The Government of Canada presented its Throne Speech today
--- about an hour of trying to buy most people’s votes it seems to me. It was
like an extended gift opening on Christmas morning. Something for everyone ….. all
bought on credit. You can look up the details.
I agree with the Conservative observation, reflecting the
comments of the Premier of Quebec, that the federal government is stepping into
Provincial jurisdiction. My observation has been that the Liberals do not pay
much attention to the constitutional separation of powers. They seem to think
they know how to run people’s lives better than the individuals do, and it is
reflected into their forays into health care and education.
I do not agree with the Conservative objection that the
country will be saddled with debt that will be borne by future generations. The
give-aways are funded by borrowed money, but mainly borrowed from the Bank of
Canada. It works something like this. The Government issues a debt instrument to
the Bank of Canada in exchange for cash. Cash is a liability of the Bank of
Canada. So the Government debits Cash and credits Due to Bank of Canada, while
the Bank of Canada debits Government Bonds and credits Cash outstanding (a
payable). The Cash in the hands of the Government is liquid, and it gets spent.
The entry ends up being debit Deficit and credit Cash. The final result is
Government accounts that have a debit Deficit balance and a credit Due to Bank
of Canada balance. Debt for the next generation? No. What it does is make the
Canadian dollar worth less. It is not the future generations paying for the
goodies; it’s the holders of Canadian dollars. But since other countries are
essentially doing similar things, the Canadian dollar likely will not lose much
ground against most major currencies. Where it will lose ground is in terms of how
much of various commodities, goods and services it can buy.
If we get into negative interest rates, which will make it
easy to handle such foreign debt as we do have, the velocity of money will
increase quickly and we will likely have a major price inflation as people
spend, spend, spend. The loss in purchasing power of the Canadian dollar could
likely be more than mitigated if the country did away with all income tax at
every level and funded government solely through the creation of money, sales
tax, and fees for services. I suspect the economy would be vigorous as
companies moved here and the production of goods and services increased. The
retention of income taxes combined with massive amounts of new money and very
low, and even negative, interest rates is likely the road to an inflationary depression.