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Email this6:45 am
March 15, 2019
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"Canada's debt turnaround in the late 1990s was more than just austerity—it was propelled by a booming U.S. economy, which:
1. Stimulated exports, fueling GDP growth.
2. Raised revenues, aiding deficit elimination.
3.Lowered debt ratios, coinciding with rising U.S. demand."
I would add a cheaper $CAD.
The problem is that a lot of our debt is in USD's and Canada is not allowed to print USD's.
7:34 am
April 27, 2017
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COIN said
"Canada's debt turnaround in the late 1990s was more than just austerity—it was propelled by a booming U.S. economy, which:1. Stimulated exports, fueling GDP growth.
2. Raised revenues, aiding deficit elimination.
3.Lowered debt ratios, coinciding with rising U.S. demand."I would add a cheaper $CAD.
The problem is that a lot of our debt is in USD's and Canada is not allowed to print USD's.
Federal debt is overwhelmingly in CAD. Some provinces (like BC) borrow in USD as well as CAD.
We don’t know exactly what would happen if a province were to default but one suspects Canadian taxpayers would be forced to bail it out. Which makes provincial debt Federal in all but name. And makes Canada overall dangerously indebted, weak and unable to do the “elbows up” thing.
9:54 am
November 3, 2022
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mordko said
Federal debt is overwhelmingly in CAD. Some provinces (like BC) borrow in USD as well as CAD.
We don’t know exactly what would happen if a province were to default but one suspects Canadian taxpayers would be forced to bail it out. Which makes provincial debt Federal in all but name. And makes Canada overall dangerously indebted, weak and unable to do the “elbows up” thing.
We do know what happened during the only sovereign default in Canada's history - which occurred in 1936 on debt issued by Alberta. Ottawa did not bail Alberta out, at the time. Alberta passed a sales tax which was in force for a couple of years (!) to bail itself out.
10:07 am
April 27, 2017
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Interesting but 100 years is a long time.
Today the legal and fiscal frameworks are fundamentally different. We have Federal-Provincial Fiscal Arrangements Act, Financial Administration Act – Part II (Default of Provinces), etc.
And in 2020 Newfoundland and Labrador received federal help (loan guarantees) to avoid a crisis over debt.
Also, Federal credit rating would take a major hit, so in today’s environment Feds will almost certainly be forced to bail out provinces. Let's hope we won’t get to find out for certain.
11:38 am
April 6, 2013
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mordko said
Try reading before responding and saying same thing in different words.
Regardless, the share of GDP used to service national debt is growing every year and will grow faster if inflation rises. Inflation and higher interest rates together can significantly slow an economy’s growth. Statistics Canada notes real GDP grew just 1.1% in 2023, its weakest pace (excluding COVID) since 2016. Canadian economy is projected to slow down even without rates going up. If they do which might well happen, the debt burden will become even more difficult to carry.
No, it isn't. It also doesn't matter even if it were the case.
Federal government's $1.2 trillion debt is not a significant part of Canada's $2.5 to $3 trillion of GDP each year even if GDP were servicing the debt. That's because repayment is spread out over decades.
The $47.2 billion per year to service the debt is a miniscule part of that $2.5 to $3 trillion annual GDP.
GDP doesn't really service the federal government debt. It is the taxes and other revenue that the federal government collects. Government is spending around 12% of that revenue to service its debt.
There's actually no real problem. Just like there's no problem with someone borrowing three years worth of their income and servicing that debt with 12% of their income going fowrad.
You should get some facts and better information. We've seen this kind of garbage before. It comes from talking points of opposition parties.
Ontario provincial government was supposedly in the financial gutter years ago. When we looked into it, we found no evidence of that. It turned out that the Ontario government was doing just fine servicing its debt with less than 10% of its revenues.
11:43 am
April 6, 2013
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mordko said
Today the legal and fiscal frameworks are fundamentally different. We have Federal-Provincial Fiscal Arrangements Act, Financial Administration Act – Part II (Default of Provinces), etc.
And in 2020 Newfoundland and Labrador received federal help (loan guarantees) to avoid a crisis over debt.
…
That's simply false. Just because one government wants to help another doesn't mean there's an obligation.
If the federal government really was legally liable to bail out the provinces, then all the provincial government debt would have the same AAA or AA+ ratings and interest rates as federal government debt.
12:08 pm
August 9, 2014
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In true honesty, most countries are going to be bankrupt in the next 30 to 50 years anyway because of aging and declining population.
This is because economy is ultimately built on workers and consumers, and we expected to have less of them, so economy growth and tax revenue growth are going to face headwind. At the same time, more retirees are going to cause pension and healthcare expenses to speed up its growth.
12:19 pm
April 27, 2017
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There is some uncertainty (as already noted) and obligation is a strong word but in real world Federal government “will want to help” under most scenarios just like it did in 2020.
Pompous bs and calling yourself in plural is neither here nor there. For something a little bit more authoritative:
Under the Financial Administration Act (FAA), Part IV, the federal government holds clear authority (“to stabilize the financial system… providing loans, lines of credit, loan guarantees” as needed)
https://www.macdonaldlaurier.ca/files/pdf/Provincial-Solvency-October-2012.pdf?utm_source
The Federal‑Provincial Fiscal Arrangements Act enables the government to deliver emergency funding to a struggling province—but typically only if the province requests it or agrees to fiscal restructuring measures (e.g., spending controls, oversight by independent monitors).
https://laws-lois.justice.gc.ca/eng/acts/f-11/?
Market expectations reflect this backup: provincial bonds trade at relatively low risk premia—investors expect Ottawa would intervene to prevent a full blown default.
https://www.macdonaldlaurier.ca/files/pdf/Provincial-Solvency-October-2012.pdf?
So, reality is the exact opposite to whats claimed above. Provincial debt has high rating despite precarious finances exactly because bond traders assume that in most circumstances federal taxpayers will have to backstop provinces.
1:51 am
November 18, 2017
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Bill: While parental mortgage subsidy isn't illegal (save for the "silent second" which constitutes fraud in the way that that it distorts risk assessment), it does prevent the market from operating freely in the best interests of buyers, sellers and the economy.
Anyway, all I know is that when houses go for sale on my street a For Sale sign goes up and sooner rather than later two arm's length parties freely and willingly agree on a sale-purchase price and the house changes hands. No-one is forced to do anything they don't want to. For pretty much my whole life now. I like that system.
But we more often see sales where arm's length parties aren't freely negotiating. The buyer and seller rarely get to talk to each other! Investment corporations have contacts with real estate dealers, and those dealers deal with each other, and in a depressing number of cases the same real estate dealer handles both ends - to the detriment of the parties, usually. The commission system actively propels fraud - such as reassignment of sales so the dealer buys low and steals the profit of the deal from the seller. Or concealment of offers so the best one isn't known to the seller. Or an agent swooping in and buying a good deal rather than letting the seller do better.
That's fraud, too, and forbidden by law, but it happens and impedes functioning of a fee market. That's why there are real estate laws and regulations, but they are rarely detected or enforced and the penalties are miniscule.
Check out some of Malcolm Gladwell's writings - he goes into unfair advantages of many sorts (especially temporal ones) in "Outliers." Not are all unfair by design, but rather by the times or circumstances. But they do distort hopes of a "free and fair market."
Norman1:
If the federal government really was legally liable to bail out a bunch provinces, then all the provincial government debt would have the same AAA or AA+ ratings and interest rates as federal government debt.
Or, alternately, the federal debt would be downgraded BECAUSE of its vulnerability to a big heap of provincial debt.
RetirEd
12:47 pm
September 11, 2013
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Some people can afford stuff that others can't, for whatever reasons (parental help or lack of it is not a special category), that does not "prevent the market from operating freely", that's normal life as it's always been everywhere in all eras.
And I'm not buying the rest of the victim narrative either, life since Adam & Eve has always been full of hooey, fraud, marketing tricks, privileges for insiders, things we use to our advantage, things that are a detriment to us, etc, etc, so what? At the end of the day I've never been forced to buy or sell anything at a price I didn't freely agree to, I get the impression I'm not unique in that, so all that background stuff is irrelevant to me.
So we disagree, RetirEd, enjoy your Gladwell etc, I'll stick with reading the ancients as I find it very enjoyable to be repeatedly reminded that there's absolutely nothing new under the sun when it comes to humans and their antics.
6:53 am
March 15, 2019
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I was part of a group that met with Deputy Minister Dodge many years ago. He warned that a Canadian province was on the verge of bankruptcy. We can now say that province was Saskatchewan.
8:57 am
January 11, 2020
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Just to reveal my personal biased, I was raised in a way and it’s within the DNA of my family to be debt adverse and that eventually debts cause problems.. however
As a novice in this area of government spending I’m always told I don’t need to worry because debt to GDP as ratios are great in Canada compared to other countries, etc.
It’s also my understanding that all government expenditures are part of the GDP equation not just private business. So I hear politicians statements about growing GDP so we’re not as bad as we think.
I also hear other statements saying that absolutely debt servicing, which is rising to record levels is part of the growing GDP as well as record deficit spending on the federal and provincial and municipal fronts
So my question and I’m trying to remove my personal biased is how can anyone even reference debt to GDP when it appears the more mismanagement we have and the more financial recklessness in governments that we have our GDP scorecard actually looks better. This doesn’t make sense to me. So I see ballooning debt , deficits, and debt servicing I am very triggered believing Doomsday is approaching because consequences lie around the corner. I am also very sceptical when people say it’s OK don’t worry about it because if that was the case, why was my child tax benefit taken away because I choose to work 48 out of 52 Saturdays that’s a bull crap reason to make me feel like I’m not treated fairly, especially when there is no issue as well as other increased tax burdens that have been placed on the struggling middle class why would they be doing these things if there is no issue. So I default into what’s reasonable to me and that is the piper will be paid and there is trouble around the corner, but our governments are not paid to make good decisions. All they want is to be reelected so they won’t make any hard decisions.
For the record staying out of debt , prudently managing what debt you do have, and not paying very much interest on borrowed money I’ve never heard of that ruining anybody or any business so that’s how my house is ran
1:21 pm
April 14, 2021
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MattS said For the record staying out of debt , prudently managing what debt you do have, and not paying very much interest on borrowed money I’ve never heard of that ruining anybody or any business so that’s how my house is ran
I vaguely remember a university economics class lecture. Unfortunately, I cannot recall the details. The general premise was that a certain level of debt is actually efficient in the performance of a business or economy. I think it might also have something to do with leverage on the borrowed funds. I wish I had been a better student.
Anyone else able to elaborate on the theory?
1:50 pm
April 27, 2017
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I don’t think that government debt is necessarily bad, as long as its sustainable. For example during recessions, governments can borrow to stimulate demand and then repay during times of boom to smooth cycles. We’ve seen this done very effectively in Canada in 2008.
Arguably certain government investment types are worth borrowing for because they will be “repaid” in the future. The problem here is that governments like to call spending “investment”. Like “investment in healthcare” or “dental care”. And, in general, government “investment” projects are driven by political reasons and perform poorly vs private investment.
Debt to GDP is a good measure of ability to handle debt. Whats important is the trend. If the ratio is stable or going down then the debt is sustainable. If the ratio is going up, even during the “good” times then we have a problem. Canada’s ratio has been going up faster than any other advanced country in the last decade. Our debt level is also a problem.
As of 2024, Canada’s gross debt-to-GDP ratio is around 106–107%, the 7th highest among advanced nations and the top within the G7 https://www.oecd.org/en/publications/2025/05/oecd-economic-surveys-canada-2025_ee18a269.html
There is an argument about gross vs net (subtraction of government assets like CPP) but thats just messing with numbers. And provincial mountain of debt compounds the problem.
1:17 am
November 18, 2017
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The curse of the financial tax-cutting right is that they almost never pay back the borrowed money. The Paul Martin/Jean Chretien play was an exception demonstrating that, in at least that case, borrowing as investment and then paying back can work.
Unfortunately, the US experience has been to continue cutting taxes and raising debt.
RetirEd
5:43 am
January 11, 2020
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Feels like a legalized pyramid scheme
7:20 am
April 6, 2013
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Not really. Budgets of long lifespan entities, like countries, don't need to balance, unlike the budgets of people who have a debt servicing lifespan around 85 - 18 = 67 years.
There are limits however. A country can't continually overspend by 50% of its revenues each year even if it looks like the country will be around for another 1,000 years.
10:21 am
November 18, 2017
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Yeah, that thousand-year Reich thing didn't work out either.
RetirEd
10:37 am
April 6, 2013
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1,000 years isn't needed. But, then many countries have way more than 5, 10, or even 30 years to go.
Those arguments involving debt to GDP are junk and are just opposition party talking points for the ignorant. Some people wish they were only carrying mortgages and debt that total 100% to 120% of their gross annual personal income. They wish they only had to use 8% to 12% of their gross annual income to service their debt.
1:26 pm
January 11, 2020
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I guess this will be a comment from the ignorant side of things then.. when it comes to debts our politicians go to great lengths to tell us their defecit spending into the billions annually or hundreds of billions over their 4 yr term present zero issue and it’s entirely manageable ( a lot of this money spent on things we or I dont agree with) but when it comes time to find a couple million to help a municipality fix a couple ageing water infrastructure they can’t help and the people within that municipality are faced with double digit 10%+ water increases for five years in a row minimum as is the case in Waterloo region more specifically Cambridge Ontario. The few million dollars they need to raise thru households with is literally rounding error on the billions and billions of deficit spending. It’s like me loaning you a quarter. I don’t care if I know you I don’t care if I like you doesn’t matter I’ll give you the quarter. It’s that little. So put me in the category of abolish government fire every one of them they’re not worth their paycheques or their pensions. And I am speaking out of ignorance. I really don’t know what goes on in the inner workings of government but truly they can’t give me what would amount to $.10 out of their overall budget, piss on them. All of them. And that’s why people are not patriotic anymore sign me up 51st state who cares. The middle class is dying under the current arrangement time to try something different.
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