A Scot and A Bear Try To Explain Government Debt - I said 'try'

A very long time ago, my Uncle Jack  and I got into a heated debate about government borrowing. He was an assistant deputy minister of finance in the federal government and he was adamant that I didn't understand that it was quite harmless for the government to borrow money because essentially, we were borrowing from ourselves. Apparently it wasn't ok or else borrowing from ourselves evolved into borrowing from others and now most of the world is in hock up to its eyeballs....and stupidly, we seem to be in debt to many of the same countries to who we either lend or provide foreign aid.

How in the hell does that work? How do governments who borrow money from others also end up being lenders to them? It seems to make sense to someone out there because almost all major governments including the US, Canada and most of Europe are in debt...mostly to each other and the mountain of debt service is about to cripple the global economy. Increasingly many are in debt to  China, probably to get enough money to loan to other countries.

Delightful!

Politicians, of course, take no responsibility for any of this convoluted mess. They blame previous governments or they blame you and I. It's our fault because we demand too many social programs. But, I don't actually remember demanding anything (other than to be  left alone). I do remember countless, visionless and faceless politicians from democracies all over the world promising all kinds of things in order to get elected. They also promised good government but that's another story.

Typically, politicians make promises to get elected and then borrow money to deliver on some of those promises. They don't regulate major financial institutions and the high-flyers who misuse the capitalist system to sate their own greed  and when it implodes, they blame you and I, the great unwashed.

To be honest, I do believe that to some extent, it is our fault. We bought the fantasy, after all. We fell for the honey-words and let them bribe us with our own money and money they borrowed. Like over-indulgent parents , we gave them a huge credit card and like arrogant and spoiled children they spent money we didn't have to buy things we didn't need. The result? Mom and dad had to bail the kid out either through increased taxes or the reduction of the very services purchased with the borrowed money. It's sort of like borrowing to buy new golf clubs but having to turn in your membership at the club because you can't afford to play anymore.

Unfortunately, countries can't flush their debt with a simple bankruptcy and we're not allowed to spank them. Countries can default and have in the past but today we're more connected financially than most of the 400+ million people connected to each other on Facebook. If one country goes down, the entire house of cards collapses taking the world economy down with it. Fortunately the governments of the G20 are on the case. Don't be concerned that these are the same governments that got us into this mess.

Some blame the left's tax and spend agenda while others blame the right for mismanagement. What a pointless argument! They are the same when it comes to borrowing and it doesn't matter whether you support the left or the right, the borrowing continues and believing that one party or the other will change that is lunacy.

In my adult lifetime, a series of conservative and Liberal governments have run the national debt in Canada from $17 billion to half a trillion. It may not sound like much compared to the $15 trillion debt in the United States built by both Republicans and Democrats but Canada is a nation of only 35 million people and that national debt doesn't include another half trillion in provincial and local government debt.

It is the same in democracies around the world. The orgy of borrowing continues and government debt is spiraling out of control. The United States, Canada, Ireland, Spain, Itally and, of course, Greece the poster nation for where it all leads, continue to borrow as if they never have to pay it back.

As the people of Greece are discovering................you do! 

I keep hoping that a politician will show up who a) can think beyond the next election b) is a true leader and will show leadership and c) tells the truth from the beginning and not only when there is no other alternative. I also hope that we will put aside our differences and our entitlement greed to listen if that  person ever does  emerge.

It's a vain hope I admit but in that regard, I'm like our dog, Jasper, who still follows me around hoping that food will suddenly fall out of my pocket. Sometimes, hope is all you have, especially when your fate and that of so many others is in the hands of people who's logic it is not only convoluted but downright dangerous to our success as nations.

Politicians of all parties, both the right and the left, like to think of it as pubic service. I think they should think again before they create a world economy that will make the depression look like a minor inconvenience,

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