Canada's $614,307,000,000.00 Debt Solution

[Russ Browne]

http://www.debtclock.ca/

Why did Pierre Elliot Trudeau move Canada from having a public debt (printed money from the Bank of Canada) - Edit - this should state that the bank of Canada loaned money to the government before 1974, this was very manageable as the public debt was only 18 billion dollars in 1974 before Trudeau drove it to over 100 billion dollars which got the compounding private bank monster rolling) to borrowing money from private banks and issuing bonds (money) that pay interest?

This was essentially a criminal act, there was never any referendum of Canadian taxpayers that agreed to let the government start borrowing money from banks and investors. Approximately 70% of the 600+ Billion dollar federal debt is from compounding interest. If they had just printed the money from the Bank of Canada we would only have a 200 billion dollar excess currency in circulation instead of this monsterous 600 billion debt that is compounding and threatening to destroy our civilization.

The whole mess was started by the Liberals, a bunch of lawyers who know how to pass laws and spend money but cannot run a business, no business can just pile up debt with no intention of paying anything back and neither can a country, it just takes longer for a country to finally go bankrupt. With interest rates at record lows now there is great danger that as rates swing back up (like a pendulum that has built up momentum) Canada's debt service charges will become overwhelming, taking from vital government services, just when the demand for those services will be rising as the baby boomers retire. Currently 14% of tax dollars are going to service the debt as interest rates rise that number could double, triple or worse until the system collapses. Government cannot continue to raise taxes and inhibit the productive members of society from creating wealth so that the capital can be wasted on debt and overpaid civil servants, including Pierre Trudea's offspring Justin who has now moved up to the trough.

The solution as detailed by Economist Martin Armstrong is:

1) Stop all payments to the bondholders and issue local spending credits (probably based on the 200 billion initial loans, not the compounding level of 600 billion since Canadian taxpayers did not vote or approve these loans.

2) Make it illegal for politicians to borrow money

3) Term limits (one term) for all politicians at all levels of government. A permanent privileged class of politicians that get used to having far more money than most Canadians must not be allowed as this makes then out of touch with the problems that the taxpayers who elected them have. It should be an honour to serve your country not a way to get rich. Canadian business people with strong experience in running businesses efficiently should be encouraged to step forward and give 1 term of service to running the country (this principle should apply to all levels of government).

4) Change all pensions and pay levels for politicians and public servants retro-actively to be more in line with private pensions, amounts given out are to be based on number of years served just as in the private world. The average federal civil servant total cost according to the Canadian Taxpayers Federation is over $114,000 dollars per year, this is far above what most Canadians get and is not right.

5) Eliminate the Income Tax and replace it with a sales tax and small property transfer tax. Mr. Armstrong did a study showing government would actually get more money if this was done. Income tax inhibits the formation of capital required by business to expand and hire more people. This would also help working Canadians save for buying house or a business. It is better to let those who know how to create wealth direct the money instead of government bureaucrats wasting a great deal of tax dollars. Government in Canada now gets a total of 43% of Canadian's income according to the Fraser Institute, this is way too much and a great deal of it is going to those at the top, not the poor.

Prime Minister Harper and his gang are no different than the Liberals or NDP, these politicians set themselves above everyday taxpayers and above all are more concerned with their own power and money than the concerns of working Canadians.

The tragedy of a debt crisis is that the people at the bottom, the poor people are the ones that get hurt the most, it is always government's duty to help those who cannot help themselves.

Martin Armstrong and his AI supercomputer model predicted the world-wide debt crisis we are in now back in the 1980's when he warned the Reagan administration of the dangers of compounding interest but was ignored. Europe and Japan are predicted to collapse followed by the core economy the United States between 2016-2020, the debt party started by FDR in the 1930's will end, Socialism will collapse as its big brother Communism did in 1989 as was predicted by Armstrong's computer, it was after this that the CIA took notice and requested a copy of Armstrong's model. In Armstrong's veiw Karl Marx is the most influential economist of our time and has given legitimacy to western governments to interene heavily in the economy with no intention or long term plan of every paying anything back.

I believe we need a new political party, the Taxpayers Party to set things right. My letters to Harper and his finance minister have been ignored.

Read more from Economist Martin Armstrong here... http://armstrongeconomics.com/sovereign-debt-crisis/

Russ Browne

Edited July 21, 2013 by Russ Browne

[August1991]

Russ, God knows why, but I'll try two arguments on you.

Argument One

it makes sense for you to pay off your debts because you will die some day - and surely you don't want to burden your children with debt after you're gone.

But Canada will never die. And it makes no sense for Canada collectively to pay off its debts, or even to pay them down,

At any given moment, many Canadians will be in debt (largely because of a mortgage) and many other Canadians will have savings (largely because of retirement needs).

A snapshot of Canada, at any given moment, will always show debt - while each individual Canadian is slowly paying it down. Our federal government is a reflection of Canada as a whole and it makes perfect sense for it to be in debt.

Your error is the fallacy of composition: what may be true for an individual is not true for a group.

-------

Argument Two

I am completely indifferent to whether the federal government borrows to pay for its expenditures, or if it uses tax revenues to pay for them. Why? If the government raises my taxes, I will have less money to pay down my mortgage and my kids will inherit a less valuable property from me. If the federal government borrows instead (and my taxes are lower) then I'll be able to pay down my mortgage faster and leave a more valuable asset for my kids. And they'll need the extra money when the federal government raises taxes to pay off its debts.

Hence, while government spending matters to me, how the government pays for this spending (taxes or borrowing) makes no difference. In finance theory, something roughly equivalent is known as the Modigliani-Miller theorem.

Edited July 19, 2013 by August1991

[Michael Hardner]

Hi Russ - check your messages.

[Russ Browne]

Voltaire's Bastard (whoever you are):

Your arguments are nonsense, it was Elizabeth Cull the British Columbia finance minister under the NDP in the 1990's that said government debt is like a mortgage, a morgate does not keep growing like our national and provincial debts are. Cull was eventually discredited after British Columbia got into trouble with its bonds as Economist Martin Armstrong had predicted they would.

In case you have not noticed Europe is starting to fall apart, what you see happening in Greece is going to sweep through all the western countries, like a bunch of dominoes. Suicides are moving up in Greece and other European countries now, the real victims of governments going into debt. People like you are being selfish, lets party now and let our children and grandchildren pay the price. Chritien and Martin's attempt to reduce the debt has now been totally blown away, a wasted effort and the debt continues to grow.

Note the chart below, before Trudeau and his liberal lawyers and banking buddies, Canada's debt was public and managable, now it is over 600 billion dollars and there is great danger that it can now have a 'phase transition' as interest rates rise leading to what Greece is going through...bankrupcy.

Albert Einstein said compounding interest is the eighth wonder of the world, unfortunately when it is government debt that is compounding it becomes a nightmare. Right now 11% of working Canadians taxes are going to pay interest on the 614 billion dollar debt, when interest rates go up that 11% could double or triple, meaning there will be less money for important things, like health care, welfare, education etc. So the bankers get all the money and everyone else can be their slaves.... WRONG!!

HIstory is now going to show that people like you are wrong, that the trees cannot grow to the sky and neither can government debt.

Between 2016 and 2020 the system will collapse, then it will be too late and great suffering will happen.

Russ, God knows why, but I'll try two arguments on you.

Argument One

it makes sense for you to pay off your debts because you will die some day - and surely you don't want to burden your children with debt after you're gone.

But Canada will never die. And it makes no sense for Canada collectively to pay off its debts, or even to pay them down,

At any given moment, many Canadians will be in debt (largely because of a mortgage) and many other Canadians will have savings (largely because of retirement needs).

A snapshot of Canada, at any given moment, will always show debt - while each individual Canadian is slowly paying it down. Our federal government is a reflection of Canada as a whole and it makes perfect sense for it to be in debt.

Your error is the fallacy of composition: what may be true for an individual is not true for a group.

-------

Argument Two

I am completely indifferent to whether the federal government borrows to pay for its expenditures, or if it uses tax revenues to pay for them. Why? If the government raises my taxes, I will have less money to pay down my mortgage and my kids will inherit a less valuable property from me. If the federal government borrows instead (and my taxes are lower) then I'll be able to pay down my mortgage faster and leave a more valuable asset for my kids. And they'll need the extra money when the federal government raises taxes to pay off its debts.

Hence, while government spending matters to me, how the government pays for this spending (taxes or borrowing) makes no difference. In finance theory, something roughly equivalent is known as the Modigliani-Miller theorem.

[AlienB]

http://www.debtclock.ca/

Why did Pierre Elliot Trudeau move Canada from having a public debt (printed money from the Bank of Canada) to borrowing money from private banks and issuing bonds (money) that pay interest?

This was essentially a criminal act, there was never any referendum of Canadian taxpayers that agreed to let the government start borrowing money from banks and investors. Approximately 70% of the 600+ Billion dollar federal debt is from compounding interest. If they had just printed the money from the Bank of Canada we would only have a 200 billion dollar excess currency in circulation instead of this monsterous 600 billion debt that is compounding and threatening to destroy our civilization.

The whole mess was started by the Liberals, a bunch of lawyers who know how to pass laws and spend money but cannot run a business, no business can just pile up debt with no intention of paying anything back and neither can a country, it just takes longer for a country to finally go bankrupt. With interest rates at record lows now there is great danger that as rates swing back up (like a pendulum that has built up momentum) Canada's debt service charges will become overwhelming, taking from vital government services, just when the demand for those services will be rising as the baby boomers retire. Currently 11% of tax dollars are going to service the debt as interest rates rise that number could double, triple or worse until the system collapses. Government cannot continue to raise taxes and inhibit the productive members of society from creating wealth so that the capital can be wasted on debt and overpaid civil servants, including Pierre Trudea's offspring Justin who has now moved up to the trough.

The solution as detailed by Economist Martin Armstrong is:

1) Stop all payments to the bondholders and issue local spending credits (probably based on the 200 billion initial loans, not the compounding level of 600 billion since Canadian taxpayers did not vote or approve these loans.

2) Make it illegal for politicians to borrow money

3) Term limits (one term) for all politicians at all levels of government. A permanent privileged class of politicians that get used to having far more money than most Canadians must not be allowed as this makes then out of touch with the problems that the taxpayers who elected them have. It should be an honour to serve your country not a way to get rich. Canadian business people with strong experience in running businesses efficiently should be encouraged to step forward and give 1 term of service to running the country (this principle should apply to all levels of government).

4) Change all pensions and pay levels for politicians and public servants retro-actively to be more in line with private pensions, amounts given out are to be based on number of years served just as in the private world. The average federal civil servant total cost according to the Canadian Taxpayers Federation is over $114,000 dollars per year, this is far above what most Canadians get and is not right.

5) Eliminate the Income Tax and replace it with a sales tax and small property transfer tax. Mr. Armstrong did a study showing government would actually get more money if this was done. Income tax inhibits the formation of capital required by business to expand and hire more people. This would also help working Canadians save for buying house or a business. It is better to let those who know how to create wealth direct the money instead of government bureaucrats wasting a great deal of tax dollars. Government in Canada now gets a total of 43% of Canadian's income according to the Fraser Institute, this is way too much and a great deal of it is going to those at the top, not the poor.

Prime Minister Harper and his gang are no different than the Liberals or NDP, these politicians set themselves above everyday taxpayers and above all are more concerned with their own power and money than the concerns of working Canadians.

The tragedy of a debt crisis is that the people at the bottom, the poor people are the ones that get hurt the most, it is always government's duty to help those who cannot help themselves.

Martin Armstrong and his AI supercomputer model predicted the world-wide debt crisis we are in now back in the 1980's when he warned the Reagan administration of the dangers of compounding interest but was ignored. Europe and Japan are predicted to collapse followed by the core economy the United States between 2016-2020, the debt party started by FDR in the 1930's will end, Socialism will collapse as its big brother Communism did in 1989 as was predicted by Armstrong's computer, it was after this that the CIA took notice and requested a copy of Armstrong's model. In Armstrong's veiw Karl Marx is the most influential economist of our time and has given legitimacy to western governments to interene heavily in the economy with no intention or long term plan of every paying anything back.

I believe we need a new political party, the Taxpayers Party to set things right. My letters to Harper and his finance minister have been ignored.

Read more from Economist Martin Armstrong here... http://armstrongeconomics.com/sovereign-debt-crisis/

Russ Browne

I Russ, I'm for Inflationary print as part of a sound economic policy too, however, I'm not for advocating leaving bond holders high and dry that would be dishnourable at face value.

What needs to be done is to divest the public debt 50/50 between the public and corporations. This works out to about 15 or 20,000 per person, plus about 300 billion for corporations to pay down (this amounts to about 10 years of all corproate taxes)

Stop issuing bonds is important.

Likewise transfering the debt from a public debt to private debt.

Creating a death tax.

Creating a $20,000 citizenship bond.. that is to gain citizenship you must pay down aboout 20k before eligibility for citizenship. Instituting a higher residence fee. eg. 2500 / year. or mroe.

putting a money transfer fee for any capital transfered out of Canada eg. 15% of all capital transfers. (to be paid direct to debt paydown)

increasing royalties, and taxing infrastructure at a higher value eg. pipelines and railways (which are federal property)

All government spending needs to be cut to non deficit... based on revenue, not taxation except for essential servicse such as the RCMP and Canadian Military (and related Coast Gaurd etc..), and the Courts.

All new public service hirers should be transfered to members of the military to double up on the value of having a civil service that can also act as military in time of need, except for highly skill positions that cannot be trained under officer training programs, eg. post secondary studies and officer entry as ROTC.

the government need to put all crown lands up for sale to create a means of property tax revenue.

the government also needs to end free trade and leave the WTO and put on tarrifs for all goods that can be made in Canada.

Corporate taxes should be reduced on a 15 year schedule at 1% per year, and fees for essential services such as registries should be put in..

Fees for services should be implmented to ship all expenditures to fees, while the RCMP and military should be raised through a levy of the public with rebates of the fee for people who are members of miitia and meet annual training limits.

The key is to remove expenditures and shift it all over to crown corps. Fact is none of it is needed it is madness to think the gov is spending 300 billion or more every year? On what?

They are spending to spend.

Massive spending reduction needs to happen first...

inflationary print may be able to handle 50 billion or so a year.. but more than that would implode the economy.

also safeguards for seniors need to be put in place.

The key is to shift the public service and the military into only military.

.

That will take a few decades of transitioning.

All new hirers need to be military.

-

Stop all new bond issues... not stop payment to bond holders.

" Make it illegal for politicians to borrow money" Make it illegal to deficit spend too.

"Term limits (one term) for all politicians at all levels of government." I'm not sure about this, however I would call for every citizen has one vote on all legislative decisions, creating a referendum process that isn't as costly by creating atm voting by creating voting stations in police stations, court houses and barracks. Make a death penalty for electoral fraud. And insure there are oversights and people can check their own vote online or via phone with their access codes like telephone and internet banking.

Oh and convert police stations and court houses and barracks into banks too.

I don't think there should be pensions other than an equal social security, pay them today when they leave the job give them the same benefits as everyone else. If they can't afford freedom 55 they are spending their money on the wrong things. fact is they make enough to contribute to a private pension plan they don't need more tax dollars they get paid too much already for lecturing each other with one liners. It is way too much money for what they do.

5.) Eliminate the income tax - Income tax should be replaced with debt paydown, service fees for optional service buy ins. However it will take about 15 years or perhaps longer to do this at about equal income tax levels. People should be able to pay their personal debt portion off earlier to remove the interest on that debt. Personally I don't think peoples private sales should be taxed. Although I understand that real estate can be a lucrative market since there is a certain amount of speculation. None the less I don't think government should be involved in taxing services or chattel property transfers. The government should tax imports and exports of capital not internal transfers.

Unfortunately that won't happen because Canada is run by two mega parties with the occasional NDP government not federally as of yet though.. none the less... none of them will eliminate the debt because they don't care. People will find a reason to hate them in 5 or 10 years anyway and its someone elses problem.

Other measures are to remove borders.. make residency a matter of paying the annual fee in advance... making a tourist fee rather than visas.

Reforming criminal law, removing prisons and making northern work camps in their place eg. oil rigs. merchant marine (paid to remove dokey need on release and reduce recidivism by remove the need for crime such as theft or other low class crimes by having them have skills and money) as well making very serious crimes with intent 10 years or more in work camps.. funding the courts with "Criminal Fee that is criminals pay for the cost of policing and courts for life" or a portion of it.

It is the whole way the system is working that isn't being managed to be fiscally sound.. they don't care they are still being bank rolled. It is about "doing the stuff" not about being financially prudent. They are just trying to keep things in the status quo even if it is broken to begin with., They don't care. Its all about victimizing people or rewarding people its not about making things right.

Edited July 20, 2013 by AlienB

[Russ Browne]

AlienB:

Some interesting ideas, death penalty for voting fraud is a little extreme though. Perhaps Justin Trudeau can pay down the debt his father started...good luck on that one. Armstrong is also opposed to property taxes btw. It is worth studying what he says since he is the guy that predicted all this trouble 3 decades ago.

None of our ideas will be implemented though, as Martin Armstrong says the whole system is going to crash and burn. Just look at what recently happened in Detroit, they filed for bankruptcy after racking up 18 billion dollars in debt, that debt could have easily been paid off with the over 1 Trillion spent on the Iraq war.

Politicians are all gutless and will just keep passing the ball over to the next guy instead of cleaning up the mess. They are only interested in themselves and getting re-elected. Crash and burn is coming to Europe, Japan USA and Canada by 2020 they system will have collapsed. China will be the new power. Its all very sad, but historically inevitable for the power to shift from the west to the east where they are hungry, disciplined and smart as well as having large numbers of people.

[Pliny]

http://www.debtclock.ca/

Why did Pierre Elliot Trudeau move Canada from having a public debt (printed money from the Bank of Canada) to borrowing money from private banks and issuing bonds (money) that pay interest.

Russ Browne

Hi Russ,

I have a few questions about your post.

I read a little bit of Mr. Armstrong's website but maybe you can point me to the place where my questions are answered.

Firstly, you say Mr. Trudeau moved Canada from "having a public debt (printed money from the Bank of Canada) to borrowing money from private banks and issuing bonds (money) that pay interest?"

As far as I know the Government has always sold bonds to Canadian Citizens and private interests that have paid interest to the holders of those bonds - Canada savings bonds and such? Is that not true?

I have read more about the Federal Reserve system in the States than I have the Bank of Canada and its role here.

The global central banking system is more or less all tied together now and they seem to be operating from the same play book. They didn't always but, the US dollar, which was brought into being as the world's reserve currency after the demise of Bretton-Woods in 1971, the system over time became more centralized and the IMF and World Bank became more influential and the Federal Reserve more powerful.

We see today where that system has taken us, essentially to the edge of an economic abyss, where Greece is laying off 25,000 public employees, major cities in the US are filing for bankruptcy and economic indicators are being anemically propped up with more credit.

Basically, after the end of Bretton-Woods, the soveriegn national governments of the world could create "money" out of thin air as the only thing backing it was basically the production of the country and a confidence in the stability of the issuing government. You will notice that shortly after 1971 the "money supply" of most nations started to rise quite quickly and has not stopped and has most recently spiked - especially the US dollar.

My second question is why would a system that just prints money or creates it electronically be any better than one thatprints it and charges interest? Certainly, compound interest does add substantially to the total but really if a government creates the "money" interest is irrelevant. They could just print enough to pay the interest. Now that would create a devaluation of the currency raising prices and such and they couldn't go so far as to destroy the value of the currency entirely by flooding it into society.

To me, the problem today is first world economies need to donw-size and that means governments need to down-size but they seem intent on maintaining themselves at their current size and look for ways to also maintain their revenue level.

They can't do this in a stagnant economy

[Newfoundlander]

But Canada will never die. And it makes no sense for Canada collectively to pay off its debts, or even to pay them down, At any given moment, many Canadians will be in debt (largely because of a mortgage) and many other Canadians will have savings (largely because of retirement needs).

What? You're saying we shouldn't pay down our debt?

[Russ Browne]

Hi Pliny, My comments are in red below....

Hi Russ,

I have a few questions about your post.

I read a little bit of Mr. Armstrong's website but maybe you can point me to the place where my questions are answered.
Firstly, you say Mr. Trudeau moved Canada from "having a public debt (printed money from the Bank of Canada) to borrowing money from private banks and issuing bonds (money) that pay interest?"

As far as I know the Government has always sold bonds to Canadian Citizens and private interests that have paid interest to the holders of those bonds - Canada savings bonds and such? Is that not true?

Below text taken from: http://occupyourbank.ca/Money-The_Canadian_Experience.php

This information is from a few years ago....

PLEASE NOTE IN THE TEXT ABOVE: - National debt shown as $494.4Billion Our FEDERAL FINANCE MINISTER, JAMES FLAHERTY, will have given away JUST IN INTEREST: 2004-05 $34.1 B, 2005-06 $33.7B, 2006-07 $34.8B, 2007-08 $34.8B TO PRIVATE MONEY LENDERS. In four years a total of 137.4 BILLION of our tax dollars. This is money STOLEN from the taxpayers of CANADA!

• This is a violation of the Canadian Constitution of 1867, article 91
• It is also a violation of the Bank of Canada Act of 1934, Article 18, ©, (i), & (j)

**What makes out Politicians be complicit in this great theft?

Here is the history of Canadian Bonds...

History

1939-45 – Victory Bonds
Bonds first made their appearance in Canada during the First and Second World Wars as War Savings Certificates and Victory Bonds. They were used to fund the war efforts.

1946 – Launch of the CSBs and the original Payroll Program.
CSBs are introduced as part of Canada’s Postwar Financing Program.
• Certificated CSBs were purchased through payroll deductions
• Customers received bonds upon full payment
• Up to 16,000 employers participated in this plan

1953 – Fully registered bonds
Acting as an agent of the Government of Canada, the Bank of Canada paid the annual interest directly to the bond holder.

1956 – Escalating coupon bonds were introduced.

1977 – Regular-Interest “R” Bonds and Compound-Interest “C” Bonds replaced old style coupon bonds. Direct deposit of interest payments was also made possible with the introduction of the new bonds.

1996 – New Payroll Savings Program

1997 – Introduction of The Canada RSP and The Canada RIF
CSBs were allowed to be purchased directly as an RSP without a Self-Directed Plan, and without fees. Existing bonds could also be transferred into The Canada RSP/RIF without fees or new cash investment.

1998 – Introduction of the Canada Premium Bond (CPB)
The CPB was introduced with the same general features as the Canada Savings Bond (CSB), but with a higher rate of interest at the time of issue than a CSB on sale at the same time, and is cashable once a year.

2010 – Program Changes
Campaign sales period is changed from 6 to 2 months.
Canadians can no longer open new Canada RSP or Canada RIF accounts.
Bonds will mature at the end of their individual term.

2012 – Product Changes
CSBs offered exclusively through the Payroll Savings Program.
Only CPBs are available through financial institutions, dealers and by phone.
CPBs become cashable anytime with interest paid up until the last anniversary date of issue.
Term to maturity for all bonds shortened to three years from 10 years.

The chart below shows that Trudeau changed the debt from a public debt to a private bank debt, this chart is taken trom the two websites listed here, these sites have a great deal of information about Canada's debt, they state that taking the debt private was illegal according to our constitution and several people actually sued the Canadian Government over this issue. I don't fully understand the mechanisms as to how the debt was moved from a public debt to a private bank debt but that seems to be the case.

http://www.occupyourbank.ca/images/cnb.jpg

http://occupyourbank.ca/Money-The_Canadian_Experience.php

http://www.occupyourbank.ca/images/cnb.jpg

http://occupyourbank.ca/Money-The_Canadian_Experience.php

Cowichan Citizens CoalitionBill Abram. Chair of the 'Duncan Initiative'
6668 Genoa bay Road, Duncan, B.C. V9L 5Y7
E-mail [email protected]

December 24, 2006

Honorable Jim Flaherty, Minister of Finance,
House of Commons, Parliament Buildings,
Ottawa, Ontario K J 2A OA6

Dears Sir:

Re: The Bank of Canada & why it was created

The purpose of the Cowichan Citizens Coalition's 'Duncan Initiative' is to remind elected officials that:

1. The Canadian Constitution Act of 1867, Article 91, gives the Government of Canada the "exclusive" right to create the nation's money.
2. The Statutes of the Bank of Canada Act of 1934, Article 18 (1), © (i) & (j) spell out clearly how governments, Federal, Provincial or Municipal, borrow from the Bank of Canada for public projects and services with little or no added interest.

Sir, "money exists not by nature but by law" as Aristotle stated 2300 years ago. Article 14 (2) places you, an elected official of Canada, as final authority for Bank of Canada policy. You hold all the shares of the BoC on our behalf. Your duty is to uphold that BOL law.

On September 30^th you declared a [budget] surplus of $13 billion which you would use to pay down the debt. Why would you not borrow that $13B to pay down the debt from the, Bank of Canada, interest free, and use the $13B budget surplus to provide urgently needed social services like child care or housing, for the thousands of homeless Canadians?

Elected officials did use our Bank of Canada effectively from 1935 to 1974. In 1974 our national debt, dating back to 1867, stood at a mere $18B.According to the Auditor General's report of November 1993, that debt had risen to $423 billion, of which $386 billion was entirely interest on interest. (please refer to attached graphs). Please note Economist, Jack Biddell's figures: Income Taxes paid by Canadians from 1981 to 1995 totaled $619B. Interest paid to private banks during that same period totaled $428B.

On November 14. 2006, the Fraser Institute stated that our current direct governmental debt stands at $798 billion. As elected lawmakers of Canada, how do you and your fellow elected lawmakers justify the abdication of this “most conspicuous and sacred responsibility” as stated by Prime Minister William Lyon Mackenzie King, in 1938. Please be honest and thoughtful with your reply. Note the words of Economist, John Kenneth Galbraith, “The study of money, above all other fields in 'economics, is one in which complexity is used to disguise truth or 10 evade truth, not reveal it”.

Sincerely,

William E. Abram, Chair of the CCC, 'Duncan Initiative'
Cc. Jean Crowder, MP Nanaimo - Cowichan

I have read more about the Federal Reserve system in the States than I have the Bank of Canada and its role here.

The global central banking system is more or less all tied together now and they seem to be operating from the same play book. They didn't always but, the US dollar, which was brought into being as the world's reserve currency after the demise of Bretton-Woods in 1971, the system over time became more centralized and the IMF and World Bank became more influential and the Federal Reserve more powerful.

We see today where that system has taken us, essentially to the edge of an economic abyss, where Greece is laying off 25,000 public employees, major cities in the US are filing for bankruptcy and economic indicators are being anemically propped up with more credit.

Basically, after the end of Bretton-Woods, the soveriegn national governments of the world could create "money" out of thin air as the only thing backing it was basically the production of the country and a confidence in the stability of the issuing government. You will notice that shortly after 1971 the "money supply" of most nations started to rise quite quickly and has not stopped and has most recently spiked - especially the US dollar.

My second question is why would a system that just prints money or creates it electronically be any better than one thatprints it and charges interest? Certainly, compound interest does add substantially to the total but really if a government creates the "money" interest is irrelevant. They could just print enough to pay the interest. Now that would create a devaluation of the currency raising prices and such and they couldn't go so far as to destroy the value of the currency entirely by flooding it into society.

The reason it would be better to print money is because bonds are a form of money - money that pays compounding interest which is like a cancer that just keeps growing until it leads to a collapse. The government has not intention of paying anything back, there is no long term plan, its the next guys problem. We are like a train racing down the mountainside with no engineer while politicians are saying everything is fine. This is wholesale theft from Canadian taxpayers. Approximately 400 Billion Dollars of the 614 Billion Dollar debt is from interest payments, i'm pretty sure that Canada would be much better place if that 400 billion had stayed in taxpayers pockets.

To me, the problem today is first world economies need to donw-size and that means governments need to down-size but they seem intent on maintaining themselves at their current size and look for ways to also maintain their revenue level.
They can't do this in a stagnant economy

As Martin Armstrong says, we are in a stagflation era now, rising costs for government and citizens with stagnant to shrinking revenues, we have painted ourselves into a debt hell. Politicians do not want to give up their power and willl fight to hang onto it at taxpayers expense, this is all the legacy of Karl Marx who preached intervention in the economy by the government and the bankers have gone along with it as they have been able to extract great wealth from the taxpayers. It is Armstrong's view that Government is the enemy of the people, it always has been for thousands of years.

Hi Russ,

I have a few questions about your post.

I read a little bit of Mr. Armstrong's website but maybe you can point me to the place where my questions are answered.
Firstly, you say Mr. Trudeau moved Canada from "having a public debt (printed money from the Bank of Canada) to borrowing money from private banks and issuing bonds (money) that pay interest?"

As far as I know the Government has always sold bonds to Canadian Citizens and private interests that have paid interest to the holders of those bonds - Canada savings bonds and such? Is that not true?

I have read more about the Federal Reserve system in the States than I have the Bank of Canada and its role here.

The global central banking system is more or less all tied together now and they seem to be operating from the same play book. They didn't always but, the US dollar, which was brought into being as the world's reserve currency after the demise of Bretton-Woods in 1971, the system over time became more centralized and the IMF and World Bank became more influential and the Federal Reserve more powerful.

We see today where that system has taken us, essentially to the edge of an economic abyss, where Greece is laying off 25,000 public employees, major cities in the US are filing for bankruptcy and economic indicators are being anemically propped up with more credit.

Basically, after the end of Bretton-Woods, the soveriegn national governments of the world could create "money" out of thin air as the only thing backing it was basically the production of the country and a confidence in the stability of the issuing government. You will notice that shortly after 1971 the "money supply" of most nations started to rise quite quickly and has not stopped and has most recently spiked - especially the US dollar.

My second question is why would a system that just prints money or creates it electronically be any better than one thatprints it and charges interest? Certainly, compound interest does add substantially to the total but really if a government creates the "money" interest is irrelevant. They could just print enough to pay the interest. Now that would create a devaluation of the currency raising prices and such and they couldn't go so far as to destroy the value of the currency entirely by flooding it into society.

To me, the problem today is first world economies need to donw-size and that means governments need to down-size but they seem intent on maintaining themselves at their current size and look for ways to also maintain their revenue level.
They can't do this in a stagnant economy

[Russ Browne]

One other important point... If the government had not created a 614 billion dollar debt your taxes would be lower now, 14 percent of your taxes are going into the debt hole now, being used to service the debt.

Russ, God knows why, but I'll try two arguments on you.

Argument One

it makes sense for you to pay off your debts because you will die some day - and surely you don't want to burden your children with debt after you're gone.

But Canada will never die. And it makes no sense for Canada collectively to pay off its debts, or even to pay them down,

At any given moment, many Canadians will be in debt (largely because of a mortgage) and many other Canadians will have savings (largely because of retirement needs).

A snapshot of Canada, at any given moment, will always show debt - while each individual Canadian is slowly paying it down. Our federal government is a reflection of Canada as a whole and it makes perfect sense for it to be in debt.

Your error is the fallacy of composition: what may be true for an individual is not true for a group.

-------

Argument Two

I am completely indifferent to whether the federal government borrows to pay for its expenditures, or if it uses tax revenues to pay for them. Why? If the government raises my taxes, I will have less money to pay down my mortgage and my kids will inherit a less valuable property from me. If the federal government borrows instead (and my taxes are lower) then I'll be able to pay down my mortgage faster and leave a more valuable asset for my kids. And they'll need the extra money when the federal government raises taxes to pay off its debts.

Hence, while government spending matters to me, how the government pays for this spending (taxes or borrowing) makes no difference. In finance theory, something roughly equivalent is known as the Modigliani-Miller theorem.

[Russ Browne]

Pliny,

Here is some more very good information about how Canada moved from a public debt to a private bank debt and at the bottom it includes the solution as to how to get out of the mess...

Between 1939 and 1974, the government actually did borrow from its own central bank. That made its debt effectively interest-free, since the government owned the bank and got the benefit of the interest. According to figures supplied by Jack Biddell, a former government accountant, the federal debt remained very low, relatively flat, and quite sustainable during those years. (See chart below). The government successfully funded major public projects simply on the credit of the nation, including the production of aircraft during and after World War II, education benefits for returning soldiers, family allowances, old age pensions, the Trans-Canada Highway, the St. Lawrence Seaway project, and universal health care for all Canadians.

The debt shot up only after 1974. That was when the Basel Committee was established by the central-bank Governors of the Group of Ten countries of the Bank for International Settlements (BIS), which included Canada. A key objective of the Committee was and is to maintain “monetary and financial stability.” To achieve that goal, the Committee discouraged borrowing from a nation’s own central bank interest-free and encouraged borrowing instead from private creditors, all in the name of “maintaining the stability of the currency.”

(The above is ironic as the reason to move to a private bankers debt was to "maintain monetary and financial stability"... exactly the opposite is true, a debt crisis leads to currencies crashing. The bankers neglected to mention that perpetual borrowing and compounding interest would eventually lead to a massive debt that would consume everything. RB )

The presumption was that borrowing from a central bank with the power to create money on its books would inflate the money supply and prices. Borrowing from private creditors, on the other hand, was considered not to be inflationary, since it involved the recycling of pre-existing money. What the bankers did not reveal, although they had long known it themselves, was that private banks create the money they lend just as public banks do. The difference is simply that a publicly-owned bank returns the interest to the government and the community, while a privately-owned bank siphons the interest into its capital account, to be re-invested at further interest, progressively drawing money out of the productive economy.

The debt curve that began its exponential rise in 1974 tilted toward the vertical in 1981, when interest rates were raised by the U.S. Federal Reserve to 20%. At 20% compounded annually, debt doubles in under four years. Canadian rates went as high as 22% during that period.

Canada has now paid over a trillion Canadian dollars in interest on its federal debt!!! — nearly twice the debt itself. If it had been borrowing from its own bank all along, it could be not only debt-free but sporting a hefty budget surplus today. And that is true for other countries as well.

Another way

Why are governments paying private financiers to generate credit they could be issuing themselves interest-free? According to Professor Carroll Quigley, Bill Clinton’s mentor at Georgetown University, it was all part of a concerted plan by a clique of international financiers. He wrote in Tragedy and Hope in 1964:

The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.

Each central bank . . . sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.

In December 2011, this charge was echoed in a lawsuit filed in Canadian federal court by two Canadians and a Canadian economic think tank. Constitutional lawyer Rocco Galati filed an action on behalf of William Krehm, Ann Emmett, and COMER (the Committee for Monetary and Economic Reform) to restore the use of the Bank of Canada to its original purpose, including making interest free loans to municipal, provincial and federal governments for “human capital” expenditures (education, health, and other social services) and for infrastructure. The plaintiffs state that since 1974, the Bank of Canada and Canada’s monetary and financial policy have been dictated by private foreign banks and financial interests led by the BIS, the Financial Stability Forum (FSF) and the International Monetary Fund (IMF), bypassing the sovereign rule of Canada through its Parliament.

Today this silent usurpation has been so well obscured that governments and voters alike are convinced that the only alternatives for addressing the debt crisis are to raise taxes, slash services, or sell off public assets. We have forgotten that there is another option: cut the debt through the use of publicly-owned banks that return the interest to public coffers. Cutting out interest has been shown to reduce the average cost of public projects by about 40%.

Game over: we win.

Hi Russ,

I have a few questions about your post.

I read a little bit of Mr. Armstrong's website but maybe you can point me to the place where my questions are answered.
Firstly, you say Mr. Trudeau moved Canada from "having a public debt (printed money from the Bank of Canada) to borrowing money from private banks and issuing bonds (money) that pay interest?"

As far as I know the Government has always sold bonds to Canadian Citizens and private interests that have paid interest to the holders of those bonds - Canada savings bonds and such? Is that not true?

I have read more about the Federal Reserve system in the States than I have the Bank of Canada and its role here.

The global central banking system is more or less all tied together now and they seem to be operating from the same play book. They didn't always but, the US dollar, which was brought into being as the world's reserve currency after the demise of Bretton-Woods in 1971, the system over time became more centralized and the IMF and World Bank became more influential and the Federal Reserve more powerful.

We see today where that system has taken us, essentially to the edge of an economic abyss, where Greece is laying off 25,000 public employees, major cities in the US are filing for bankruptcy and economic indicators are being anemically propped up with more credit.

Basically, after the end of Bretton-Woods, the soveriegn national governments of the world could create "money" out of thin air as the only thing backing it was basically the production of the country and a confidence in the stability of the issuing government. You will notice that shortly after 1971 the "money supply" of most nations started to rise quite quickly and has not stopped and has most recently spiked - especially the US dollar.

My second question is why would a system that just prints money or creates it electronically be any better than one thatprints it and charges interest? Certainly, compound interest does add substantially to the total but really if a government creates the "money" interest is irrelevant. They could just print enough to pay the interest. Now that would create a devaluation of the currency raising prices and such and they couldn't go so far as to destroy the value of the currency entirely by flooding it into society.

To me, the problem today is first world economies need to donw-size and that means governments need to down-size but they seem intent on maintaining themselves at their current size and look for ways to also maintain their revenue level.
They can't do this in a stagnant economy

Edited July 21, 2013 by Russ Browne

[Topaz]

On the other side, Mulroney ran it up $300 Bil., so the truth be known, both the Liberals and the PC are to blame and Harper has jack it up too, so what does that tell you? So how do we reduce it? Cut more in Ottawa, smaller government, including MP's in cabinet,benefits cost Canadians too much. Put pay freezes in for ALL, including MPs and senators. http://www.prime-ministers.ca/mulroney/issues.php

[Russ Browne]

Topaz: Yes all the main parties are guilty of running up debt, including the NDP provincially.

From the links I have posted above the solution is to start to use the Bank of Canada again as was done between 1939 and 1974 to borrow money or issue credit if you will, at very little cost to the Canadian taxpayer. It is our bank and we have the legal authority to use it but the governments have refused to use is since the 1970's. International bankers conspired to extract large amounts of money out of Canadian taxpayers. If people really understood what was going on their would be a revolution.

Payments on the bonds must stop otherwise we will be like the frog in the pot of water that is slowly getting hotter until there

is a phase transition and the water comes to a boil, then it will be too late.

On the other side, Mulroney ran it up $300 Bil., so the truth be known, both the Liberals and the PC are to blame and Harper has jack it up too, so what does that tell you? So how do we reduce it? Cut more in Ottawa, smaller government, including MP's in cabinet,benefits cost Canadians too much. Put pay freezes in for ALL, including MPs and senators. http://www.prime-ministers.ca/mulroney/issues.php

[Pliny]

Well, Russ, the whole central banking system was created to bring monetary stability to economies. Establishment of the Federal Reserve in 1913 (marking its centennial year this year)was a major turn in global finance.

But what does a central bank do? The Royal Canadian Mint actually prints the physical currency we use and call cash.<br />The US Treasury prints the US currency.

What does the central bank do? It does regulate the banking industry in the nation where it exists. It sets the interest rate and the reserve rate and the currency supply thus regulating inflation. It essentially keeps prices and wages stable.

Maintaining the economic stability of a nation is the primary job of its central bank.

The economy of a nation is no small thing and thus a lot of power is in the hands of the central bankers.

There was another reason to establish a central bank as well - it protected the banking industry and member banks, following the rules of the central bank essentially immunized those banks from bank runs.

Since the inception of the central bank the currencies of the world have gone from being commodity backed to just being backed by the issuing government and based almost upon the production of the nation and the ability to tax that production.

Of course, to make a long story short when the currency was commodity backed the government had to borrow money, if it needed to, out of existing wealth and it did that by selling bonds to its citizens. The money supply was based upon the supply of gold somewhat and tied the hands of bankers and governments. They needed more flexibility in controlling the money supply than what a commodity backed currency would allow.

Suffice it to say that the commodity backed currency of all nations ended in 1971 and that gave governments and bankers the flexibility in the monetary supply they needed to solve the problems of their nation's and the influence of nations globally which centralized even more power.<br /><br />If we had not gone off the commodity backed standard of currency then we would have had to face a period of deflation and several corrections in the economy that would not have been healthy for most people and for government revenues. Emergency measures included the end of Bretton-Woods.

Now I am not certain how it has been established by Mr. Armstrong that funding of the government moved form being public to private in 1974 with the establishment of the Besel Committee of the Bank of International Settlements. As far as I know the government has always funded itself from the sale of bonds, private and public and the revenues it receives through taxation.

In my view the flexibility that governments achieved when they abandoned the commodity backed currency allowed them to essentially create "money" (in its various forms) out of thin air and that explains the rise in the debt of all nations after 1971.

Edited July 21, 2013 by Pliny

[Albert_Einstein]

Russ, I agree with you that public debt is a risk to the country and we should deal with it. I'm not sure we'll find much more to agree on.

Borrowing money from the central bank is essentially the same as printing money to pay off the debt. This is hugely inflationary and would destabilize the economy. You contend that because of fractional reserve banking and the power of banks to create money to service loans, the money is being created anyway (so why not let the central bank create it?). The problem with this argument is that the Canadian Government doesn't go to the Royal Bank and get a loan; it issues bonds and t-bills. In order for people or institutions to fund the debt, they must give up real money that would otherwise be spent. So (as I understand it), the way that the Government services debt does not create money. And a lot of the debt is held by non-banking institutions like pension funds and insurance companies.

There are no shortcuts to getting out of debt - we can either cut spending, raise taxes or a combination of both. What has happened is that the Conservatives foolishly hacked taxes when times were good and now the government can't afford to pay the bills. It doesn't take a rocket scientist to figure out what the options are.

[Russ Browne]

Albert:

What has been hugely inflationary is jacking interest rates up to 20% thirty years ago to "control inflation", the fallacy of this was that government (both US and Canada) were the largest borrowers causing Canada's debt to move from 18 billion in 1974 to 614 billion now, this was like shooting yourself in the foot to slow yourself down. Were the politicians really that stupid to not use a calculator to estimate what high compounding interest on those bonds would lead to at those high rates? There is no intention to pay anything back, they will just keep the debt rolling until it crashes.

I agree with Martin Armstrong that the only way out is to halt all payments on the bonds and issue local spending credits for them, the alternative is to let it run its course to the point that the 'zero bid day' shows up for the bond markets which would be followed by a bond market crash of biblical proportions, sky-rocketing interest rates and the implosion of the economy which is what Armstrong thinks will happen between 2016 and 2020.

Gold will surge to at least $5000 as confidence is totally lost in the governments. The politicians are gutless and will not do long term planning and do not want to give up their power, so as Armstrong says we are going to crash and burn.

You think we can get out of debt by raising taxes and or cutting expenditures, if they raise taxes that will cause the velocity of money to slow down leading to more stagflation and hoarding of money by the productive members of society since there is not purpose in investing and working hard if the government is just going to grab your profits. Canadians are already handing 43% of their income over to governments at all levels - federal, provincial and municipal.

I do not see anyway out of this, we are screwed and Mr. Armstrong's long standing debt crisis prediction is going to unfold, the train is going to hit the mountain.

Russ, I agree with you that public debt is a risk to the country and we should deal with it. I'm not sure we'll find much more to agree on.

Borrowing money from the central bank is essentially the same as printing money to pay off the debt. This is hugely inflationary and would destabilize the economy. You contend that because of fractional reserve banking and the power of banks to create money to service loans, the money is being created anyway (so why not let the central bank create it?). The problem with this argument is that the Canadian Government doesn't go to the Royal Bank and get a loan; it issues bonds and t-bills. In order for people or institutions to fund the debt, they must give up real money that would otherwise be spent. So (as I understand it), the way that the Government services debt does not create money. And a lot of the debt is held by non-banking institutions like pension funds and insurance companies.

There are no shortcuts to getting out of debt - we can either cut spending, raise taxes or a combination of both. What has happened is that the Conservatives foolishly hacked taxes when times were good and now the government can't afford to pay the bills. It doesn't take a rocket scientist to figure out what the options are.

[Russ Browne]

Pliny,

It was not Armstrong that said Canada moved from a public debt to a private debt after 1974, it is the group that is suing the federal government for not using the Bank of Canada to loan money to the government - these people - http://www.comer.org/projects/index.htm

It is somewhat confusing, I agree that Canada has been selling bonds since WWII but according to Comer, the Bank of Canada also issued interest-free loans from 1935-1974.

"Therefore, we Canadian civil society organizations, who work for public welfare, call on our federal government to revive the powers of the Bank of Canada to provide funding to all levels of government in Canada, largely with interest-free loans, as was done between 1935 and 1975 with very low inflation, enabling our nation to break out of the Great Depression, to fulfill extraordinary responsibilities during World War II, and to prosper while building our infrastructure and highly valued social programs during some thirty post-war years. We Canadians now urgently need a renaissance of these powers of our Bank of Canada." ..... Comer.org

eople -

Well, Russ, the whole central banking system was created to bring monetary stability to economies. Establishment of the Federal Reserve in 1913 (marking its centennial year this year)was a major turn in global finance.

But what does a central bank do? The Royal Canadian Mint actually prints the physical currency we use and call cash.<br />The US Treasury prints the US currency.

What does the central bank do? It does regulate the banking industry in the nation where it exists. It sets the interest rate and the reserve rate and the currency supply thus regulating inflation. It essentially keeps prices and wages stable.

Maintaining the economic stability of a nation is the primary job of its central bank.

The economy of a nation is no small thing and thus a lot of power is in the hands of the central bankers.

There was another reason to establish a central bank as well - it protected the banking industry and member banks, following the rules of the central bank essentially immunized those banks from bank runs.

Since the inception of the central bank the currencies of the world have gone from being commodity backed to just being backed by the issuing government and based almost upon the production of the nation and the ability to tax that production.

Of course, to make a long story short when the currency was commodity backed the government had to borrow money, if it needed to, out of existing wealth and it did that by selling bonds to its citizens. The money supply was based upon the supply of gold somewhat and tied the hands of bankers and governments. They needed more flexibility in controlling the money supply than what a commodity backed currency would allow.

Suffice it to say that the commodity backed currency of all nations ended in 1971 and that gave governments and bankers the flexibility in the monetary supply they needed to solve the problems of their nation's and the influence of nations globally which centralized even more power.<br /><br />If we had not gone off the commodity backed standard of currency then we would have had to face a period of deflation and several corrections in the economy that would not have been healthy for most people and for government revenues. Emergency measures included the end of Bretton-Woods.

Now I am not certain how it has been established by Mr. Armstrong that funding of the government moved form being public to private in 1974 with the establishment of the Besel Committee of the Bank of International Settlements. As far as I know the government has always funded itself from the sale of bonds, private and public and the revenues it receives through taxation.

In my view the flexibility that governments achieved when they abandoned the commodity backed currency allowed them to essentially create "money" (in its various forms) out of thin air and that explains the rise in the debt of all nations after 1971.

[August1991]

What? You're saying we shouldn't pay down our debt?

Collectively, Canadians will always have debt and if the population growing, this debt will grow too. It makes sense for the federal government to have, generally, a growing debt too. For it to be sustainable in the long run, the debt must grow more slowly than GDP. IOW, the government cannot become a Ponzi scheme.

In the short run, however, there are many reasons to run a budget deficit, financed by the Bank of Canada printing new money and holding bonds. For the past few years, it has done this - and rightly so. Many Canadians have deleveraged and decided to have larger cash holdings in their portfolios. If the Bank of Canada had not followed a loose monetary policy, we would have seen a far more severe recession.

Gold will surge to at least $5000 as confidence is totally lost in the governments.

Have you pursued this prediction as an investment strategy? How is that working out for you?

If you are not prepared to invest your own savings in your own theories of politics and economics, why should anyone give you any credence for your postings to anonymous Internet forum?

Edited July 22, 2013 by August1991

[Albert_Einstein]

Albert:

What has been hugely inflationary is jacking interest rates up to 20% thirty years ago to "control inflation", the fallacy of this was that government (both US and Canada) were the largest borrowers causing Canada's debt to move from 18 billion in 1974 to 614 billion now, this was like shooting yourself in the foot to slow yourself down. Were the politicians really that stupid to not use a calculator to estimate what high compounding interest on those bonds would lead to at those high rates? There is no intention to pay anything back, they will just keep the debt rolling until it crashes.

The high interest rates did cause pain (I was there) but if you want to see what happens can happen to a country that devalues its currency to pay down debt, check what happened in Germany after WWI.

I agree with Martin Armstrong that the only way out is to halt all payments on the bonds and issue local spending credits for them, the alternative is to let it run its course to the point that the 'zero bid day' shows up for the bond markets which would be followed by a bond market crash of biblical proportions, sky-rocketing interest rates and the implosion of the economy which is what Armstrong thinks will happen between 2016 and 2020.

This is patent nonsense. Before the Conservatives came to power, the Government was able to start paying down the debt. It's a simple matter of income vs expenses and the Government has the power to raise income through taxation.

Gold will surge to at least $5000 as confidence is totally lost in the governments. The politicians are gutless and will not do long term planning and do not want to give up their power, so as Armstrong says we are going to crash and burn.

I've read so many doom and gloom predictions over the years about how the economy will collapse and only gold will be worth anything. Perhaps one day that will happen but it's been predicted so many times that the predictions are useless. It's a little like predicting the end of the world. If you do it often enough and long enough, some day someone will be right.

You think we can get out of debt by raising taxes and or cutting expenditures, if they raise taxes that will cause the velocity of money to slow down leading to more stagflation and hoarding of money by the productive members of society since there is not purpose in investing and working hard if the government is just going to grab your profits. Canadians are already handing 43% of their income over to governments at all levels - federal, provincial and municipal.

That's exactly what I think. In the same way that you lose weight by exercising more and controlling your eating, you lose the fiscal deficit by more revenue and controlling spending. The Cons have cut the GST, corporate taxes and income taxes. If they hadn't done that, we wouldn't be in the pickle we're in.

The whole "velocity of money" and "productive members of society" bafflegab is just Randian gobbledygook. In the 50's and 60's, tax rates on the wealthy were much higher and the world did not come to an end. And don't get me started about all of the tax revenue lost because the CRA is afraid to go after tax shelters. Or the dead money lying around in corporate coffers that is being made bigger by ideological-driven tax cuts.

I do not see anyway out of this, we are screwed and Mr. Armstrong's long standing debt crisis prediction is going to unfold, the train is going to hit the mountain.

You've convinced yourself that this demagogue Armstrong has the secrets to the economic equivalent of the fountain of youth. His cycles have been described by real economists as numerology.

[Albert_Einstein]

Everyone reading this should have the following information on Martin Armstrong. He is a "self-taught" economist who claims that boom-bust cycles occur every 3,141 days (pi * 1000). He was indicted for fraud (the accusations included hiding trading losses and running a ponzi scheme). He spent 7 years locked away for contempt of court when he refused to tell the court where he hid his gold (he claimed he gave it away). He then spent a further 5 years on prison for conspiracy to commit fraud.

Full disclosure.

[Russ Browne]

The high interest rates did cause pain (I was there) but if you want to see what happens can happen to a country that devalues its currency to pay down debt, check what happened in Germany after WWI.

What happened to Germany is quite different, they had a Communist government back then that was even considering letting their Russian Comrades come in to Germany and capital went into hiding out of fear of being confiscated, so they printed their currency but no one wanted to use it so it hyper inflated in addition to France and Britain demanding war reparations.

This is patent nonsense. Before the Conservatives came to power, the Government was able to start paying down the debt. It's a simple matter of income vs expenses and the Government has the power to raise income through taxation.

The Liberals who by and large started the debt under Trudeau brought it down a little in the 1990's but those were the dot.com boom years, since then there has been a major financial crisis and the manufacturing sectors have been decimated in Ontario in particular. Detroit just declared bankruptcy!

I've read so many doom and gloom predictions over the years about how the economy will collapse and only gold will be worth anything. Perhaps one day that will happen but it's been predicted so many times that the predictions are useless. It's a little like predicting the end of the world. If you do it often enough and long enough, some day someone will be right.

That's exactly what I think. In the same way that you lose weight by exercising more and controlling your eating, you lose the fiscal deficit by more revenue and controlling spending. The Cons have cut the GST, corporate taxes and income taxes. If they hadn't done that, we wouldn't be in the pickle we're in.

The whole "velocity of money" and "productive members of society" bafflegab is just Randian gobbledygook. In the 50's and 60's, tax rates on the wealthy were much higher and the world did not come to an end. And don't get me started about all of the tax revenue lost because the CRA is afraid to go after tax shelters. Or the dead money lying around in corporate coffers that is being made bigger by ideological-driven tax cuts.

You've convinced yourself that this demagogue Armstrong has the secrets to the economic equivalent of the fountain of youth. His cycles have been described by real economists as numerology.

Armstrong was named by Equity Magazine as North America's top Economist in the 1980's he was the highest paid Economist in the world and had several billion dollars under management before they shut him down and took in AI computer from him (which he had programmed to X itself out once it sensed it had been moved). His pi cycle model has a proven statistical correlation to the markets that is into the billions to one odds. Michael Campbell who is the financial journalist that hosts Money Talks Radio show across Canada - the top rated business show in our country - said Martin Armstrong is different than other economists, he is usually right.

After his computer predicted the break-up of the Soviet Union which was reported by one of the top British business newspapers, the CIA contacted him and requested a copy of the model which he refused and said they could subscribe to his publications, a few months later he was arrested, denied a trial for not handing over valuables before they had proved anything and had all his lawyer's money taken away so he ended up defending himself then his mother raised some money and got his another lawyer.

Armstrong predicted the debt crisis we find ourselves in in the 1980's when he told the Reagan administration that the then 1 Trillion dollar debt would compound to the point of it being unmanageable and of course it now is being over 16 trillion dollars, numerous cities in the USA have already declared bankruptcy and the problem is just going to get worse in the coming years as interest rates rise. The USA being Canada's largest trading partner will have a huge impact on us when it goes bankrupt. Do you think we will come out okay when they go down? Anyway I am tired of arguing with you, you are obviously a shallow reactionary that knows little while using the name of one of the smartest people to ever live.

Edited July 23, 2013 by Russ Browne

[Russ Browne]

Collectively, Canadians will always have debt and if the population growing, this debt will grow too. It makes sense for the federal government to have, generally, a growing debt too. For it to be sustainable in the long run, the debt must grow more slowly than GDP. IOW, the government cannot become a Ponzi scheme.

In the short run, however, there are many reasons to run a budget deficit, financed by the Bank of Canada printing new money and holding bonds. For the past few years, it has done this - and rightly so. Many Canadians have deleveraged and decided to have larger cash holdings in their portfolios. If the Bank of Canada had not followed a loose monetary policy, we would have seen a far more severe recession.

The Bank of Canada just follows their boss the USA, they have stolen from seniors by pushing interest rates close to zero while bankers are still allowed to chart 4% for a car loan.

Have you pursued this prediction as an investment strategy? How is that working out for you?

If you are not prepared to invest your own savings in your own theories of politics and economics, why should anyone give you any credence for your postings to anonymous Internet forum?

I have made 50% on my money in 2012, I am in agreement with Armstrong using my own technical analysis that Gold will peak in 2016-2017. Remember what I said when it happens but by then it will be too late for you and many others as the system will be in implosion mode by then. I am finished here and will not post again.

[Pliny]

I am finished here and will not post again.

I'm sorry to hear that Russ.

I think the discussion is important. People really need to know about the central banking system, what money is and all that.

I was reading about the Bank of Canada on Wikipedia this morning to see what happened in 1974 and why the big push from COMER is to return to the days prior to 1974.

I guess essentially inflation is what happened. The loans the Bank of Canada made prior to 1974 were not entirely interest free but loans wwere made for as little as 1%. This policy was cited as being responsible for high inflation and consequently they decide to slow the growth of the money supply through higher interest rates on loans thus making loans less desirable.

But really people need to know what money is and why a legal tender issued currency is not money in the full sense of the term.

[Albert_Einstein]

Armstrong predicted the debt crisis we find ourselves in in the 1980's when he told the Reagan administration that the then 1 Trillion dollar debt would compound to the point of it being unmanageable and of course it now is being over 16 trillion dollars, numerous cities in the USA have already declared bankruptcy and the problem is just going to get worse in the coming years as interest rates rise. The USA being Canada's largest trading partner will have a huge impact on us when it goes bankrupt. Do you think we will come out okay when they go down? Anyway I am tired of arguing with you, you are obviously a shallow reactionary that knows little while using the name of one of the smartest people to ever live.

Wow - it didn't take you long to stoop to an ad hominem attack.

Whatever Armstrong predicted in the 1980's is largely meaningless. Subsequent American administrations could have avoided the current debt load through a combination of taxation and spending restraint. They didn't due to spinelessness and foolishness. Was that was Armstrong was predicting?

[Pliny]

Whatever Armstrong predicted in the 1980's is largely meaningless.

Not if he was right. The whole purpose of the current economic structure is stability and that requires predictability both of the policies implemented and the market forces themselves. Predictability is a valuable commodity and it depends upon correct analysis of information.

Subsequent American administrations could have avoided the current debt load through a combination of taxation and spending restraint. They didn't due to spinelessness and foolishness. Was that was Armstrong was predicting?

Spinelessness and foolishness? Or a system out of control?

The fact is they created a boom which always results in a bust and that means a crisis for government revenues resulting in deficit spending and increased debt as they try and pump up the economy with new money. The boom and bust cycles are getting increasingly frequent and increasingly unwieldy.

Of course, someone with power will not easily give it up or back. The people need to have it back. They had it when government was not in control of the money supply, the market set interest rates and production was accomplished based upon real savings and not debt created out of thin air..

Edited July 24, 2013 by Pliny