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Canadian government deficit catapulted by spending to unprecedented levels

Written by Alain Pilote on Friday, 01 May 2020. Posted in Social Credit

Since all money is created as a debt it is impossible to get out of debt!

We knew it was coming. With the astronomical expenditures made by the Canadian government to come to the aid of citizens and businesses hit by the coronavirus pandemic, and the cessation of practically all economic activities, Parliamentary Budget Officer Yves Giroux announced on April 30, 2020 that the federal deficit would reach a record level, increasing from $24.9 billion in 2019-2020 to $252.1 billion in 2020-2021, a 10-fold increase in 1 year. The deficit will continue to climb if the emergency spending measures remain in place longer than hoped.

As a result, the federal government’s accumulated debt (the total of deficits accumulated year after year), was $685 billion in 2018-2019 and increased to $962 billion in just one year. All countries are in the same catastrophic boat. For instance, the U.S. debt reached $25 trillion in early May 2020 and could climb to $30 trillion by the end of the year.

Not since World War II have nations witnessed such enormous deficits compared to their GDP. All countries are ‘at war’ with a common enemy: the response to the coronavirus. Reporters asked Prime Minister Trudeau how the country planned to address deficit spending in the future and he answered: “We are not at all thinking about that now.”

Not thinking about the deficit will not make it go away. The headache will be felt when the interest on this sum must be paid. Remember that all the money the government has spent in its response to the coronavirus will have to be repaid, with interest. We may not think about it today but the day will arrive when payments become due. The entirety of the money spent to help the population is money borrowed from private banks; debt-money.

It is very important to understand this point: the total debt can never be paid off, for it represents money that does not exist. Louis Even explained it so brilliantly and simply in his fable, The Money Myth Exploded. (See page 3.) In the fable, Oliver lends money at a rate of 8%, but any rate – even 1% – would create an impossibility to pay back the entire loan, which consists of principal and interest.

Let us suppose the five shipwrecked people on the island decide to borrow from Oliver a total of $100, at 6% interest. At the end of the year, they must pay Oliver the interest of 6%, that is to say, $6. 100 minus 6 = 94, so there is $94 left in circulation on the island. But the $100 debt remains. The $100 loan is therefore renewed for another year, and another $6 of interest is due at the end of the second year. 94 minus 6, leaves $88 in circulation. If they continue to pay $6 in interest each year, by the seventeenth year, there will be no money left in circulation on the island, but the debt will still be $100, and Oliver will be authorized to seize all the properties of the island’s inhabitants.

Production has increased on the island but not the money supply. It is not products that the banker wants but money. The island’s inhabitants were making products, but not money. Only the banker has the right to create money. So, it seems that it was not wise for our five fellows to pay the interest yearly.

Even borrowing the interest won’t solve anything but will only delay the final bankruptcy. Let us suppose that at the end of the first year, the five fellows decide not to pay the interest, but to borrow it from Oliver, thereby increasing the loan principal to $106. “No problem,” says Oliver, “the interest on the additional $6 is only 36 cents; it is peanuts in comparison with the $106 loan!” So the debt at the end of the second year is: $106 plus the interest at 6% of $106, $6.36, for a total debt of $112.36 after two years.

At the end of the fifth year, the debt is $133.82 and the interest is $7.57. “It is not so bad,” thought the five guys, “the interest has only increased by $1.57 in five years. We can handle that.” However, after 50 years, the situation is quite different. The debt is $1,842.02 and the interest due on the debt is $104.26. At no time can the debt be paid off with the money that exists in circulation, not even at the end of the first year: there is only $100 in circulation, and a debt of $106 remains. And at the end of the fiftieth year, all the money in circulation ($100) won’t even pay the interest due on the debt: $104.26.

All money in circulation is a loan and must be returned to the bank, increased with interest. The banker creates money and lends it, but he has the borrower’s pledge to bring all this money back, plus money not created. Only the banker can create money: he creates the principal, but not the interest. And he demands that we pay him back, in addition to the principal that he created, the interest that he did not create, and that nobody else created either. (In the example mentioned above, the banker lends $100 and wants to get $106 back.)

As it is impossible to pay back money that does not exist, debts accrue. The public debt is made up of money that does not exist, that is to say, the interest that has never been created, but that governments nevertheless have committed themselves to paying back. An impossible contract, represented by the bankers as a “sacrosanct contract”, to be abided by, even though human beings die because of it.

Put all these results on a chart: the horizontal line across the bottom of the chart is marked off in years, and the vertical line is marked off in dollars. By connecting all these points by a line, we trace a curve, and you see the effect of compound interest and the growth of the debt.

The curve is quite flat at the beginning, but then becomes steeper as time goes on. The debts of all countries follow the same pattern, and are increasing in the same way. Let us study, for example, Canada’s public debt.

Each year, the Canadian government develops a budget wherein are estimated the expenditures and revenues for the year. If the government takes in more money than it spends there will be a surplus; if it spends more than it takes in there will be a deficit. Thus, for the fiscal year 2017-2018, the federal government had expenditures of $333.6 billion ($310.7 billion in program expenses plus $21.9 billion in public debt charges) and revenues of $313.6 billion, resulting in a $19 billion deficit.

The national debt is the total accumulation of all budgetary deficits since Canada was formed in 1867. Thus, the 2018 of $19 billion was added to the debt accumulated by 2017. For a total national debt (accumulated deficit) of $671.3 billion in 2018.

By January 1994, Canada’s public debt had reached $500 billion. If the federal government managed to reduce its debt between 1997 and 2007, it is simply because it managed to balance its budget and even make surpluses by downloading its deficit onto provinces and municipalities, forcing them to increase their own provincial debts accordingly. Yet the tactic has not prevented the increase of the overall debt.

When Canada was founded in 1867 (the union of four provinces — Ontario, Quebec, New Brunswick, and Nova Scotia), the country’s debt was $93 million. The first major increase took place during World War I (1914-18), when Canada’s public debt went up from $483 million in 1913 to $3 billion in 1920. The second major increase took place during World War II (1939-45), when the debt went up from $4 billion in 1942 to $13 billion in 1947. These two increases may be explained by the fact that the Government had to borrow large sums of money in order to take part in these two wars.

But how can be explained the phenomenal increase of these last years, when the debt almost increased ten times, passing from $24 billion in 1975 to $224 billion in 1986, in peacetime (then $671 billion in 2018), when Canada had no need to borrow for war? It is the effect of compound interest, like in the example of the island in The Money Myth Exploded.

Debts of federal governments represent huge sums, but they are only the peak of the iceberg: If there are public debts, there are also private debts! The Federal Government is the biggest single borrower, but not the only borrower in the country: there are also individuals and companies. In the United States, in 1992, the public debt was $4 trillion, and the total debt was $16 trillion, with an existing money supply of only $950 billion. In 2020, the debt of the U.S. government reached $25 trillion, which gives you some idea of what the total debt is...

In his November 1993 report, Canada’s Auditor General calculated that of the $423 billion in net debt accumulated from Confederation to 1992, only $37 billion went to make up the shortfall in program spending. The remaining $386 billion covered what it has cost to borrow that $37 billion. In other words, 91% of the debt consisted of interest charges, the Government having spent only $37 billion (8.75% of the debt) for actual goods and services.)

Fortunately, more and more people understand this fraudulent scheme of creating money as a debt. example, Mr. Gilbert Vik of Cathlamet, Washington, wrote a few years ago, this very interesting letter:

“For every person in our country, there is $20,000 of money in existence. Sounds good! But there is $64,000 of debt! Apply your $20,000 to the debt, and that money will cease to exist, leaving you without any money and $44,000 of debt. Your options are to forfeit your assets or borrow more money to attempt to pay. You cannot borrow yourself out of debt!

“Since the method of money creation is itself the cause of the ever-increasing debt, it is not possible to correct the problem using any method that deals with money after it has been created.

“Working harder will not correct it. Working longer hours will not correct it. Having a job for everyone in the family will not correct it. Neither raising nor lowering wages will correct it. Full employment will not correct it. Less spending will not correct it. More spending will not correct it. (And the list goes on...)

“The only thing that will correct it is the one thing that is sacrosanct in the media, in education, in politics, and, yes, even in our social circles. The only thing that will correct it is to strip private companies (banks) of their power to create money as debt at interest, and to adopt a method of money creation whereby the United States Treasury creates money as credit!

“This issue is the key issue to the financial future of our nation and world! This chicanery is practiced throughout the world! We must turn an entrenched, centuries old financial establishment on its ear! Read about it. Study it. Understand it. Talk about it. Then raise some hell!”

The best way to do all that is to get people around you to subscribe to MICHAEL!

About the Author

Alain Pilote

Alain Pilote

Alain Pilote has been the editor of the English edition of MICHAEL for several years. Twice a year we organize a week of study of the social doctrine of the Church and its application and Mr. Pilote is the instructor during these sessions.

 

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