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Liberal Minority Government 2019 - ????

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Altair

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Here is one assessment of what we are now on the hook for.


The Parliamentary Budget Officer has finally answered the burning question: will Prime Minister Justin Trudeau’s budget balance itself? The answer: yes, it will — but not for another almost 50 years. According to data published by the PBO, under status quo policies the federal government will balance its budget again in the year 2070 .
Now now. Let's wait until 2070 to see if this is true. That's the logic around here, no?
By then, Ottawa will have added another $2.7 trillion to its debt tab. That’s on top of its current $1 trillion of federal debt.
We shall see if this is true come 2070.
More deficits mean more debt that Canadian kids and grandkids will need to pay back.

A baby born this year owes more than $26,000 in federal government debt. By the time the budget is balanced a half-century from now, newborns will be on the hook for about $67,000.

You owe Fishbone Jones an apology.
If this is true in 2070 I will certainly apologize.
 

daftandbarmy

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Our debt to GDP ratio is appalling....

"And yet, Finance Minister Chrystia Freeland continues to use our supposedly low indebtedness to rationalize massive government spending increases based on borrowing, including in her first speech as finance minister and the recent 2021 budget. In reality, Canada’s debt situation is not nearly as rosy as the federal government would have us believe. Ottawa should exercise much more caution in buying things with debt."

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Altair

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Spoken like a true Gerald Butts' acolyte.
I don't want to bring up old disputes, but this was the exact same logic that was used for the vaccine procurement.

What's good for the goose is good for the gander. Wait until July I heard, wait until September I heard. Fine. Wait until 2070.
 

Brad Sallows

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Budget forecasts based on status quo continuing more than about 12 months are worthless.

"Paying back" is kind of a weird notion, since the government just rolls over whatever has come due each year. In any given year during which it is not in deficit, it might retire some debt instead of rolling it over.

What matters are limits on borrowing (which are not infinite) and going rates for debt when it is rolled over. If borrowing becomes impractical, either revenues must be found/created, or expenses decreased, or the government defaults.

Programs have been squeezed before, which is a manifestation of "paying back".
 

Altair

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Our debt to GDP ratio is appalling....

"And yet, Finance Minister Chrystia Freeland continues to use our supposedly low indebtedness to rationalize massive government spending increases based on borrowing, including in her first speech as finance minister and the recent 2021 budget. In reality, Canada’s debt situation is not nearly as rosy as the federal government would have us believe. Ottawa should exercise much more caution in buying things with debt."

View attachment 65951


Thats a weird system of measurement.

Pension plans still have value, counting it as debt is like buying a house and not accounting for the equity
 
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Altair

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Budget forecasts based on status quo continuing more than about 12 months are worthless.
It's weird when we agree on something.
"Paying back" is kind of a weird notion, since the government just rolls over whatever has come due each year. In any given year during which it is not in deficit, it might retire some debt instead of rolling it over.
Its weirder still when someone brings forward a factual point that isn't automatically this party bad.
What matters are limits on borrowing (which are not infinite) and going rates for debt when it is rolled over. If borrowing becomes impractical, either revenues must be found/created, or expenses decreased, or the government defaults.
Bravo sir/madame/non binary gender
Programs have been squeezed before, which is a manifestation of "paying back".
Austerity until its affordable again, but other than that, sure.
 

Eaglelord17

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Some simple math as to why the debt is terrible for Canadians. This was all based off numbers gathered when Trudeau first took office so I suspect the interest payments have increased if only due to the massive increase in debt, but at that point we had 600 billion in debt. We were paying 35 billion a year in interest. That coincidentally happened to be the amount that we had a deficit for even with all of Trudeaus extra non-essential spending.

So at that point in time if we had had no debt we wouldn't have had any deficit. At that point every 10 years we were paying more than half of what our national debt was in interest and not shrinking our debt any. Great way to deprive your children and grandchildren of their wealth for your temporary non-essential gains. Our debt skyrocketed right around 1974 under Mr. Trudeau Sr. increasing significantly with the increase in what we expected government to do for us but in line with a increase in funds to pay for them. From 1974-2010 we have spent over a trillion dollars on servicing our debt.

I fail to understand how anyone can argue that debt is a good thing. It makes sense in times of need (i.e. WWII, WWI, etc.), but it also needs to be paid back as soon as possible to prevent us selling out our childrens futures for nothing.
 

Brad Sallows

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It's not just children's futures that are affected. The debt accumulated from the mid '70s to mid '80s, and the cost of servicing it, was partly why some of the people wanting nice things from government went empty-handed through the '80s and '90s and onward.

Again, no point whining about the state of the CAF on any matter requiring more money while simultaneously finding excuses to keep the LPC in control.
 

MilEME09

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It's not just children's futures that are affected. The debt accumulated from the mid '70s to mid '80s, and the cost of servicing it, was partly why some of the people wanting nice things from government went empty-handed through the '80s and '90s and onward.

Again, no point whining about the state of the CAF on any matter requiring more money while simultaneously finding excuses to keep the LPC in control.
Interest payments on our debt alone takes a huge chunk of the federal budget, and it's only going to get worse
 

YZT580

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Simple truth that people and governments forget: when you owe money you are only as free as the lender allows. A good example of that is the manner in which China is gradually gaining de facto control over a number of African and Asian countries through their silk road initiatives. So who do we owe and to what extent does that debt control our foreign policy?
 

Altair

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Some simple math as to why the debt is terrible for Canadians. This was all based off numbers gathered when Trudeau first took office so I suspect the interest payments have increased if only due to the massive increase in debt, but at that point we had 600 billion in debt. We were paying 35 billion a year in interest. That coincidentally happened to be the amount that we had a deficit for even with all of Trudeaus extra non-essential spending.

So at that point in time if we had had no debt we wouldn't have had any deficit. At that point every 10 years we were paying more than half of what our national debt was in interest and not shrinking our debt any. Great way to deprive your children and grandchildren of their wealth for your temporary non-essential gains. Our debt skyrocketed right around 1974 under Mr. Trudeau Sr. increasing significantly with the increase in what we expected government to do for us but in line with a increase in funds to pay for them. From 1974-2010 we have spent over a trillion dollars on servicing our debt.

I fail to understand how anyone can argue that debt is a good thing. It makes sense in times of need (i.e. WWII, WWI, etc.), but it also needs to be paid back as soon as possible to prevent us selling out our childrens futures for nothing.
One could toss 2008 financial crisis and 2020 covid crisis there as well, no?
 

Oldgateboatdriver

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First of all, it's important to understand that Government borrowing is not like you or I going to the bank to get a loan (which, BTW is what China is doing to get control of Asian/African countries: China comes over and offers them a loan - to build an infrastructure that is useful to them and to China - with terms that give ownership of the infrastructure to China in case of default - then China barely uses it at the beginning so it becomes unsustainable, the Asian/African country defaults and China becomes the owner - at which time it uses it fully to its own benefit).

Government borrow by issuing bonds. At its most basic, a bond is a document that basically states "I, GoC, will pay (say) C$1,000,000 to the bearer of this bond in ten years". Then the government goes on the market with, say, a thousand of these bonds as an issue. Well, the investors (not lenders - investors) make their calculation and bid on the bonds, say at 60% of the value (which is a nominal 4% annual yield - not interest - yield). So the Government has raised 600 million dollars to finance its operations, in return for paying $1B in ten years. In the year that the government pays back the billion, the whole billion is accounted for in what is known as "debt servicing" in the national accounts (again, not interest payment but debt servicing). While some bonds, to make them easier to sell, include a small nominal interest payment each year (mostly the ones sold to the public in general such as Canada saving bonds) and therefore these interests are also included in the national accounts as debt servicing for this year, they form a very small part of the whole.

That's why you cannot equate debt servicing amount every year with interest payments nor can you calculate directly the effect of annual deficit on the national debt. That is also why government (particularly the Bank of Canada) is often active in the bond market to "buy back" government debt (i.e. bonds). Here is how it works: Say that today, the government can sell bonds for a nominal 2%, meaning they can sell a ten year $1Mil. bond at $800,000, but that five years ago, they had to sell for a nominal 5% (i.e. they sold it then for $500,000). The old bond still has five years to run, but it's been traded on the market many times for investors to cash in the accrued value of getting near the term. At five year, it is probably trading at around $750,000. So the government (or BoC) issues the new bond at nominal 2%, gets $800k, buys back on the open market the five year old bond for $750k (which becomes voided since the issuer has now recovered it), pockets $50k, wipes out $1B from its debt load in five years but takes on $1B of debt load in ten years. However, because of inflation and economic growth in the meantime, that $1B in ten years is actually less of a debt load than the $1B in five years they just wiped out.

All this to say that, regardless of the fact that politician in the opposition parties (it always the ones in the opposition ) at the time always try to play the easy populist card of comparing sovereign debt with "mom-and-pop dealing with the big bad banker", sovereign debt does not repeat not work the same way at all.
 

SeaKingTacco

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No, but you can reach a point where it gets difficult/expensive to sell new bonds, because the market begins to get nervous.

And the money you spending buying bonds or paying out bonds is still not being used to do things for the populous.
 

Brad Sallows

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Regular "investors" don't always want to buy all the bonds governments want to sell, which is when the real problems begin.
 

MilEME09

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At any point could we in theory look to see who do we owe to, and who owes us, take a hard look and go to them and say can we mutually write off X debt where X equals what we mutually owe each other?
 

Weinie

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First of all, it's important to understand that Government borrowing is not like you or I going to the bank to get a loan (which, BTW is what China is doing to get control of Asian/African countries: China comes over and offers them a loan - to build an infrastructure that is useful to them and to China - with terms that give ownership of the infrastructure to China in case of default - then China barely uses it at the beginning so it becomes unsustainable, the Asian/African country defaults and China becomes the owner - at which time it uses it fully to its own benefit).

Government borrow by issuing bonds. At its most basic, a bond is a document that basically states "I, GoC, will pay (say) C$1,000,000 to the bearer of this bond in ten years". Then the government goes on the market with, say, a thousand of these bonds as an issue. Well, the investors (not lenders - investors) make their calculation and bid on the bonds, say at 60% of the value (which is a nominal 4% annual yield - not interest - yield). So the Government has raised 600 million dollars to finance its operations, in return for paying $1B in ten years. In the year that the government pays back the billion, the whole billion is accounted for in what is known as "debt servicing" in the national accounts (again, not interest payment but debt servicing). While some bonds, to make them easier to sell, include a small nominal interest payment each year (mostly the ones sold to the public in general such as Canada saving bonds) and therefore these interests are also included in the national accounts as debt servicing for this year, they form a very small part of the whole.

That's why you cannot equate debt servicing amount every year with interest payments nor can you calculate directly the effect of annual deficit on the national debt. That is also why government (particularly the Bank of Canada) is often active in the bond market to "buy back" government debt (i.e. bonds). Here is how it works: Say that today, the government can sell bonds for a nominal 2%, meaning they can sell a ten year $1Mil. bond at $800,000, but that five years ago, they had to sell for a nominal 5% (i.e. they sold it then for $500,000). The old bond still has five years to run, but it's been traded on the market many times for investors to cash in the accrued value of getting near the term. At five year, it is probably trading at around $750,000. So the government (or BoC) issues the new bond at nominal 2%, gets $800k, buys back on the open market the five year old bond for $750k (which becomes voided since the issuer has now recovered it), pockets $50k, wipes out $1B from its debt load in five years but takes on $1B of debt load in ten years. However, because of inflation and economic growth in the meantime, that $1B in ten years is actually less of a debt load than the $1B in five years they just wiped out.

All this to say that, regardless of the fact that politician in the opposition parties (it always the ones in the opposition ) at the time always try to play the easy populist card of comparing sovereign debt with "mom-and-pop dealing with the big bad banker", sovereign debt does not repeat not work the same way at all.
But it is still debt, whether or not it is less of a debt load. How about some fiscal responsibility?
 

OldSolduer

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But it is still debt, whether or not it is less of a debt load. How about some fiscal responsibility?
That would mean telling (pick your favourite social programs) the piggy bank is bare. JT and his den of ne’er do wells aren’t good at saying “no” to those they like.
 
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