Re: Canadian national debt

From: Darren (reply.to_at_news.group)
Date: 06/21/04 

Date: Sun, 20 Jun 2004 22:33:59 -0700

I'm no expert, but...

"Igor Khavkine" <k_igor_k@lycos.com> wrote in message
news:f1ac2e6e.0406202120.3e48f184@posting.google.com...
> I would like to know to whom is the Canadian national debt owed?

To holders of Canadian government securities.... some of those people are
Canadians, some aren't... don't know the breakdown.

>
> I've seen breakdowns of the US national debt on this group. I wonder
> if someone could provide a similar breakdown of the Canadian debt
> as well as sources for that information.
>
> I've seen indications that a lot of the debt is owed to Canadian
> individuals and businesses. If this is so, they are the ones who
> receive the debt interest payments. But since they reside in canada
> they must pay taxes to the interest received.

True, but they get to keep most of the money... so debt represents a
transfer of wealth from taxpayers in general to bondholders.

And of course, many of the bondholders are foreigners who are not subject to
Canadian taxes.

>
> Is this "money loop" actually beneficial to the economy? If not,
> would the goverment be in a position to eliminate this loop and
> free up some cash that could be used elsewhere in the budget?

The bonds have been issued, and they come due all the time....The gov't
can't "eliminate the loop" without defaulting, which would.... hmmm, what
would it do? I'll take a stab: It would make future borrowing virtually
impossible (and since Canada "rolls over" its bonds, ie when a bond comes
due, Canada just sells a new one to pay off the original bond holder, a
default on any part of the debt would bring that process to a grinding
halt.... send shockwaves throughout the financial world, etc etc.)

They used to say: "sovereign countries don't default", then Latin America
proved them wrong (Argentina in 1982 IIRC).
Then they said "nuclear powers don't default", and then Russia in 1998
proved them wrong.
Now they say that nice first-world democracies don't default..... (and note
that many countries, Japan and Italy come to mind, have debt/GDP ratios well
in excess of Canada/US levels... )

Darren

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