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Posts Tagged ‘borrowing’

During the 2015 Canadian federal election campaign, Liberal leader Justin Trudeau, now Prime Minister, promised to borrow money (at interest) to pay for $60 billion in new infrastructure investments, as opposed to the NDP’s plan to balance the budget in their first year.

It was, and remains, a false frame of having to stay in a deficit and grow the debt by borrowing at interest for infrastructure investments when the government of Canada, all its provinces, and its municipalities, have the statutory authorization under the Bank of Canada Act to borrow money, effectively, or, in actuality, interest-free.

For instance, money can be borrowed effectively interest-free when the Bank of Canada issues bonds that are held by the government, and when it buys its own bonds, as the government of Canada is the sole shareholder of the bank, and all profits, after expenses, will go back to the government.

But even better, the federal government can borrow money, interest-free, by requesting interest-free money, to borrow for infrastructure investments today.

So, despite Trudeau seemingly one-upping the NDP in saying that he would invest in critical infrastructure by borrowing today, as opposed to putting off such investments in favour of immediately balancing the budget, he bought into the typical false frame that we have to borrow the money at interest as opposed to borrowing it interest-free.

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Fiscal cliffThe mass media misled Americans, and the world, about the phony U.S. debt fiscal cliff non-crisis in at least two big ways:

1) There was never any threat of defaulting on the U.S. debt as a result of not raising the debt limit, as federal revenues still exceed interest and principal payments on the federal debt. The consequence would be that the federal government would have to return more closely to its constitutional boundaries, in cutting back the >40% of every dollar spent that it is currently financing by borrowing.

2) The U.S. doesn’t depend on borrowing from any country or individuals — the Federal Reserve could buy up as many Treasury Bonds as it wants, and return most of the money back to the U.S. Treasury, as it is required to do by law, after paying its expenses, and shareholders. This is what the government’s been relying on since 2008 anyway. This will result in the eventual destruction of the USD, as this borrowing isn’t subject to the same kind of scrutiny by big lending countries like China and Japan.

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