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Feb 23 2015

Canada’s Debt and Government Growth Problem

Today on Zero Hedge, there was a post about how government debts are over 100% of GDP in many countries, and there are even six nations with debt/GDP ratios greater than 300%.   Canada was mid-pack at 221%, just ahead of China (if you called having more debt being ahead).

What caught my attention was the second table:

Screen Shot 2015-02-23 at 6.20.00 PM

which shows for each country how the growth in GDP over the last 8 years is divided (government, corporate, household and financial institution. Note how in Canada only the banks have deleveraged (and only a little, compared to other places).  But government has been the PRIMARY source of economic growth in Canada.    Corporations provided almost no growth over 8 years, and households run about 2% per year (which seems about right).  But why is government growing so fast?  And is it sustainable?  Considering that corporations and households have to pay taxes to support government, and they are growing slower – this can only have been achieved through increasing government debt.  Which we know is happening in almost every province (except Saskatchewan).  Luckily, the federal government is nearly balanced on it’s budget – but Quebec, Ontario, BC and Alberta are bleeding red ink and seemingly unwilling to stop…

This does not bode well.  Our leaders should be looking to Greece.  And recognizing how foolish their new government really is.

3 comments

  1. Roy Elsworth

    man is this Right because I go bye what they said that Canada is on target at the end of 2015 or 2016 that we would be debt free and have a surplus. so how can we be in the middle of the pack.

    1. Taliesyn

      The federal government should be out of “deficit” in 2016. However, we still have a huge accumulated debt. And most of the provinces are also in the red (annual deficits) with growing debt.

  2. oldwhiteguy

    using the word government and economic growth in the same sentence requires a question. just how does government generate economic growth? government is a net destroyer of the wealth produced by real economic activity. that government continues to grow and continues to consume the wealth produced by others is a serious problem. if Canadians cannot see this and are unwilling stop spending money they do not have then the country will experience very difficult times ahead.

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