Government GDP Debt Ratio - What if?

[August1991]

We in Canada are about 40% Our Canadian dollar is good.

In the US, it's over 100%.

(I'm ignoring provincial and state debts....)

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What happens to Canadian paper if no one wants to hold US paper?

[Aristides]

On 11/24/2023 at 4:29 PM, August1991 said:

We in Canada are about 40% Our Canadian dollar is good.

In the US, it's over 100%.

(I'm ignoring provincial and state debts....)

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What happens to Canadian paper if no one wants to hold US paper?

Federal debt to GDP is about 70%. When you add in provincial and municipal debt we are well over 100%.

When you look at our  73 cent dollar, it is pretty clear more people want US paper than Canadian.

[August1991]

43 minutes ago, Aristides said:

Federal debt to GDP is about 70%. When you add in provincial and municipal debt we are well over 100%.

When you look at our  73 cent dollar, it is pretty clear more people want US paper than Canadian.

Harper reduced our federal debt to GDP ratio to 40%. Fergawdsakes why?

Provincial debt? How do you calculate Hydro-Quebec's assets?

And the Quebec nest egg? The Caisse - how do you include that?

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The US? It has Social Security. Millions of Americans around the world expect their check, each month.

As the Chinese say: Iron Rice Bowl

Is Norway really "rich"?

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IMHO, there is a huge misunderstanding of wealth - real vs nominal. 

Edited December 2, 2023 by August1991

[Aristides]

13 minutes ago, August1991 said:

Harper reduced our federal debt to GDP ratio to 40%. Fergawdsakes why?

Provincial debt? How do you calculate Hydro-Quebec's assets?

And the Quebec nest egg? The Caisse - how do you include that?

Is Norway really "rich"?

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IMHO, there is a huge misunderstanding of wealth - real vs nominal. 

That's net debt. What government assets would you sell off to get it to a real 40%. Our debt servicing costs this year will be 46.5 billion and our deficit is 40 billion. We are borrowing 40 billion to pay the interest on what we already owe. This will only get worse as we borrow more and old debt at low interest matures and has to be re issued at higher rates because we don't pay anything off. Our debt servicing costs are forecast to exceed 60 billion by 2028/29 and if governments keep racking up deficits it will be even more.

 

This debt to GDP crap is a scam used to avoid real fiscal responsibility. Right now our GDP is shrinking while the government borrows like nothing is wrong.

Edited December 2, 2023 by Aristides

[August1991]

6 minutes ago, Aristides said:

...

We are borrowing 40 billion to pay the interest on what we already owe. This will only get worse as we borrow more and old debt at low interest matures and has to be re issued at higher rates because we don't pay anything off.

.....

We?  The Canadian government will live forever.

Imagine if you could live forever.

Heck. Do your kids borrow?

[August1991]

To return to my OP, what about Canada if the US dollar goes sideways.

 

[Aristides]

21 minutes ago, August1991 said:

We?  The Canadian government will live forever.

Imagine if you could live forever.

Heck. Do your kids borrow?

So what happens when our debt servicing costs equal our revenues? We become Argentina.  Why would we need a government if it only exists to pay interest on debt? What will our currency be worth then? We are borrowing to pay interest on what we already owe.  How long would you or your kids last doing that? 

This year we are spending 46.5 billion to pay interest on debt, that is 46.5 billion that provides no value to Canadians. 46.5 billion that can't be spent on things we actually need and it is only getting worse. 

What happens when creditors say no, we don't want your debt because it is devaluing your currency at rate that makes your debt a poor investment?

Basically that is what happened  in 93 and forced Chretien and Martin to make drastic cuts in federal spending.

Edited December 2, 2023 by Aristides

[August1991]

2 minutes ago, Aristides said:

So what happens when our debt servicing costs equal our revenues? We become Argentina....

   

Agreed. Our Canadian federal government would become a Ponzi scheme.

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The Bank of Canada and the governments of Quebec, Alberta would oppose. As usual. 

[August1991]

Once again:

We in Canada have solid paper - everyone around the world knows about a Canadian dollar.

What happens if the US dollar goes south?

[Aristides]

29 minutes ago, August1991 said:

Once again:

We in Canada have solid paper - everyone around the world knows about a Canadian dollar.

What happens if the US dollar goes south?

Everyone around the world knows more about the US dollar. It is the world's reserve currency and when times are uncertain it is in demand.

Edited December 2, 2023 by Aristides

[August1991]

2 minutes ago, Aristides said:

Everyone around the world knows more about the US dollar. It is the world's reserve currency and when times are uncertain it is in demand.

I agree. Th US dollar is the reserve currency of private banks around the world.

But Canadian banks have their own currency.

[Aristides]

17 hours ago, August1991 said:

I agree. Th US dollar is the reserve currency of private banks around the world.

But Canadian banks have their own currency.

Canadian banks have branches in other countries as well, including the US. 

[August1991]

On 12/2/2023 at 5:04 PM, Aristides said:

Canadian banks have branches in other countries as well, including the US. 

True.

But like Norway, we in Canada have our own currency.

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Look at financial economic history: Our Canadian banks/paper is good. American paper?

 

Edited December 4, 2023 by August1991

[August1991]

Survive? No doubt.

As I've often argued on this forum: we people in this part of northern America: we get along.

[Aristides]

On 12/3/2023 at 5:02 PM, August1991 said:

True.

But like Norway, we in Canada have our own currency.

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Look at financial economic history: Our Canadian banks/paper is good. American paper?

 

So good our dollar is only worth 73 cents US on a good day.

Edited December 5, 2023 by Aristides

[August1991]

On 12/4/2023 at 9:47 PM, Aristides said:

So good our dollar is only worth 73 cents US on a good day.

Leftist English-Canadians -typically from Ontario- want to show that they're not American.

I recommend that they look at the monetary history of our two countries.

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The Bank of Canada was created in 1935. Hamilton, whatta guy!

 

 

[August1991]

On 12/4/2023 at 9:47 PM, Aristides said:

So good our dollar is only worth 73 cents US on a good day.

A number - but note something else. You'll note that like Norway (and the UK) we in Canada have our own currency.

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In the midst of the 2008 catastrophe, when everyone thought that American banks would go bankrupt, I bought Canadian bank shares.

It's the only time that I have ever bought other than a broad index.

[Aristides]

On 12/30/2023 at 11:20 PM, August1991 said:

A number - but note something else. You'll note that like Norway (and the UK) we in Canada have our own currency.

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In the midst of the 2008 catastrophe, when everyone thought that American banks would go bankrupt, I bought Canadian bank shares.

It's the only time that I have ever bought other than a broad index.

Banks are public companies, they do not print money or control the money supply. A poorly managed company can go bust at any time. The US has a huge number of banks and they are much less risk averse making failures more common. US banks are in crisis now but it hasn't done much to hurt the strength of the USD.

[August1991]

20 hours ago, Aristides said:

Banks are public companies,...

True. But buying a TD, RBC or CIBC share in Canadian dollars on the TSX is almost like buying the index.

My question is different.

If the US government defaults (it won't - but what if it has problems selling its bonds), what happens to the Canadian dollar? If the US government bond market changes (yield curve), what happens to Canadian paper?

 

Edited January 2 by August1991

[Aristides]

The only reason the US will default is because of partisan politics but if they do, we will be in a shit load of trouble because our economies are so tightly linked.

[CdnFox]

2 hours ago, Aristides said:

The only reason the US will default is because of partisan politics but if they do, we will be in a shit load of trouble because our economies are so tightly linked.

ANd for some other reasons - but regardless it IS the 'anchor currancy" of the world right now which lets them get away with some games nobody else can,

Our dollar is NOT particularly solid.  IT's basically based on our oil industry - an industry that trudeau has been weakening and which will not last forever. EVENTUALY other sources of power other than oil will become prevalent.

 

@August1991,  you are 100 percent in the wrong and Aristides is correct.  And harper's debt to gdp was far lower than 40 percent btw. It was about 28.

The current debt load is pretty much crippling, and even if interest rates go down it's going to hurt us for many decades to come

[August1991]

On 1/2/2024 at 8:20 PM, Aristides said:

The only reason the US will default is because of partisan politics but if they do, we will be in a shit load of trouble because our economies are so tightly linked.

The Japanese are at over 200% of debt/GDP.

The US government can tax people like Musk/Gates.

It is perception.

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In Quebec, my government borrows (sells bonds) at about 2%. Why? Buyers know that the Quebec government can pay its bonds.

Edited January 16 by August1991

[CdnFox]

1 minute ago, August1991 said:

The Japanese are at over 200% of debt/GDP.

The US government can tax people like Musk/Gates.

It is perception.

Sorry but if you read anything about that it's NOT good for them nor will it end well.

If you pull the pin on a grenade, just because nothing bad happened for the first 9 seconds doesn't mean the 10th isn't going to end badly  

[August1991]

10 minutes ago, CdnFox said:

Sorry but if you read anything about that it's NOT good for them nor will it end well.

....

This is my question.

Americans have federal Social Security promises - zillions of Americans (around the  world) expect their monthly paper.

What happens if the US number changes? What about Canadian numbers?

 

[CdnFox]

25 minutes ago, August1991 said:

This is my question.

Americans have federal Social Security promises - zillions of Americans (around the  world) expect their monthly paper.

What happens if the US number changes? What about Canadian numbers?

 

The US has one luxury in that it's an anchor currency and they can get away with certain things that would be brutal for most economies as  a result.

There is a theory called modern monetary theory which suggest you can spend as much money as you want when the economy is weaker provided you hoover all that excess back out as soon as the economy starts to warm up using taxes (not interest but taxes).  But it hasn't worked out well  not the least because no gov't wants to be seen raising taxes so they don't when they're supposed to.

On the other hand we saw with greece and spain etc what happens if you let borrowing get out of control. 

And the short answer is if things begin to collapse then services become unavailable.

The biggest weakness with capitalism as a fiscal model is it's prone ot fluctuations - booms and busts. Gov'ts conduct themselves in such a way as to try to level that and flatten it. But if they do stupid things and lose control, when the piper finally comes for his payment it can get very dar and very bad very fast.