Comment 88298

By A Smith (anonymous) | Posted May 01, 2013 at 14:09:46 in reply to Comment 88288

>> Someone someday has to pay it all back or you end up with sizeable portions of revenues just servicing debt.

Higher public debt service costs = More interest income for savers.

>> that money has to come from somewhere, it doesn't just grow on trees

These days, money is created by keystroke.

>> more debt you have that is more money from revenues transferred to debt payment that could be used for, much better purposes... Like LRT.

Public debt service costs = Pool of private capital available to build condos, coffee shops.

>> we have been racking up public-debt irresponsibly and almost non-stop for decades

Current debt service costs (all levels of government): 3.59%/GDP

Last time it was this low: 1974

Average debt service costs 1982-2000: 8.47%/GDP

>> That can't continue

Technically, it can. As long as you control you're own banking system, which Canada does, there is no limit to how much debt the government can issue.

Of course, if the government wastes money and depletes productive capacity, inflation can be a real concern.

However, in our own history, when public debt has gone up, inflation rates actually tend to fall.

1982: Infl-12%, Fed Debt-30%
1986: I-4.25%, FD-53%

1990: I-5.3%, FD-57%
1995: I-1.0%, FD-71%

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