Comment 75059

By A Smith (anonymous) | Posted March 06, 2012 at 12:11:25 in reply to Comment 75054

>> Yes and look how printing more money has worked for the United States.

It's actually worked pretty well.

From July 2007, when U.S. household debt payments/income were 13.96%, they are now down to 11.08%, the lowest level since Oct 1994.

In contrast, Canadian consumer debt is on the rise, as people are being forced to borrow, because taxes are too high.

As for who owns U.S. debt, it is not important. As long as the U.S. can "print" money to make payments, there will always be someone willing to swap U.S. cash for cash plus interest (bonds).

>> Further.... ahem Greece, Italy, Spain, Portugal.

And all of these countries use the Euro, not their own national currency. By giving up their own central banks, they have lost the ability to "print" money.

Canada retains its central bank and therefore can always make interest payments, no matter how high they get.

>> By paying the national debt down you're not taking money out of the banking system.

Let's assume there is $1000 of Canadian savings in the banking system.

If the feds run a surplus, that means they tax $10 and only spend $9. Because spending adds money to bank accounts and taxes deplete bank accounts, if you tax more than you spend, eventually you deplete the amount of money in bank accounts.

$100 Savings + $9 Spending - $10 Taxes = $99
$99 Savings + $9 Spending - $10 Taxes = $98
$98 Savings + $9 Spending - $10 Taxes = $97

As you can see, when the feds run a surplus, it actually depletes the bank accounts of Canadians.

If people already have high levels of household debt, a government surplus makes it almost impossible for people to pay back their loans. They can, but it requires an equally as large reduction in spending.

When people stop spending, that's what they call a recession/depression.

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