Spending our children's money...

[August1991]

How often do you hear that phrase?

Several years ago, I sat through a lecture/presentation of Kevin Page who, Pollyanna style, claimed that the federal government was living beyond its means.

WTF?

Shy about my spoken English, I said nothing. In my mind, I seethed. I looked around the room at the middle-aged bankers, professors, consultants, bureaucrats, traders - largely male, white, older, balding. Each of them probably owned a house or if divorced, a condo, I thought. Maybe it's paid off. These guys probably have a kid or two. I wondered what would happen if these white rich older guys kicked the bucket soon. What would they leave behind? What is the point of life?

So. I thought of Page's nonsense.

If the federal government raises taxes, to pay down the government debt, these older guys will have less money and just pay less on their mortgage - and leave less to their kids.

OTOH, if the federal government cuts taxes, runs a deficit and doesn't pay its debts, these older guys will use the money to pay their mortgage and leave a more valuable property to their kids.

IOW, whatever the federal government does to pay for its spending, these older white guys can undo it. These rich older white guys have a house/condo/property to leave to their kids. Whatever the government does, these rich older white guys will decide how much their kids will get.

Bottom line?

Canada has more rich white older guys than spendthrift politicians.

Edited November 14, 2011 by August1991

[dre]

These rich older white guys have a house/condo/property to leave to their kids. Whatever the government does, these rich older white guys will decide how much their kids will get.

Not really. If our children inherit a government that is so deep in debt that that 1/4 of the federal budget goes towards debt maintenance, and theres trillions of dollars in worth of bonds waiting to mature and become payable, then they will have to pay much higher taxes than we did, and they will have to produce real goods and services to pay for our excesses.

Edited November 14, 2011 by Charles Anthony
deleted re-copied Opening Post

[August1991]

If our children inherit a government that is so deep in debt that that 1/4 of the federal budget goes towards debt maintenance...

But if a government is in such debt because of low taxes, then the rich white guys will have more home value to leave to their kids.

dre, think of your house like a swimming pool. If the government taxes you, you leave less water in the pool for your kids (but your kids have a lower tax liability). If the government doesn't tax you, you leave more water in the pool (but your kids have a greater tax liability).

Ultimately, you decide the level of the water in the pool when you die; not the government. Whatever the government does, you can undo.

Canadians - white, male, balding or otherwise - generally leave a house to their kids, if not a swimming pool.

Edited November 14, 2011 by August1991

[blueblood]

But if a government is in such debt because of low taxes, then the rich white guys will have more home value to leave to their kids.

dre, think of your house like a swimming pool. If the government taxes you, you leave less water to your kids. If the government doesn't tax you, you leave more water in the pool for your kids.

You decide the level of the water in the pool when you die; not the government.

But if the government doesn't get it's spending in line and get more revenues by growing the economy, the kids are going to be making the call about the water in the pool and that call will involve more water having to be taken out.

Might as well have a teaspoon of buckleys vs a couple of tablespoons.

[August1991]

But if the government doesn't get it's spending in line...

Two points:

1. Blueblood, you rightly recognize that government spending is the issue, not taxes or borrowing. I am not worried about government deficits/debts. It is government spending that I fear.

2. Governments/politicians can borrow a heck of alot more than they borrow now.

... the kids are going to be making the call about the water in the pool and that call will involve more water having to be taken out.

About 60% of Americans (and Canadians) own their own homes, and the net equity in their homes is around $150,000. (That's a gross under guesstimate.)

I am fearful that more politicians/leftists may discover the point 2. Bush Jnr certainly did when he decided to fight his wars. Obama knows about it when he started his stimulus package. Stephen Harper seems to have discovered it too, since he wanted reelection in Ontario.

Politicians and bureaucrats love to spend other people's money. It's so easy.

Edited November 14, 2011 by August1991

[blueblood]

Two points: 1. You recognize that government spending is the issue, not taxes or borrowing. 2. Governments/politicians can borrow a heck of alot more than they borrow now. I am not worried about government deficits/debts.

[i am fearful that politicians/leftists may cotton on - wonderful Americanism that I learned - to the point 2.]

I am. Debt is the devil. Were you worried in the early 90s when the bond vigilantes brought the currency liberals to heel? Do you know what quebec's debt looks like? Do you know what happens to interest rates when debt gets too high? What's wrong with getting out of debt?

Debt is like a night of drinking. It's better to have one or two, have a casual night and have a good nights sleep and be productive the next day than to go on a bender, have an epic night, get to bed at sunrise, and be hungover and throw your internal clock out of whack.

[blueblood]

About 60% of Americans (and Canadians) own their own homes, and the net equity in their homes is around $150,000. (That's a gross under guesstimate.)

[i am fearful that more politicians/leftists may discover the point 2. Bush Jnr certainly did. Obama knows about it. Stephen Harper seems to have discovered it too.]

That's just a paper value of the house, that value can go down based on demand and if we Canadians keep being more indebted than Americans, that 150000 dollar house might be 100k or less.

At least Harper is trying to pay the stupid thing off as efficiently as possible.

[August1991]

I am. Debt is the devil.

For politicians, debt is not the devil.

If a politician taxes and spends money in your name, that simply means that you leave less home equity to your kids. If the politicians borrows instead and spends, you leave more money to your kids.

Assuming that you leave a house/property to your kids, it makes no difference whether the government borrows, or taxes you.

-----

Voters are seriously mistaken if they think that competent politicians "balance the government budget". Who cares whether the government budget is balanced or not?

Edited November 14, 2011 by August1991

[August1991]

That's just a paper value of the house, that value can go down based on demand and if we Canadians keep being more indebted than Americans, that 150000 dollar house might be 100k or less.

Even at 100,000, you will leave something to your kids.

Harper can tax you now, or tax your kids later. What's the difference?

The difference is what he is spending the money on now. IOW, government spending is the issue; not the government budget deficit/surplus.

-----

I reckon that Harper/Flaherty have already figured this out (a decade after Bush Jnr, almost four years after Obama) and I fear that it means that they will spend even more of our money.

For me, when Flaherty claimed that he could only balance the budget in 2017, I realized that these guys had learned the truth about government budgets. Debts and deficits don't matter. It is spending that matters.

You have to have lived the life of a bureaucrat/politician. It is so easy/seductive to spend other people's money.

Maybe I'm wrong, but I now think that Harper is clueless about controlling government spending. He seems to be a bookkeeper in a casino.

Edited November 14, 2011 by August1991

[blueblood]

For politicians, debt is not the devil.

If a politician taxes and spends money in your name, that simply means that you leave less home equity to your kids. If the politicians borrows and spends, you leave less money to your kids.

Assuming that you leave a house/property to your kids, it makes no difference whether the government borrows, or taxes you.

-----

Voters are seriously mistaken if they think that competent politicians "balance the government budget".

No it doesn't because the kids will have to pay interest on the debt which makes it larger and if you keep kicking the can down the road you turn Into Italy. Imagine if the country was out of debt and we can invest in other countries and have them pay us Interest?

The difference is the amount being paid. I'd rather pay a little now, than have the kids pay a lot later.

When you inherit a business, it's a legacy, and you want that legacy to continue and sometimes that involves making sacrifices in order for the business to survive long term. It's why we have the "old money" phenomenon in some places in new England.

[August1991]

No it doesn't because the kids will have to pay interest on the debt which makes it larger and if you keep kicking the can down the road you turn Into Italy. Imagine if the country was out of debt and we can invest in other countries and have them pay us Interest?

The Canadian federal government borrows at about 2-3%. This is lower than any mortage that you may have.

The Italian government now borrows at 7% for 10 year terms. (Do you know any Canadian who can finance a fixed 10 year mortgage at 7%? Do 10 year mortgages exist in Canada?)

More generally, the government will always borrow at a lower interest rate than you or I.

In a sense, it is better if the government borrows on our behalf. BTW, the Quebec government does exactly that. It borrows money at low interest rates (also around 2-3%) based on Hydro-Quebec revenues, its power to tax and guaranteed transfers from the federal government. It then uses the money to invest in financial markets through the Caisse de dépôt where it receives returns well above its borrowing costs. Talk about leverage!

The difference is the amount being paid. I'd rather pay a little now, than have the kids pay a lot later.

The fact is that the money would be better in your hands. When the government borrows money, it borrows at a lower interest rate.

When you inherit a business, it's a legacy, and you want that legacy to continue and sometimes that involves making sacrifices in order for the business to survive long term. It's why we have the "old money" phenomenon in some places in new England.

Raison plus to leave the money in your hands and let the government borrow, rather than tax you.

----

As I say, the issue is government spending. It is not government taxes, deficit/debt, borrowing or whether its budget is balanced. When politicians speak of balanced budgets, they are usually speaking nonsense. Rather, when a politician speaks, listen carefully to whether it involves more spending of your money. That's all you need to know.

Edited November 14, 2011 by August1991

[WWWTT]

I am. Debt is the devil. Were you worried in the early 90s when the bond vigilantes brought the currency liberals to heel? Do you know what quebec's debt looks like? Do you know what happens to interest rates when debt gets too high? What's wrong with getting out of debt?

Debt is like a night of drinking. It's better to have one or two, have a casual night and have a good nights sleep and be productive the next day than to go on a bender, have an epic night, get to bed at sunrise, and be hungover and throw your internal clock out of whack.

Actually the interest rate is the devil.

Practically every business at some time assumes some amount of debt in order to continue making money-Its actually good business sence!

As far as currency value goes it would be better to see a lower dollar!Since we do not see any benefit of a high dollar at the consumer level-Or what I call the heart or engine of the economy level!

A high dollar seriously hurts our export and manufacturing sector(Ontario and Quebec) and only helps Alberta and Saskatchewan.

WWWTT

[Shwa]

The Canadian federal government borrows at about 2-3%. This is lower than any mortage that you may have...

More generally, the government will always borrow at a lower interest rate than you or I.

Quick question: from whom does the government borrow and what is the form of the loan?

[blueblood]

Actually the interest rate is the devil.

Practically every business at some time assumes some amount of debt in order to continue making money-Its actually good business sence!

As far as currency value goes it would be better to see a lower dollar!Since we do not see any benefit of a high dollar at the consumer level-Or what I call the heart or engine of the economy level!

A high dollar seriously hurts our export and manufacturing sector(Ontario and Quebec) and only helps Alberta and Saskatchewan.

WWWTT

No, an artificially low interest rate is the devil.

Paying off that debt is better business sense, because why pay interest if you don't have to. Not only that if you have cash in the kitty, the bank pays you interest.

No a higher dollar is in fact better, because our purchasing power will rise. Alberta and Saskatchewan are more export driven economies than Ontario. The thing with western Canada is that we have a production based economy instead of a consumer based economy. If you have ever bought things in the USA, you will see what the benefits are of a high dollar.

If a person can produce something and get paid more for it, that's a good thing. The Swiss have one of the most valuable currencies and they have very very low unemployment.

The only reason Canadians don't see the benefits of a higher dollar is that we are still willing to pay sticker price for goods instead of taking our business elsewhere.

[blueblood]

The Canadian federal government borrows at about 2-3%. This is lower than any mortage that you may have.

The Italian government now borrows at 7% for 10 year terms. (Do you know any Canadian who can finance a fixed 10 year mortgage at 7%? Do 10 year mortgages exist in Canada?)

More generally, the government will always borrow at a lower interest rate than you or I.

In a sense, it is better if the government borrows on our behalf. BTW, the Quebec government does exactly that. It borrows money at low interest rates (also around 2-3%) based on Hydro-Quebec revenues, its power to tax and guaranteed transfers from the federal government. It then uses the money to invest in financial markets through the Caisse de dépôt where it receives returns well above its borrowing costs. Talk about leverage!

The fact is that the money would be better in your hands. When the government borrows money, it borrows at a lower interest rate.

As I say, the issue is government spending. It is not government taxes, deficit/debt, borrowing or whether its budget is balanced. When politicians speak of balanced budgets, they are usually speaking nonsense. Rather, when a politician speaks, listen carefully to whether it involves more spending of your money. That's all you need to know.

And in the 80s the gov't was borrowing at double digit interest rates because Trudeau thought wallowing in debt was a fun idea.

How is it better to borrow? Why not live within their means. Look at Quebec, their debt is borderline unsustainable if not so already. Do we need to spend like that. Why do you want to copy Europe where borrow and spend has proven to be a disaster.

I'm saying paying off the debt is the only way long term to ensure that there is more money in people's hands. What's worse is that the borrowing is for consumption and not production. At least if it was for production, it would be easier to pay back.

Just because gov't has an eternity to pay back debt doesn't mean we should be swimming in it.

[GostHacked]

At least Harper is trying to pay the stupid thing off as efficiently as possible.

He is not trying to pay off anything. Just like any leader before. He may have had cuts in a certain sector, but overall the debt of the government is always on the rise.

One cut they can easily do is the extravagant meetings that accomplish little to nothing, but makes them feel better because they are 'meeting' with other leaders.

What is it costing the Canadian taxpayer for the summit in Hawaii? Could it have been done cheaper?? Oh hell yes.

[WWWTT]

No, an artificially low interest rate is the devil.

Paying off that debt is better business sense, because why pay interest if you don't have to. Not only that if you have cash in the kitty, the bank pays you interest.

No a higher dollar is in fact better, because our purchasing power will rise. Alberta and Saskatchewan are more export driven economies than Ontario. The thing with western Canada is that we have a production based economy instead of a consumer based economy. If you have ever bought things in the USA, you will see what the benefits are of a high dollar.

If a person can produce something and get paid more for it, that's a good thing. The Swiss have one of the most valuable currencies and they have very very low unemployment.

The only reason Canadians don't see the benefits of a higher dollar is that we are still willing to pay sticker price for goods instead of taking our business elsewhere.

This is only theory,none of this is reality.

WWWTT

[blueblood]

This is only theory,none of this is reality.

WWWTT

Ask Zimbabwe how having a devalued currency works out.

[WWWTT]

Ask Zimbabwe how having a devalued currency works out.

Ask the Ontario manufacturing sector how the overvalued Cdn.$ has helped.

WWWTT

[eyeball]

...our children inherit a government that is so deep in debt...

...they will have to produce real goods and services to pay for our excesses.

Therein lies a real problem our children face, they're also inheriting a planet that's been exhausted of most of it's resources. One of the worst things we're probably bequeathing our descendants though is the judgmental, social and moral imperative we've placed on having a job and pulling up your socks and being self-reliant. Anyone can be a gazillionaire.

I suppose now someone will be along with some warm fuzzy anecdote about their great grand pappy who arrived in Canada with next to nothing but initiative and the shirt on his back...but of course they always forget to mention the near empty continent our fore moms and dads had for the easy pickings.

It's just not that easy anymore and yet it's the choosers who seem to bear the biggest grudge against the losers. The twisted tortured society and economy we're leaving in our wake will say more about today's generations than anything else we leave behind.

[blueblood]

Ask the Ontario manufacturing sector how the overvalued Cdn.$ has helped.

WWWTT

Maybe Ontario should make things that people want and lower their costs of production. Western Canada is far more dependent on exports than Ontario, who's in better shape?

[blueblood]

Therein lies a real problem our children face, they're also inheriting a planet that's been exhausted of most of it's resources. One of the worst things we're probably bequeathing our descendants though is the judgmental, social and moral imperative we've placed on having a job and pulling up your socks and being self-reliant. Anyone can be a gazillionaire.

I suppose now someone will be along with some warm fuzzy anecdote about their great grand pappy who arrived in Canada with next to nothing but initiative and the shirt on his back...but of course they always forget to mention the near empty continent our fore moms and dads had for the easy pickings.

It's just not that easy anymore and yet it's the choosers who seem to bear the biggest grudge against the losers. The twisted tortured society and economy we're leaving in our wake will say more about today's generations than anything else we leave behind.

What are you talking about, we should encourage laziness?

It is still that easy these days, people need to get that late 60s nonsense out of their heads.

[eyeball]

What are you talking about, we should encourage laziness?

Birth control would be a better idea.

It is still that easy these days, people need to get that late 60s nonsense out of their heads.

So you figure anyone can just start whacking down trees or trapping beavers tomorrow and start building their empires? How about just picking any old 3000 acres out of the wilderness somewhere and starting a ranch, what is there to stop anyone from doing that?

Am I supposed to believe you started from scratch? I mean I know a few self-reliant types around here who picked up or inherited thousands of acres that originally sold for .25 an acre but the only one's just starting out are doing so at more like $100,000 an acre. Who knows maybe that's just chicken feed for anyone with their sleeves rolled up where you come from.

[WWWTT]

Maybe Ontario should make things that people want and lower their costs of production. Western Canada is far more dependent on exports than Ontario, who's in better shape?

Man you live in like some kind of fantasy world.

Why can't you just accept that I won't believe you,do you sincerelly believe the manufacturers would ever buy your opinion?

WWWTT

[Bonam]

So you figure anyone can just start whacking down trees or trapping beavers tomorrow and start building their empires?

Umm, no. But anyone can start a business and thereby start building their empire.