Deficit financing

[Smallc]

Here it is so you can try to find the meaning of it and you'll see it absolute truth.

Sorry, but there is no meaning to be found within that.

[punked]

The Separatist Bloc Led NDP/Liberal Coalition would raise the deficit by $100B while raising corporate taxes in an economic recession. Oh let's not forget the impact of the additional $40B Green Shift Tax. None of this would effect Quebec of coarse but the rest of Canada would pay the price for a prosperous Quebec.

Yah Yah well it is a fact a known fact Harper will spend close to a trillion dollars on this deficit while killing babies.

That is how ridiculous you sound. You don't know what the Coalition would have done do you? Exxon Mobile came out in favour of a green shift just weeks ago saying it would help business but that really doesn't mean anything but you also don't know what that would have done. All we got right now is the Cons and if they do a bad job they will be thrown out no matter what you dream at night.

[jdobbin]

The latest information available from the Liberals is that they would spend $30B in a stimulus package.

That wasn't the latest info. In fact, it was corrected within a day.

[jdobbin]

The Separatist Bloc Led NDP/Liberal Coalition would raise the deficit by $100B while raising corporate taxes in an economic recession. Oh let's not forget the impact of the additional $40B Green Shift Tax. None of this would effect Quebec of coarse but the rest of Canada would pay the price for a prosperous Quebec.

The Tories will raise the deficit by more than $160 billion and their cap and trade will be raise prices by $50 billion.

[capricorn]

That wasn't the latest info. In fact, it was corrected within a day.

Why? Did they make an adding mistake?

[jdobbin]

Why? Did they make an adding mistake?

According to McCallum, it was number that didn't originate with him and he wasn't sure where it came from. Liberals who began citing it soon learned that there had been number decided.

Of course, you know this already.

[Jack Weber]

I have a question on the topic of deficit spending as it relates to borrowing money.

Unlike the US,this country does have its own bank,the Bank of Canada.This country also funded almost all of its 2nd World War effort and the major public works projects of the 1950's(like the St.Lawrence Seaway) using the funds from the Bank of Canada.At the end of The War,we were hardly in debt at all.

Why are we not using this to all our benefit right now,in terms of infrastructure spending?I realize there is potential for inflation,however,if the supply of money is monitored judiciously that would not be a problem.It would save this country on the question of debt,and interest payments on that debt on the other side of this recession.

Why is this not being openly discussed as an option?

Edited January 19, 2009 by Jack Weber

[blueblood]

The Tories will raise the deficit by more than $160 billion and their cap and trade will be raise prices by $50 billion.

160 billion? I'd have to ask for a cite on that to see this for myself...

Tory brass would pull their hair out if they had a PM who put us through a 160 billion dollar deficit.

[jdobbin]

160 billion? I'd have to ask for a cite on that to see this for myself...

Tory brass would pull their hair out if they had a PM who put us through a 160 billion dollar deficit.

That is is $40 billion a year for the next four years. It is what Harper has been hinting at in all his speeches.

[blueblood]

That is is $40 billion a year for the next four years. It is what Harper has been hinting at in all his speeches.

But, most economists have been suggesting that the recession will end late this year, early next year. I have a feeling in my bones other parties are suggesting deficit financing for a set period of time too. The question is, can we afford 160 billion dollars over 4 years?

[Smallc]

The question is, can we afford 160 billion dollars over 4 years?

Oh, with our credit rating, we can afford to borrow all kinds of money. The question is, what will we have to do to pay it back later?....I don't think the answer will be pretty.

[Smallc]

This does give some hope though:

http://www.cbc.ca/money/story/2009/01/13/s...ng.html?ref=rss

[blueblood]

Oh, with our credit rating, we can afford to borrow all kinds of money. The question is, what will we have to do to pay it back later?....I don't think the answer will be pretty.

What I don't get is why we have to spend it over 4 years.

This is why I am not a fan of firehose spending that the prev. Liberals did, and now unfortunately the tories are doing.

[jdobbin]

But, most economists have been suggesting that the recession will end late this year, early next year. I have a feeling in my bones other parties are suggesting deficit financing for a set period of time too. The question is, can we afford 160 billion dollars over 4 years?

I wish I thought long term forecasts by the economists could be trusted. At the moment, it is about something that is less easy to predict: confidence.

It would be a shame if all that resulted from tax cuts was people paying off debts since that would such prolong the recession and add to the deficit.

Edited January 19, 2009 by jdobbin

[Pliny]

Will government spending help get us out of depression or just make a bad situation much worse??

Government spending what? Money? The question should be will government creation of more credit get us out of depression..... That appears to be the plan and the hope being sold. Will it help or make a bad situation much worse? Re-worded does the outcome seem to slant in one direction more than the other? Spending ourselves into prosperity seems odd.

Falling prices, deflation in other words, is something to be avoided according to government so they will attempt to stop falling prices with the creation of credit - inflation in other words, and then they will bring in wage and price controls. It is the Keynesian way.

[Jerry J. Fortin]

The government will do what it wants or can get away with. Sadly that is the wrong approach and it will yield a direction not desired. I find it strange that the entire planet seems to be consumed with the concept of stimulus packages that translate to little more than corporate welfare. I wait patiently for some government in some nation to begin a new path. The pursuit of improving the human condition will eventually be undertaken by some wise or enlightened civilization. They will of course profit from the effort, but it seems that it will not be our society that gains.

[Jack Weber]

I have a question on the topic of deficit spending as it relates to borrowing money.

Unlike the US,this country does have its own bank,the Bank of Canada.This country also funded almost all of its 2nd World War effort and the major public works projects of the 1950's(like the St.Lawrence Seaway) using the funds from the Bank of Canada.At the end of The War,we were hardly in debt at all.

Why are we not using this to all our benefit right now,in terms of infrastructure spending?I realize there is potential for inflation,however,if the supply of money is monitored judiciously that would not be a problem.It would save this country on the question of debt,and interest payments on that debt on the other side of this recession.

Why is this not being openly discussed as an option?

I'm not an economist like Steve,but I'm just askin'?

[August1991]

I wish I thought long term forecasts by the economists could be trusted. At the moment, it is about something that is less easy to predict: confidence.

It would be a shame if all that resulted from tax cuts was people paying off debts since that would such prolong the recession and add to the deficit.

What a curious notion, Dobbin.

If people could pay off their debts, they might just have more confidence, no?

[Jerry J. Fortin]

I'm not an economist like Steve,but I'm just askin'?

The result of printing your own money is a devaluation of your currency. The entire financial market is designed outside of this effort. An interesting note to this is reality of the "money" supply. Nearly 90% of the money supply of this entire planet is not in hard currency or cash but instead it is "credit" That credit comes into being not in the form of paper or coins but instead in the form of interest bearing debt. That debt provides income, on paper, to financial institutions, so they can lend even more money and collect even more interest on a debt they created themselves to expand the money supply!

Given the reality of our current economic status, it is a wonder more folks don't start asking questions about the "financial crisis".

To reply to your question Jack; yes we could simply print some money or create some bonds or something and just pay off our debt, but the resulting consequence is that it would serve to make the money or bonds less valuable.

[capricorn]

If people could pay off their debts, they might just have more confidence, no?

It also injects money into financial institutions which in turn is made available to consumers for low risk loans.

[jdobbin]

What a curious notion, Dobbin.

If people could pay off their debts, they might just have more confidence, no?

Not for some time. As you well know, the Paradox of Thrift says that when people stop spending and pay off their debts, it makes the economic situation a lot worse before it gets better. In other words, confidence doesn't come back if jobs are still being lost and companies going under. And this occurs when people are not doing as much consumer spending.

Edited January 19, 2009 by jdobbin

[jdobbin]

It also injects money into financial institutions which in turn is made available to consumers for low risk loans.

However, evidence suggest that banks are hoarding cash and not making as many loans. Or when they do make loans, they do it at less favourable terms.

Banks have debts to pay off as well and many are using the cash injections to do this rather than opening up to the credit market.

[Pliny]

I have a question on the topic of deficit spending as it relates to borrowing money.

Unlike the US,this country does have its own bank,the Bank of Canada.This country also funded almost all of its 2nd World War effort and the major public works projects of the 1950's(like the St.Lawrence Seaway) using the funds from the Bank of Canada.At the end of The War,we were hardly in debt at all.

Why are we not using this to all our benefit right now,in terms of infrastructure spending?I realize there is potential for inflation,however,if the supply of money is monitored judiciously that would not be a problem.It would save this country on the question of debt,and interest payments on that debt on the other side of this recession.

Why is this not being openly discussed as an option?

The US has it's own bank as well. It's called the Federal Reserve.

The Bank of Canada has no funds for the government to use.

How it works Jack is the government, if it should find it needs funds, borrows from the Bank of Canada. This becomes the National debt. The National debt stands at around $600B dollars today. This is an accumulation of government deficits in their budgets over the years since the Bank of Canada came into existence in 1933. I am not positive but I think most of that debt was created in the seventies and eighties.

You are right that creating more debt by the government borrowing more from the Bank of Canada, would be inflationary. What the government would hope to do by spending that borrowed money (adding to the national debt) is to increase economic activity. The theory being that putting money into the hands of consumers, via government spending, will increase consumer spending and in turn create a demand for production of goods and services, decreasing unemployment and all kinds of good things.

The problems in doing so are inflation and the increase in debt which is to be paid back in future taxes but somehow never does.

ANyone else care to add to that or correct it. I am not an economist either so keep that in mind.

[Huston]

The theory being that putting money into the hands of consumers, via government spending, will increase consumer spending and in turn create a demand for production of goods and services, decreasing unemployment and all kinds of good things.

The questio is... how does that increase consumer spending?

[Mr.Canada]

The fact of the matter is that in today's world economic situation a deficit is unavoidable in order to try and sustain and stimulate the world into pulling out of this mess. None of the three nationalist federal parties would deny this fact, so let's stop fighting over this. The argument comes up when it comes to how long should the deficits continue and should they stay to the tune of money that they are now?