Page 24 - HQ May June July 2020

Canadian government deficit catapulted

by spending to unprecedented levels

Since all money is created as a debt

it is impossible to get out of debt!

by Alain Pilote it so brilliantly and simply in his fable, The Money
Myth Exploded. (See page 3.) In the fable, Oliver
We knew it was coming. With the astronomical
expenditures made by the Canadian government to lends money at a rate of 8%, but any rate – even
1% – would create an impossibility to pay back the
come to the aid of citizens and businesses hit by entire loan, which consists of principal and interest.
the coronavirus pandemic, and the cessation of
practically all economic activities, Parliamentary Let us suppose the five shipwrecked people on
Budget Officer Yves Giroux announced on April 30, the island decide to borrow from Oliver a total of
2020 that the federal deficit would reach a record $100, at 6% interest. At the end of the year, they
level, increasing from $24.9 billion in 2019-2020 must pay Oliver the interest of 6%, that is to say, $6.
to $252.1 billion in 2020-2021, a 10-fold increase 100 minus 6 = 94, so there is $94 left in circulation
in 1 year. The deficit will continue to climb if the on the island. But the $100 debt remains. The
emergency spending measures remain in place $100 loan is therefore renewed for another year,
longer than hoped. and another $6 of interest is due at the end of the
As a result, the federal second year. 94 minus 6, leaves
government’s accumulated debt $88 in circulation. If they continue
to pay $6 in interest each year, by
(the total of deficits accumulated the seventeenth year, there will
year after year), was $685 billion be no money left in circulation on
in 2018-2019 and increased to the island, but the debt will still be
$962 billion in just one year. $100, and Oliver will be authorized
All countries are in the same to seize all the properties of the
catastrophic boat. For instance, island’s inhabitants.
the U.S. debt reached $25 trillion
in early May 2020 and could climb Production has increased on the
to $30 trillion by the end of the island but not the money supply.
year. It is not products that the banker
wants but money. The island’s
Not since World War II have
nations witnessed such enormous inhabitants were making products,
but not money. Only the banker has
deficits compared to their GDP. All countries are the right to create money. So, it seems that it was not
‘at war’ with a common enemy: the response to wise for our five fellows to pay the interest yearly.
the coronavirus. Reporters asked Prime Minister
Trudeau how the country planned to address deficit Even borrowing the interest won’t solve anything
spending in the future and he answered: “We are but will only delay the final bankruptcy. Let us suppose
not at all thinking about that now.” that at the end of the first year, the five fellows decide
Not thinking about the deficit will not make it go not to pay the interest, but to borrow it from Oliver,
away. The headache will be felt when the interest thereby increasing the loan principal to $106. “No
problem,” says Oliver, “the interest on the additional
on this sum must be paid. Remember that all the $6 is only 36 cents; it is peanuts in comparison with
money the government has spent in its response to the $106 loan!” So the debt at the end of the second
the coronavirus will have to be repaid, with interest. year is: $106 plus the interest at 6% of $106, $6.36,
We may not think about it today but the day will for a total debt of $112.36 after two years.
arrive when payments become due. The entirety of
the money spent to help the population is money At the end of the fifth year, the debt is $133.82
borrowed from private banks; debt-money. and the interest is $7.57. “It is not so bad,” thought
It is very important to understand this point: the the five guys, “the interest has only increased by
total debt can never be paid off, for it represents $1.57 in five years. We can handle that.” However,
after 50 years, the situation is quite different. The
money that does not exist. Louis Even explained

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24 MICHAEL May/June/July 2020 www.michaeljournal.org