credit and debt
03. credit & debt Concerns about mounting federal debt have taken a back seat to supporting Canadians financially through the pandemic.
HEY, BIG SPENDER
There is no way to sugar-coat it: Canada’s federal government has racked up an historic amount of debt over the past 9 months, to the tune of almost $250 billion. To put this into context, the cumulative deficits from the 132 months preceding April 2020 totalled only $204.2 billion. Under normal circumstances this would be deemed totally unacceptable; profligate; irresponsible. It might even make Shirley Bassey blush. But these are far from normal circumstances. With employment nationally falling by close to 20% in the months after the pandemic hit, it became very clear very quickly that drastic action was needed to stave off a recession that would have deep and long-lasting consequences for households and businesses.
Canada is not alone in taking dramatic steps to underwrite the economy, with most industrialized nations doing the same. With interest rates expected to remain very low for the foreseeable future, economists tend to agree that while federal debt has been accumulating in ways previously thought unimaginable for a non-wartime period, the burden of servicing the additional debt will remain blunted. Let’s hope so. If it doesn’t, we’ll find that debt repayments will squeeze out necessary spending in other parts of the economy. With most other countries adopting a similar philosophy on fiscal support and debt accumulation during Covid-19, we wouldn’t be alone.
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