Juno News - November 25, 2020


Can the government run out of money？


Episode Stats

Length

4 minutes

Words per Minute

220.6569

Word Count

945

Sentence Count

2

Hate Speech Sentences

1


Summary


Transcript

00:00:00.000 can the government of Canada ever run out of money well the simple answer to
00:00:09.040 that is no because the Bank of Canada is going to basically invent money for them
00:00:13.080 now in a normal situation it basically happens like this the Bank of Canada
00:00:17.820 holds an auction where it sells bonds or Treasury bills and it normally sells
00:00:22.680 this to investors banks brokers etc but it typically buys about 20% for itself
00:00:27.320 so that means that the government of Canada buys 20% of the debt from itself
00:00:30.620 and the assets go on the Canadian government side and the liability goes
00:00:35.420 on the Bank of Canada side so it basically holds the debt for the
00:00:38.060 government even though they're kind of the same institution but that's besides
00:00:40.760 the point that this is this juncture now again 20% is in a normal situation but
00:00:45.740 right now this is not a normal situation you can kind of think of it like a
00:00:49.580 situation where you have your credit cards and they're maxed out because you
00:00:53.300 spent pretty frivolously but now you have a genuine emergency and so you're gonna
00:00:56.900 have to pull from somewhere so we maybe you just take out a new card and imagine
00:01:00.260 you could just keep on taking out new cards and racking up debt as much as
00:01:03.140 possible now no one is saying that this debt is not necessarily needed because
00:01:07.280 there's obviously things that the government is responsible for because
00:01:10.220 they shut people down they obviously have an obligation to assist and manage
00:01:13.640 the economy because they're directly interfering again for a positive reason
00:01:17.600 for reason that they have to but they're directly interfering so there's a lot of
00:01:20.060 arguments to be made that they're gonna need to get involved but the
00:01:23.240 question I have here is that many politicians are calling for more lockdown
00:01:28.160 measures while at the same time calling for additional spending programs to
00:01:31.580 keep these keep the economy going the Prime Minister himself said that the
00:01:35.460 provinces shouldn't have to choose between people's health and the economy
00:01:38.640 because the federal government is supporting businesses now that is
00:01:42.740 problematic because again the government of Canada is simply going to
00:01:45.920 invent the amount of money that is needed to cover these bills the
00:01:49.520 question is though a two-parter number one is who is going to pay this money
00:01:53.720 back and what is the invention of all this new money going to do to the
00:01:57.080 economy well if you've studied even basic economics you know that an increase
00:02:01.280 in the money supply so the total amount of money in our system an increase in the
00:02:05.420 amount of money in the system is going to basically cause a high amount of
00:02:08.460 inflation to occur as you produce more and more money now inflation is
00:02:13.280 something that most people especially if you grew up or became an adult more
00:02:16.340 recently that's not something you're necessarily used to dealing with
00:02:18.860 because interest rates have been fairly low the prime interest rate which is the
00:02:22.640 rate that it did that banks buy money from the government has typically been
00:02:26.240 at you know one two percent very very low digits you can get a lot of loans zero
00:02:30.620 percent 1.9 percent etc if you bought a car recently you might have got a
00:02:34.160 really great deal on financing so people are really not used to paying more
00:02:37.520 than five percent for things but what happens if you have a property and you
00:02:43.160 suddenly have to renegotiate your mortgage because the rates are either fixed
00:02:47.240 for five years or maybe variable but it's still a term for a couple of years the
00:02:50.840 interest rate could suddenly shoot up to ten twenty percent that could affect your
00:02:55.100 payment by hundreds perhaps even thousands of dollars depending on what
00:02:57.860 we're talking about and how much the principal amount that you borrowed is now
00:03:01.120 this is again a larger problem that people seem to be ignoring because right now the
00:03:06.720 focus is on the immediate and that is really just a factor of the way that the
00:03:11.480 political system works the government doesn't necessarily have to worry what is
00:03:14.860 going to happen five or ten years down the road maybe even two years down the
00:03:18.340 road they are really concerned with the here and the now and so that's why
00:03:21.520 Justin Trudeau keeps on promising provinces that they don't have to choose
00:03:25.480 between people's health and the economy but it's not really a real choice
00:03:29.020 because if you pay attention to what's going on in the economic system you know
00:03:32.960 that you cannot simply print money there are historical precedents I don't
00:03:35.740 even need to name them you probably know their historical precedents to just
00:03:38.920 simply printing money until you you know until you pay off your problem that does not
00:03:42.880 seem to work so a lot of stuff we do need to be pay attention to and as
00:03:46.780 Canadians we do need to ask our government what is going on and make
00:03:49.840 sure that we are being responsible with our economic planning because
00:03:53.620 ultimately this could cause a larger disaster not just for the businesses
00:03:57.040 which are now shut down during lockdown but it will have an effect on every
00:04:00.940 single person in this country and that is not something that we'll be able to
00:04:03.760 handle if interest rates go up to like 10 20 even 30 percent we will
00:04:07.120 definitely be in a huge and serious problem so a lot of stuff to thank you
00:04:10.720 think about but thank you so so much for watching for true north I'm Sam Ashkenazi
00:04:13.840 and don't forget to subscribe