It's Just An Economy

Money can print itself and jobs are everywhere but nowhere at the same time:

Statistics Canada says the economy lost 68,000 jobs in May as lockdowns to slow the COVID-19 continued.

The unemployment rate was 8.2 per cent in May, little changed from the 8.1 per cent in April because the number of unemployed people in Canada overall stayed relatively steady.

What changed is that more people dropped out of the labour force in May, including workers who simply got discouraged and gave up looking for work.

It's like locking down an entire economy was a really bad idea.

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A proposed rewrite of federal bankruptcy law will send “ripple effects across the economy,” the Canadian Bankers Association said yesterday. A private bill would give creditors’ preference to pensioners of insolvent companies: “It is very difficult.”

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It’s called the “Dutch disease” and Canada has seen it before when oil prices have spiked. The rise in resource prices pushes up the value of the Canadian dollar, which raises wages in U.S. dollar terms, and puts productivity and competitiveness on a downward spiral. During the last supercycle, Canada lost market share of U.S. imports to China, Mexico and the U.S. itself.

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Consider a hypothetical case where a government borrows $1 billion to finance spending while its public pension simultaneously buys $1 billion in bonds. The government’s gross debt increases by $1 billion but its net debt doesn’t change because there’s both an asset (the bond held by the pension plan) and a liability. If instead, the public pension invests in non-government bonds and stocks, net debt decreases by $1 billion — and that’s what’s happening in Canada. Our net debt looks better than it actually is because the assets of the Canada and Quebec Pension Plans are included.

But, crucially, earnings from those assets are spoken for — neither our federal nor provincial governments can use earnings from assets held by the pension plans or the assets themselves for anything other than paying for pension benefits. In fact, these assets are critical to meeting pension obligations to current and future retirees.

According to the IMF, the difference between Canada’s net and gross debt is roughly $1.5 trillion, and the assets of the CPP and QPP represent about one-third of that value. The other roughly two-thirds is comprised of financial assets that are fairly standard for most governments, which include currency holdings, cash deposits, debt securities and other receivables.

And yet, Finance Minister Chrystia Freeland continues to use our supposedly low indebtedness to rationalize massive government spending increases based on borrowing, including in her first speech as finance minister and the recent 2021 budget. In reality, Canada’s debt situation is not nearly as rosy as the federal government would have us believe. Ottawa should exercise much more caution in buying things with debt.

And where would we be without wasteful government spending?:

Cabinet spent the equivalent of more than $80,000 for every vote it received in a failed 2020 bid to win a seat on the United Nations Security Council, records show. Access To Information accounts disclosed yesterday by the Canadian Taxpayers Federation detailed millions in staff costs: “Send the message that Canada is back.”

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The average Kenyan earns a little over $2,000 Canadian per year.

Think about that as you absorb the news that WE Charity spent the equivalent of nine people’s annual income to fly Sophie Trudeau and her daughter to London to speak briefly at a WE Day event in March 2020.