The Budget

[dre]

kick the can down the road

... said almost every government in the history of democracy.

[Cl Le]

... said almost every government in the history of democracy.

Conservatives left a surplus and in the same economic times the Liberals delivered a 30 billion dollar deficit . One was an economist while the other is a self proclaimed feminist . I guess a P/T drama teacher really is in over his head after all . Learning as he goes is not how to run a G8 economy but the majority of Canadians where well aware of that before we hit the ballot box .

[dre]

Conservatives left a surplus and in the same economic times the Liberals delivered a 30 billion dollar deficit . One was an economist while the other is a self proclaimed feminist . I guess a P/T drama teacher really is in over his head after all . Learning as he goes is not how to run a G8 economy but the majority of Canadians where well aware of that before we hit the ballot box .

No they didn't. The only way you could possibly believe that is if you cant do math beyond a grade 3 level. The reason the Conservatives were able to claim a surplus is because they only count a small portion of the debt their policies introduced. The real Conservative debt legacy is the massive draw-down on household savings resulting from super easy credit policies. And the numbers are staggering. The credit market debt left by the Conservative party is a whopping 1.92 TRILLION dollars. Its much larger than our entire national debt. This is where the countries REAL debt crisis is.

The Bank of Canada has said that this debt threatens our entire financial system.

Anybody that thinks the previous government ran a surplus, or that the current government inherited a sound economy is an idiot that never should have made it out of elementary school.

[Cl Le]

No they didn't. The only way you could possibly believe that is if you cant do math beyond a grade 3 level. The reason the Conservatives were able to claim a surplus is because they only count a small portion of the debt their policies introduced. The real Conservative debt legacy is the massive draw-down on household savings resulting from super easy credit policies. And the numbers are staggering. The credit market debt left by the Conservative party is a whopping 1.92 TRILLION dollars. Its much larger than our entire national debt. This is where the countries REAL debt crisis is.

The Bank of Canada has said that this debt threatens our entire financial system.

Anybody that thinks the previous government ran a surplus, or that the current government inherited a sound economy is an idiot that never should have made it out of elementary school.

So much hostility , no wonder Canada doesn't rank as one of the happiest countries in the world anymore . Are you frustrated that Trudeau and the Liberals duped you into believing 3 consecutive 10 billion dollar deficits ? Are you upset that year 4 won't be balanced as promised , it's now a stretch goal until Justin figures out how to do this whole " self balancing budget routine. " Remember when Canada had one of the world's strongest economies with secured low taxes and a balanced budget . When foreign investment saw Canada as a safe place to invest . Now Canada is on track to be a larger version of Ontario because Liberals don't understand that drama teachers aren't strong in economics .

[Bonam]

The credit market debt left by the Conservative party is a whopping 1.92 TRILLION dollars. Its much larger than our entire national debt. This is where the countries REAL debt crisis is.

The Bank of Canada has said that this debt threatens our entire financial system.

Anybody that thinks the previous government ran a surplus, or that the current government inherited a sound economy is an idiot that never should have made it out of elementary school.

These are valid concerns, but not really part of the conversation regarding federal budget deficit/surplus. Almost every Western country has been running ZIRP for the past decade, resulting in increasing individual and corporate debt and asset price inflation. The long term results of this, and whether countries will be able to restore normalcy by raising rates and slowly deflating the bubbles, remains to be seen.

[Cl Le]

No they didn't. The only way you could possibly believe that is if you cant do math beyond a grade 3 level. The reason the Conservatives were able to claim a surplus is because they only count a small portion of the debt their policies introduced. The real Conservative debt legacy is the massive draw-down on household savings resulting from super easy credit policies. And the numbers are staggering. The credit market debt left by the Conservative party is a whopping 1.92 TRILLION dollars. Its much larger than our entire national debt. This is where the countries REAL debt crisis is.

The Bank of Canada has said that this debt threatens our entire financial system.

Anybody that thinks the previous government ran a surplus, or that the current government inherited a sound economy is an idiot that never should have made it out of elementary school.

One of the biggest challenges Justin Trudeau faces is his lack of economic heft. The Liberal leader has no business or financial experience. The closest he has ever come to a Laffer Curve was teaching elementary school arithmetic a decade ago.

None of the positions he has held in Parliament — critic for multiculturalism and youth, critic for secondary education and amateur sport and critic for citizenship and immigration — required financial literacy. Just another of the many articles that have been published that question Trudeau's credentials and after seeing this disastrous budget who can blame them . I wonder if the drama teacher can act his way out of this mess ? Best of luck but remember Canadian tax payers get last word in 2019 and we are not happy , after all who likes being lied to !

[dre]

These are valid concerns, but not really part of the conversation regarding federal budget deficit/surplus. Almost every Western country has been running ZIRP for the past decade, resulting in increasing individual and corporate debt and asset price inflation. The long term results of this, and whether countries will be able to restore normalcy by raising rates and slowly deflating the bubbles, remains to be seen.

That debt is no different than public debt though. If the government wants to dump money into the economy they can either borrow it themselves and spend it directly into the economy, or they can create the money through chartered banks with policies like near zero interest rates, or tripling the amount of CMHC backed mortgages.

Both are decisions by the government to borrow money into the economy. So just because you choose one instead of the other does not mean you can claim a surplus, and expect to be taken seriously by anyone that can add and subtract.

Fact is the conservative government left this country with a MASSIVE debt. If you look at both direct and indirect borrowing we are talking somewhere in the neighborhood of a trillion dollars. More than 10 times what people are screeching at Trudeau about.

The long term results of this, and whether countries will be able to restore normalcy by raising rates and slowly deflating the bubbles, remains to be seen.

Actually the results are pretty well understood. Eventual you will take a hit on consumption as households spend more and more on debt maintenance, and you will end up with asset bubbles because of the mal-investment. That is if you are LUCKY. If you get just a little bit UNLUCKY you will end up with a mortgage meltdown like the US experienced in 2007. When you combine this with the fact that the conservative government tripled the amount of CMHC mortgages it will be extremely hard for us to have a correction without a huge glut of foreclosures. Those are 5% down mortgages and the holders of them have almost no skin in the game. A housing correction would most of them underwater. Based on BOC and IMF estimates 290 000 homes would be worth less than whats owed on them and Canadians under age 30 would lose 40% of their net worth.

[dre]

One of the biggest challenges Justin Trudeau faces is his lack of economic heft. The Liberal leader has no business or financial experience. The closest he has ever come to a Laffer Curve was teaching elementary school arithmetic a decade ago.

None of the positions he has held in Parliament — critic for multiculturalism and youth, critic for secondary education and amateur sport and critic for citizenship and immigration — required financial literacy.

That doesn't matter. He just needs a good minister of finance, and a good governor at the BOC. And in reality decisions made by the arm's length BOC influence the economy way more than legislation by parliament anyways.

The closest he has ever come to a Laffer Curve was teaching elementary school arithmetic a decade ago

Hahahahahahahaha! You mean Art Laffer? The guy that predicted the mortgage meltdown was going to be a "nice little recession" that lasted 1 quarter?

Here's what he said about his own model after he was forced to admit how bad his predictions are.

"Usually when you find the model this far off, you've probably got something wrong with the model, not that the world has changed," he said. "Inflation does not appear to be monetary base driven," he said.

The further away Trudeau is from the "laffer curve" the better.

[Cl Le]

That doesn't matter. He just needs a good minister of finance, and a good governor at the BOC. And in reality decisions made by the arm's length BOC influence the economy way more than legislation by parliament anyways.

Hahahahahahahaha! You mean Art Laffer? The guy that predicted the mortgage meltdown was going to be a "nice little recession" that lasted 1 quarter?

Here's what he said about his own model after he was forced to admit how bad his predictions are.

The further away Trudeau is from the "laffer curve" the better.

Not sure but refresh my memory again why we won't see a balanced budget year 4 ? Does a Liberal stretch goal mean plainly it won't happen and we don't care ? Did the Liberals campaign on 3 straight deficits of 10 billion a year or year 1 deficit of 30 billion while unemployment continues to rise ? You know things are shaky when Canadians think the NDP would be more fiscally responsible than these incompetent liars . Keep waving the flag and be a good little Liberal by helping pack Justin's suitcase in 2019 , he will be getting the boot !

[Bonam]

That debt is no different than public debt though. If the government wants to dump money into the economy they can either borrow it themselves and spend it directly into the economy, or they can create the money through chartered banks with policies like near zero interest rates, or tripling the amount of CMHC backed mortgages.

Both are decisions by the government to borrow money into the economy. So just because you choose one instead of the other does not mean you can claim a surplus, and expect to be taken seriously by anyone that can add and subtract.

Fact is the conservative government left this country with a MASSIVE debt. If you look at both direct and indirect borrowing we are talking somewhere in the neighborhood of a trillion dollars. More than 10 times what people are screeching at Trudeau about.

I understand what you are saying but monetary policy and fiscal policy are different things, especially from the individual's point of view. When the government lowers interest rates, I have a choice whether to take on extra debt or not. When the government spends more money it means sooner or later, taxes will be higher in order to pay for it than they would otherwise have been.

ctually the results are pretty well understood. Eventual you will take a hit on consumption as households spend more and more on debt maintenance, and you will end up with asset bubbles because of the mal-investment. That is if you are LUCKY. If you get just a little bit UNLUCKY you will end up with a mortgage meltdown like the US experienced in 2007. When you combine this with the fact that the conservative government tripled the amount of CMHC mortgages it will be extremely hard for us to have a correction without a huge glut of foreclosures. Those are 5% down mortgages and the holders of them have almost no skin in the game. A housing correction would most of them underwater. Based on BOC and IMF estimates 290 000 homes would be worth less than whats owed on them and Canadians under age 30 would lose 40% of their net worth.

On what planet does any substantial fraction of Canadians under age 30 own homes? A shakedown in housing prices would be great for the country even if it caused rich landowners some pain in the short term.

[Argus]

This is pure speculation.

No, that's basic arithmetic.

Based on projections by either government or private sector economists the debt burden on Canadians wont change much.

You think adding $10 billion per year to the existing $25 billion per year debt service costs, all within five years, is not much change?

And what happens if interest rates return to normality, which is more than double existing rates? What happens if they triple?

If you keep borrowing and never pay back then one day you find yourself in a deep economic mess and reach for the wallet and find there's nothing in there. That's what happened to so many countries when the 2008 financial crisis hit.

[Argus]

The likely deficit over the next few years is 80-90 billion which would increase the 1.2 trillion national debt by about 7%. Inflation will most likely average out to somewhere near 1.5% which will also amount to roughly 7% over the same period. We will owe a larger number of tokens than we do today... but no more in terms of real output.

You are taking all government debt and adding in your under-estimate of what Trudeau will run up, but not what the provinces will run up.

Federal debt is about $620 billion. And Trudeau's budget calls for adding $120 billion to this in the next half dozen years.

[ironstone]

I remember a government that ran $130B in deficits within the last decade. I didn't complain about them, because it made sense then, just like now.

Governments often defend the act of piling up debt as merely investing in growth for the country.The whole point of investing is to get a positive return at some point.All we end up getting is more debt and more interest payments.Live it up now and let someone else pay for it later right?

[Cl Le]

Governments often defend the act of piling up debt as merely investing in growth for the country.The whole point of investing is to get a positive return at some point.All we end up getting is more debt and more interest payments.Live it up now and let someone else pay for it later right?

Ontario is the best example of Liberal fiscal incompetence . Ironically Wynne , Butts and Trudeau are all friends and equally stunned when it comes to economic matters . I would like to feel sorry for the people of Ontario but they voted for it and the Liberals delivered in spades . Wonder why Liberals don't care about their children's futures ? Broken moral compasses go with broken Liberal calculators I suspect.

[dre]

I understand what you are saying but monetary policy and fiscal policy are different things, especially from the individual's point of view. When the government lowers interest rates, I have a choice whether to take on extra debt or not. When the government spends more money it means sooner or later, taxes will be higher in order to pay for it than they would otherwise have been.

There's pros and cons to both types of debt financing and for the most part the same people end up on the hook. People with large tax bills also do more private borrowing because most loans are means tested. The bad thing about the government injecting money through chartered banks like the Conservative government has done is its rampant with mal-investment. More than half of that money was dumped into the housing market further exacerbating the problems there, and a huge part of what remains was spent on things like big-screen TV's and other non durables. The average rate of interest is also much higher than the government pays on treasures it sells.

And your claim that because consumers can choose is only partially true. Guess who's on the hook for all those CMHC mortages? The taxpayer. Guess who insures deposits at chartered banks? The taxpayers. Guess who will bail out chartered banks if they get themselves into trouble? The taxpayer. Guess who will suffer if inevitable reductions in consumption or a glut of foreclosure causes a recession? The taxpayers... the workers... Canadians...

On what planet does any substantial fraction of Canadians under age 30 own homes?

Here on earth! Feel free to join us

Home ownership rates for young people in Canada are very high.

Nearly 260,000 Canadians would see their net worth wiped out if home prices dropped 20 per cent, the study by the Canadian Centre for Policy Alternatives found. The drop in prices is larger than most bank economists are predicting, but it represents the midpoint in the Bank of Canada’s estimates that the country’s home prices are overvalued by anywhere from 10 to 30 per cent, the study’s author, economist David Macdonald, writes.

Toronto housing market at risk, OECD report warns (BNN Video)

Of those homeowners pushed underwater by a major real estate crash – owing more than they have in assets – more than half would be in their 20s and 30s, the age group that has gone the deepest into debt to buy a home.

A shakedown in housing prices would be great for the country even if it caused rich landowners some pain in the short term.

But it wont just be rich landowners that feel the pain. It will be everyone. Our whole economy is backed by the property sector, and that's where most of the nations wealth and net worth is. The entire services sector would be hit hard... construction, banking, rent and leasing, retail. Domestic consumption is heavily backed by home equity.

[dre]

No, that's basic arithmetic.

Maybe at clown college.

You think adding $10 billion per year to the existing $25 billion per year debt service costs, all within five years, is not much change?

That depends on inflation, and growth. What do you think it would cost Canadians if the government collapsed the economy through austerity measures?

That's what happened to so many countries when the 2008 financial crisis hit.

Ahhhhh no it really isn't. The recession was not a sovereign debt crisis it was almost entirely a private credit/mortgage crisis. It happened mostly because of a combination of super lower interest rates, and securitized mortgage products that hid the risk from private investors, and packaged up tranches of useless mortgages behind good ones.

[dre]

Not sure but refresh my memory again why we won't see a balanced budget year 4 ?

Because economic conditions are worse than when those projections were made.

[eyeball]

And consumer spending has been propped up by people borrowing on the equity in their homes... equity that has no basis in reality and will evaporate when the inevitable correction comes.

The relative value of the money seems like so much pie in the sky. As for real estate...the bubble should be even more evident in places that are also exposed to very real environmental deficits. Soon enough people will also be talking about the impact of social deficits to real estate but probably not until notions like natural capital become more graspable.

That said, anyone sitting on property in a region that hasn't been overly polluted or had it's natural capital drawn down to unsustainable levels is sitting on the new gold...diamond if you happen to be in a climate change winner's region. This seems a little less relative when you recall stories about civil servants in vulnerable jurisdictions being ordered to get psychological testing after linking climate change to property values in their reports. I also think that a lot of the money pouring into Vancouver and spilling over anything within a couple of hundred miles of the place is for the purpose of securing a piece of a diamond before the price really starts going through the roof.

The future will be characterized by a few ridiculously expensive Elysium like regions where everyone borrows to get by, a bunch of old Flint Michigan's where people barely get by and new urban service areas like Fort Mcmurray in between where people never know if they're coming or going.

Edited March 24, 2016 by eyeball

[Cl Le]

Because economic conditions are worse than when those projections were made.

I guess Canadians have realized that we need to have really low expectations of our P/T drama teacher .

[Bonam]

Here on earth! Feel free to join us

Home ownership rates for young people in Canada are very high.

Cite? The quote you linked says 260,000 Canadians would see their net worth wiped out if home prices dropped 20%, and that half of those 260,000 are people in their 20s and 30s (so 130,000 people 20-39). That statement includes people up to 39 (whereas your claim was about people under 30), and furthermore 130,000 people is only 1.3% of Canada's 9.9 million people in the age range of 20-39.

What % of people under 30 are homeowners?

[dre]

Cite? The quote you linked says 260,000 Canadians would see their net worth wiped out if home prices dropped 20%, and that half of those 260,000 are people in their 20s and 30s (so 130,000 people 20-39). That statement includes people up to 39 (whereas your claim was about people under 30), and furthermore 130,000 people is only 1.3% of Canada's 9.9 million people in the age range of 20-39.

What % of people under 30 are homeowners?

Theres some information on it here...

It is hardly shocking that household income also has a major impact on a person’s chances of owning his or her own home. Only 22% of young adults reporting a household income of less than $30,000 per year were homeowners; meanwhile, 68% of those with $50,000 to $80,000, and 82% of those with $100,000 or more were homeowners.

Finally, living arrangements and marital status are strongly associated with ownership. In 2006, 79% of young adults who were married and had children owned their own home. In comparison, this proportion was only 40% among individuals living alone and 33% among single parents.

http://www.statcan.gc.ca/pub/11-008-x/2007005/10314-eng.htm

I didn't find an overall number but it looks to be 30-40% but that's for young adults between 25 and 39. I had a quick look but didnt see specific numbers on a 20-30 age range.

[dre]

I guess Canadians have realized that we need to have really low expectations of our P/T drama teacher .

They have really low expectations on the economy in general and they have had them since before the election. Like I said, this is the worst economic position we have been in for at LEAST 20 years, and probably since Iv been alive (1972-).

[Cl Le]

I guess the apple didn't fall far from the tree .

[Argus]

Maybe at clown college.

Do you think sophomoric insults hides the fact you had the completely wrong numbers?

That depends on inflation, and growth. What do you think it would cost Canadians if the government collapsed the economy through austerity measures?

What would it cost Canadians if a seven thousand metric ton banana fell on Toronto? Why ask stupid questions? The economy wasn't going to collapse because of austerity.

Ahhhhh no it really isn't. The recession was not a sovereign debt crisis it was almost entirely a private credit/mortgage crisis.

I don't care how you define it. The point remains that unemployment exploded, economies went into reverse, and money was needed to throw into the system. Those countries which were run by spendthrift idiots didn't have the money available and weren't able to borrow because their debt was already so high..

[Argus]

Because economic conditions are worse than when those projections were made.

In what way?