Comment 63705

By A Smith (anonymous) | Posted May 18, 2011 at 22:43:56 in reply to Comment 63698

>> The bank of Canada does not just "print money" we borrow it from corporations and countries that have it as well as by issuing savings bonds to Canadians

The Bank of Canada does print money, that's why our current GDP is $1.6 trillion, whereas in 1961 it was $41.1B. That's an average increase of 7.65% a year in new money.

If you are the government, this is great, because it allows you to borrow $100 dollars today and then have that $100 debt be diluted by an average of 7.65% every year until it is paid back. In 10 years, that $100 debt is only $51, even without any payments made to the principal. The $49 in debt is transferred to citizens in the form of a depreciated currency, a sneaky way of increasing taxes.

If the government fixes the Canadian dollar to the price of gold, it lessens their ability to dilute their debts by printing money, thus forcing them to either raise taxes, or spend less. In other words, it beings honesty back to the process of governing.

So when the Bank of Canada says it is helping the economy by devaluing the purchasing power of your dollars, they should actually say they are raising taxes to pay for wasteful government spending.

An economy doesn't grow because the government prints more dollars, it grows because businesses create new ideas. As long as there is a trusted currency, money will find its way to those businesses and the economy will prosper. Unfortunately, when the government prints money so they can spend more on unprofitable investments, resources get wasted and the economy slows.

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