Comment 75039

By A Smith (anonymous) | Posted March 05, 2012 at 19:18:00 in reply to Comment 75031

>> Every dollar that goes to servicing debt or interest on the debt is a dollar that can not be put into hard services and programs.

At the provincial level, you're correct. However, at the federal level, this is not actually the case.

When the feds need money to spend, (programs, interest payments) they just get the Bank of Canada to credit their account (Receiver General Consolidated Revenue Fund).

Here is a quote from the Parliament of Canada...

"In contrast to a fiscal surplus, a fiscal deficit results in an influx of cash into the private economy since the government injects more money through its spending than it collects in taxes."

An influx of money means it is new money that wasn't there before. If this wasn't the case, GDP couldn't have grown from $41 billion to $1.7 trillion (1961-2011).

>> Instead of adding to the debt, a key national fiscal policy should be eliminating it.

If you reduce the amount of money in Canada's banking system, how will people be able to pay back their mortgages? Credit debt is fixed, so if too much liquidity drains from our economy, it will be mathematically impossible for people to pay these debts back.

>> Baseball facilities, velodromes etc are nice frills. But if the project can't be managed properly or paid for. Thanks but no thanks.

They can be paid for, because the feds have the ability to print money in exchange for useful work.

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