (they won’t, on net, ever be paid back but let’s assume) may create a deflationary impulse in the future but today is not tomorrow.

All of Trudeau’s insane spending will be met with inflation. It has to. Pe=MV. (See yesterdays comment at #51.)

Let’s look at just the child care program. So previously if you wanted kids you figured out how to finance them yourself, either with a stay-at-home parent or you paid for day care yourself. No increase in the money supply. Thus not inflationary. Trudeau proposes heavily subsidized day care to be paid for entirely with borrowed money. That means more day care workers bringing home a pay check and many many families with young children avoiding a major expense, leaving them more to spend on other things. And spend it they will. This is new money in the system created by government debt in the here and now. Prices will rise to absorb the new money. All prices. Pe=MV.

Government debt is inflationary. Maybe Garth is right and we won’t get hyperinflation, but all we need is a loss of confidence among the general population and look out! And even without hyperinflation what we are facing will be bad enough.

So yes, deficits do matter. You will pay it all back and then some through inflation. There is no such thing as a free lunch. Let’s hope your wages will keep up, but I don’t think they will. After all, why would someone pay you more when you have free child care? And then remember, you remain in competition with those who have free child care for life. This program will ultimately suppress wages, while stoking inflation.

#95 Nonplused on 06.19.21 at 7:45 pm

*Throughout your life, you will have to compete for jobs with people who have free child care. Good luck saving for retirement.

#96 willworkforpickles on 06.19.21 at 7:48 pm

The Fed really is poised to turn on a dime and make an about face. (next qtr?… but soon enough)
The Fed credibility-wise cannot survive near negative/negative interest rates. The age of central bank control is nearing an end.
If the Fed doesn’t raise rates, the risk to the U.S. dollar and the viability of the US debt like a time-bomb can only become increasingly questionable.
Fed hikes will make U.S. paper more attractive increasing capital inflows to the U.S. with a higher dollar being the end result.
Gold is a good buy now regardless of rate hikes and/or when in prep of ascending prices to come later this year and next.
Fear selling is making it a good buy. Fear motivates. Which way you respond to fear depends on what you really know as opposed to what you just think you know.

#97 Nonplused on 06.19.21 at 7:50 pm

#16 Rates on 06.19.21 at 11:26 am
Higher Interest Rates?

Like 0.5% higher?

Like 1% higher?

More than that is…never…gonna…happen!

——————————————–

When inflation gets to 14% hold on to your shorts. Volker is gone but not forgotten.

#98 Sail Away on 06.19.21 at 7:52 pm

#78 Faron on 06.19.21 at 5:33 pm
#74 Sail Away on 06.19.21 at 4:30 pm

I am always available to weigh in with my reasonable centrist views.

———

Centrist? Nyoooo. Libertarian with mostly right, but sometimes left accoutrements when they suit you.

———

Faron, I’m flattered by your intense focus on everything I say and think we should take this relationship to the next level. Here’s a photo from one of my earlier gigs while prepping for the Jaguar’s wedding party:

https://images.app.goo.gl/aGupEZJCavSiigNu9

Feel free to print and frame for the office!

#99 Nonplused on 06.19.21 at 8:01 pm

#36 saskatoon on 06.19.21 at 12:47 pm
the kicker is that the Canadian government shouldn’t have any interest payments at all.

they have the power (and obligation) to issue debt-free money, but instead they borrow it.

————————————-

Debt bound money is inflationary enough. Debt free money is like some kid at the Monopoly game writing his own money on Kleenex tissues. Eventually the money becomes worth more as a nose wipe.

Pe=MV. Learn it. It explains everything that is about to happen. See my comment at #51 yesterday.

#100 Wrk.dover on 06.19.21 at 8:07 pm

#86 Kurt on 06.19.21 at 6:44 pm

just in time to stick Mulroney with deficits driven by the *interest payments* on the money borrowed by PET

_________________________________

That is educational for me. Thanks

#101 baloney Sandwitch on 06.19.21 at 8:09 pm

I weep for Jago. All dogs go to heaven.

#102 Christopher Dillon on 06.19.21 at 8:16 pm

If you think deficits don’t matter, investigate Argentina’s relationship with Elliot Management. Argentina was once wealthier than Canada.

#103 Ponzius Pilatus on 06.19.21 at 8:17 pm

#80 Ponnaps on 06.19.21 at 5:50 pm
#73 Don Guillermo on 06.19.21 at 4:26 pm

Funny you chose to cut out my second para…
—————
Very selective, as always.
Same as CEF.

#104 islander on 06.19.21 at 8:48 pm

https://www.bbc.com/future/article/20210120-how-the-world-became-consumerist

How did we arrive at this?

“Over the course of the 20th Century, capitalism moulded the ordinary person into a consumer. Kerryn Higgs traces the historical roots of the world’s unquenchable thirst for more stuff.”

#105 crowdedelevatorfartz on 06.19.21 at 8:57 pm

@#81 General Zod
“CERB prevented a rental crisis and maintained property prices, even increasing it.”

+++

Bwahahaha.

You kids are so cute
Just wait for the wailing when CERB handouts are toast and the inevitable interest rates start climbing…..

#106 crowdedelevatorfartz on 06.19.21 at 9:05 pm

@#89 Other Guy
“Given the grim future here, it looks like a good time to renew my passport for my other country.”

+++

Could you take Ponzie with you?

#107 Anonymous on 06.19.21 at 9:18 pm

https://vpd.ca/police/organization/operations/canine/psd-in-memoriam.html

#108 Paul on 06.19.21 at 9:18 pm

Can our government not sell off a bunch of land to repay this debt??

#109 The Woosh on 06.19.21 at 9:42 pm

#24 Ponzius Pilatus on 06.19.21 at 11:43 am
Ryan Lewenza,
For Leader of the Conservative Party of Canada.
Has a good ring to it.

————————————————

Now why would Ryan want to sully his good name and reputation?

#110 will on 06.19.21 at 9:50 pm

well as Michael Hudson says, “Debt that can’t be paid off WON’T be paid off.”

#111 BCWally on 06.19.21 at 10:09 pm

I’m wondering how to tell a three year old that they will be paying for their own preschool care in 20 years…..at a premium.

#112 Michael in-north-york on 06.19.21 at 10:23 pm

#106 Paul on 06.19.21 at 9:18 pm

Can our government not sell off a bunch of land to repay this debt??
===

Possibly. But the buyers only will come if they get sufficient freedom to use that land as they want. That means, to operate businesses and receive profits. Which will go against the envoironmental regulations and goals.

#113 Salutations Sally on 06.19.21 at 10:24 pm

RIP Jago, may you be running free and fast at the Rainbow Bridge. Condolences to Cpl. Scott MacLeod and to your other team mates and family. Thank you for your service.

#114 Michael in-north-york on 06.19.21 at 10:52 pm

#91 baloney Sandwitch on 06.19.21 at 7:35 pm

It’s not like anybody is buying the bonds Trudeau & Co. are selling – they are being bought by BoC. You can think of it as transferring debt from one pocket to another.
===

When BoC is buying the government bonds, that’s a pro-inflation event. It doesn’t remove the excess dollars from the market. BoC bond buying makes sense as a temporary measure to avoid depression, when the economic activity takes a hit and the money circulation slows down. But that’s not a way to avoid inflation long-term.

An anti-inflation event is when non-government investors, either mutual funds or individuals, buy the government bonds. That diverts their dollars from the consumer market and returns them to the government. Since the dollars are off the market, they don’t compete for goods and don’t contribute to inflation.

That “sponge” effect of selling the government bonds is the reason we didn’t see a spike of inflation so far. But it only works as long as the government can pay interest to the bond holders. If we keep running deficits, the value of bonds they hold keeps increasing, and the interest payments consume greater and greater portion of the government’s tax collections. Eventually the government will not be able to pay enough interest to attract the bond buyers. Then they will stop buying the bonds, the excess dollars will hit the consumer market, and the inflation will rise dramatically.

Canada is a great country to live in, I agree with you on that and I am an immigrant too. Doesn’t mean we should refuse to notice the fires on the road ahead.

#115 Michael in-north-york on 06.19.21 at 10:55 pm

#92 Nonplused on 06.19.21 at 7:40 pm
===

That’s a very nice explanation, thank you.

#116 Kurt on 06.19.21 at 11:04 pm

#98 Wrk.dover on 06.19.21 at 8:07 pm

You are welcome. I have yet to see a Prime Minister I actually liked, and I shouldn’t write what I think of JT in public, but each one did something I strongly approved of and which turned out well for Canada. It is an error to allow partisanship to influence your understanding of the strategic situation facing each leader. I think some level of emergency spending was the best response to COVID-19, but I think JT has exploited this as cover for the most outrageous pre-election spending spree in Canada’s history, and we are unnecessarily at risk because of it. If we could find a true fiscal conservative, (s)he would be a good pick in the next election. Unfortunately, such leaders are rare regardless of political color, a reflection of the sense of entitlement that has become entrenched across the political spectrum (the difference being only in what people believe they are entitled *to*, not that they are entitled).

#117 Property Accountant on 06.19.21 at 11:21 pm

#65 Property Accountant
“There is significant evidence that country budget deficits DO NOT REALLY MATTER.”
_________________________________________

I don’t think you can look at the US as an example, as they have the world reserve currency (so far), so they can get away with it but…

…deficits mattered in Greece, Venezuala, Zimbabwe, …
Singapore has no gov’t debt.

Given the choice, where would you want to live?
————————————————————–
#1 GREECE CASE – IMF bailout, ECB bank bailout, today you can buy Greece debt bonds rated AAA+ and get for it less than for US bonds – debt was bought off with printed money. Apparently they are more creditworthy now that Canadians.
#2 ARGENTINA, VENEZUELA CASE – Communism, dictatorship and external debt owed in foreign currencies does not allow bailouts, printing and causes inlation (as deficits are inflationary) causing negative growth, recession, currency devaluation etc.

#118 saskatoon on 06.19.21 at 11:24 pm

#97 Nonplused

i agree.

but you are talking about currency…not money.

#119 Stuck in NB on 06.19.21 at 11:25 pm

I have seen this movie when Russia defaulted on its government bonds in 1998. The carnage was epic, but those with liquid capital and half-brain could get rich quickly.

#120 Faron on 06.20.21 at 12:13 am

#96 Sail Away on 06.19.21 at 7:52 pm

When the circus is in town can’t blame me for laughing.

#121 crowdedelevatorfartz on 06.20.21 at 12:26 am

Gee.

BLM protests. Everything protests.
Defund the Po-lice.

1.5 years of Covid lockdowns is ending …..alcohol…..crowds…..

Long hot Summer of riots?

https://globalnews.ca/news/7964550/vancouver-police-injured-english-bay-arrest/#:~:text=Vancouver%20police%20were%20called%20to,Steve%20Addison.&text=%E2%80%9CHe%20became%20hostile%2C%20began%20causing,resisted%20arrest%2C%E2%80%9D%20Addison%20said.

Everywhere….?

#122 BillyBob on 06.20.21 at 12:30 am

#19 Quintilian on 06.19.21 at 11:34 am
I think Ryan is just pacifying the political junkies.

Given the unparalleled situation, the government did the right thing. Was it perfect? No, but you can’t react that quickly and not leave some loop holes that some people will exploit.

If the government had not gone all in, we might have ended up in a depression for years, and the deficit would have exploded from lack of revenues.

The government had not choice and it prevented a flood of personal bankruptcies, record unemployment, crime and suffering.

=============================================

You don’t get it. Ryan isn’t exactly preaching austerity. And while a massive outlay for Covid was to be expected, that’s nothing compared to the other structural spending that’s being slipped in while they think no one is looking. Covid may go away, but the amazing new social spending on all things non-Covid won’t. And there is no plan, none, to pay for any of it. Good luck!

Hey Faron, so I’m driving up McKenzie tonight and I coulda swore I saw you walking along, or your doppelgänger if it wasn’t you. I’m terrible with names but great with faces. Me, borrowed Model Y, you blue shirt, shorts, trendy beard, with your lady? Only had a glimpse tho.

Right near where my cuz lives, Nelthorpe and McKenzie about 8pm. Was that you? Maybe we still CAN get that drink! Better hurry though, leaving in a couple days for sim.

#123 Rates on 06.20.21 at 6:31 am

#95 Nonplused

Higher Interest Rates?

Like 0.5% higher?

Like 1% higher?

More than that is…never…gonna…happen!

——————————————–

When inflation gets to 14% hold on to your shorts. Volker is gone but not forgotten.

———————————————

You think inflation like that would ever be acknowledged in these times by these officials?

#124 McSteve on 06.20.21 at 8:12 am

I blame the CPC for Trudeau’s lagresse. If they weren’t so keen on pandering to the So-Cons and putting such duds up as “leaders”, Mr. Socks would have been done a long time ago.

The best thing for Canada is a strong opposition party, regardless of who is in power.

#125 Ryan Lewenza on 06.20.21 at 8:17 am

Paul “ Can our government not sell off a bunch of land to repay this debt??”

The government definitely has assets on their balance sheet but nowhere enough to cover all the outstanding debt. The last big round of government privatizations was in the 1980/90s so the Canadian government has already sold off a lot of its assets. Sorry we’re stuck with this debt. No take backs! – Ryan L

#126 Canadians on 06.20.21 at 8:32 am

Complaining about deficits ? Hahaha

Trudeau keep sending folks cheques , a lock to win in October

Canada has become the world’s biggest joke

#127 crowdedelevatorfartz on 06.20.21 at 8:39 am

@#120 Billybob
“Covid may go away, but the amazing new social spending on all things non-Covid won’t. And there is no plan, none, to pay for any of it. Good luck!”

+++

The billions spent on every social experiment under the sun is criminal.
There is no limit to the damage that Trudeau under Butz have done.

And time after time, politician after politician can spend TAXPAYER money with absolutely zero accountability.
No Laws broken.
No auditors to question the losses.
No media putting these people to the fire.
Not criminal but certainly not right on many many levels.

We won’t understand how bad this truly is until inflation begins to hammer us, the interest rates start to climb, our dollar falls and the govt in power MUST start making cuts.

Massive, painful, Mommy isnt going to bail you out….cuts.

Perhaps then and only then…… Trudeau’s name will be as reviled as Mulroney’s …..?

Liberals better prepare for more than a decade in the wilderness if the loathing of Mulroney is any indication.

#128 crossbordershopper on 06.20.21 at 9:10 am

for half of canadians, deficits and debt dont matter. they own nothing, other than some scraps of furniture, a couple grand in the bank, and a used car.
litterly half of people in Canada work and live there whole life for nothing.
if dollar goes down, doesnt matter, your not travelling anywhere your poor, if stocks go down, who cares, dont own any anyway , you get the idea.
most people live and die without fanfare, money, hopes or dreams, they just exist basically on govt handouts in one form or another most of there lives. from child tax till 18, ei and assistance during the so called working years, and supplements and oas when they turn 65.
this audience here is totally the top 10% in wealth income, education and knowledge, the number of brain dead people out there is by far the norm.
having these philosophical discussions in terms of economics and crouding out theory or modern monetary theory sounds good but means nothing. Let me tell you my undergrade degree was in Economics. I got my masters in Finance, but honestly, everything you need to know in life i learned in kindergarden, but i didnt play well with others thats why personally i didnt fulfill my dreams. If you met the idiots I was with in kindergarden you would of turned out the same way.

#129 Sail Away on 06.20.21 at 9:31 am

#120 BillyBob on 06.20.21 at 12:30 am

Me, borrowed Model Y

———

And how does the pilot like the Tesla?

Also, if you were out driving Saanich, you may have seen some of my children: both bridges on Admirals. Over Colquitz near the highway and over the Gorge before Craigflower.

#130 Great job Ryan! on 06.20.21 at 9:33 am

Awesome!

Canada is KAPUT tho, lol

Trudeau will win again .if not for USA we are nothing, can’t even make our own car

Thanks Trudeau and dummy Canadian voters !

#131 Sail Away on 06.20.21 at 9:35 am

#123 Ryan Lewenza on 06.20.21 at 8:17 am

Paul “ Can our government not sell off a bunch of land to repay this debt??”

The government definitely has assets on their balance sheet but nowhere enough to cover all the outstanding debt. The last big round of government privatizations was in the 1980/90s so the Canadian government has already sold off a lot of its assets. Sorry we’re stuck with this debt. No take backs! – Ryan L

——-

The US would pay big for Alberta.

#132 Sail Away on 06.20.21 at 9:40 am

Three conspiracy theorists walk into a bar. That can’t be coincidence.

#133 RIP brave Jago on 06.20.21 at 1:48 pm

RIP brave Jago. Thank you for your service.

https://www.nbcnews.com/news/crime-courts/thirty-seven-u-s-police-officers-were-murdered-first-five-n1271020

#134 Northone on 06.20.21 at 6:23 pm

Jago was a hero!

My thoughts go out to Cpl. Scott MacLeod

What a loss

Thanks for sharing

#135 Canadian Moose on 06.21.21 at 12:56 am

Rip Jago, thank you for your service to keep the community safe. I hope they throw the book at the perpetrator.

Sad in the Hinterland

#136 Tudval on 06.21.21 at 10:12 am

“commensurate with what we think we have earned” lol.. do these people have some sense of entitlement or what? they’ve earned the money from their government jobs.. that’s exactly what they’ve earned and nothing more. The house, they need to buy it from other people who EARNED it. OR buy a piece of land in an area that others don’t already live on and build.

BTW, six degrees are no better than two. Between me and my wife, we have 4 , because the first 2 didn’t work out well enough and by now are pretty much useless. And in any case, my plumber makes more money, but then he doesn’t get the prestige that comes with a government job. But he can buy a nice house.

#137 Tudval on 06.21.21 at 10:19 am

About the $17 billion mortgage debt increase.. you know that’s fake, right? Many take advantage of the low rates to top up their mortgage and invest somewhere else. I’m “guilty” of that myself.. no desire to pay off the mortgage at 1.47%, but could easily do so if things would be getting tighter. Stop worrying so much.

Debt is debt. – Garth