Balanced Budget Bluster
Joe Oliver presented the delayed Government's budget yesterday and touted it as "balanced". All the fuss was done to lead off the Government's campaign into the upcoming October Federal Election by assuring voters of the incumbent's prowess as responsible managers.
Journalists coming out of the lockup were quick to make the point that the "balance" ie: slightly more revenue than expenditure, is a product of selling assets, reducing federal expenditures and delaying "promises" into the future.
To assuage our fears, the government will spend $7.5 million (The Tyee) of our tax-payer money beginning next month to encourage us to continue voting for the present management.
One problem that is never discussed in the mass media is the lack of understanding about how a modern national economy like Canada, which has the authority to issue and enforce the use of its own currency, actually works.
There are 3 sectors to the national economy in terms of income and expense:
And the simple balance sheet equation is that the net sum of the 3 sectors have to balance to zero, ie:
Net Public Sector+Net Private Sector+Net Foreign Trade Sector = 0
The result of this accounting reality is that:
Most people on the political right or left are programmed by their ideological beliefs and have never been presented with the above accounting reality.
Yesterday's heralding of the budget does nothing but further limit the Private Sector.
Because the current federal government has been methodically cutting its own spending since taking over in 2006, today, Canadians have fewer choices to maintain their lifestyle. They either have to continue to drain their savings or take on more debt, or find new earning sources (the search for yield).
Since the Pit of Gloom in 2009, the Feds have been on an ideological mission to "balance" the federal budget by ignoring the Negative Trade Balance and by adding to the Negative Private Sector Balance.
The following is an abstract of some of Cullen Roche's observations about how a modern national economy works with links to further reading. I originally posted this in June of 2012.
Why is the chart above a big idea?
The following is from PragCap.com edited by Cullen Roche, December 18, 2012 taken from research by Tanweer Akram of ING discussing the economics of Japan over the course of their continuing balance sheet recession.
Worried About a Canadian Housing Bust?
BMO study finds nearly 20% of Canadians surveyed didn’t save a dime in 2014
Financial Post April 7, 2015 via Canadian Press
A new survey of Canadians found almost 20% of respondents didn’t put aside a dime in 2014 and a further 40% felt they were not saving enough.
History, Charts & Curated Readings
"Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement; and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it." George Santayana Vol. I, Reason in Common Sense
"History, real solemn history, I cannot be interested in.... I read it a little as a duty; but it tells me nothing that does not either vex or weary me. The quarrels of popes and kings, with wars and pestilences in every page; the men all so good for nothing, and hardly any women at all - it is very tiresome." Jane Austen spoken by Catherine Morland in 'Northanger Abbey'