Comment 75163

By A Smith (anonymous) | Posted March 11, 2012 at 17:26:55 in reply to Comment 75154

Every dollar that Canada's government is in debt, represents a Canadian dollar in savings for someone else, either households, corporations or foreigners.

Why would people want to save so many Canadian dollars? Is it because they lack confidence in the Canadian economy? Or, is it the opposite?

Ask yourself why yields on Canadian bonds are at historical lows? In other words, why are investors willing to pay high prices for Canadian/Ontario debt?

Most of the experts out there don't realize that Canadian debt is "printed" money. As such, we could take federal debt to $200 trillion (from $580 billion), interest payments to $10 trillion and we could still spend limitless amounts on health, education, etc.

The government of Canada in reality uses a printing press to spend and ONLY levies taxes to control inflation.

Spending = money printing
Taxation = money destruction
Debt issuance = Monetary tool to control bank reserves

In our current environment of high household debt and high unemployment, the feds should decrease "money destruction" by cutting taxes and running a larger deficit (of printed Canadian dollars).

Doing this would allow households to pay back bank debt, while also increasing spending.

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