July 8, 2020 Federal Fiscal Update

I'm going to start by quoting from the Covid thread:

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Originally Posted by sabad66

Holy fuck, these numbers from the fiscal update are insane:

- Deficit for 2020-21 rises to $343.2 billion from $34.4 billion projected before pandemic.
- Net federal debt will hit $1.2 trillion.
- Federal debt-to-GDP ratio is expected to rise to 49% in 2020-21 from 31%
- Direct federal support for Canadians and businesses: $212 billion.
- COVID-19 slowdown has cost.the federal treasury an additional $81.3 billion.
- GDP will shrink by projected 6.8% this year —.worst since the Great Depression.
- Economy is expected to bounce back by 5.5% next year.

https://apple.news/A40fJCCe0Qf6eV-6hmAQ1WA

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I feel like this topic deserves it's own thread because it's not specific to the virus per se, but it's something I believe deserves some serious discussion by the public. I also think this thread belongs here and not in the finance forum because this is something that will impact the way of life for all Canadians.

My first reaction is HOLY $%&#!!! Did we just hit the financial iceberg and we're all standing on the deck of the Titanic? Well I guess it depends. Compared to the Americans we're still way better off but I don't want to use them as an acceptable standard, that's a dumpster fire I want no part of but when looking at places like China & Australia who were both at or just below 50% in previous years maybe it's not all that bad?

So Beyond, are you okay with your government owing four times every dollar they bring in from you?

It's pretty nuts. We added 40% to our national debt in a single year. From ~850 billion to 1,200 billion in a single year or in terms of our deficit that accelerator our debt levels by over a decade (34.4 billion deficit last year x 10 years = 350 billion in added debt over a decade).

It's actually going to be scary because our debt servicing costs are going to be significantly higher now which means a larger deficit every single year just to service our debt.

I think we had to do it given everything that happened (not saying it couldn't have been executed better ... CERB is a mess of people not wanting to go back to work) but it's going to be interesting to see what happens going forward to try and balance things. Every year politicians bullshit about 'oh we'll balance the budget in 5 years' but never do ... I wonder if the minority parties might push for an election over this and then parties can campaign based on what do to moving forward? Idk if that'd help though, Liberals might just get more votes because of all the money given out.

You might want to revise your "we're better than the US" conclusion once you review the fiscal situation of individual provinces. The Feds are likely going to need to bail out provincial finances in a big way, and you will see the Fed debt ratio go to the moon.

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Originally Posted by Buster

You might want to revise your "we're better than the US" conclusion once you review the fiscal situation of individual provinces. The Feds are likely going to need to bail out provincial finances in a big way, and you will see the Fed debt ratio go to the moon.

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I hadn't thought of that angle but wouldn't the Americans have the same problem at the state vs. federal level? I truly don't know anything about that kind of finance.

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Originally Posted by Masked Bandit

I'm going to start by quoting from the Covid thread:



I feel like this topic deserves it's own thread because it's not specific to the virus per se, but it's something I believe deserves some serious discussion by the public. I also think this thread belongs here and not in the finance forum because this is something that will impact the way of life for all Canadians.

My first reaction is HOLY $%&#!!! Did we just hit the financial iceberg and we're all standing on the deck of the Titanic? Well I guess it depends. Compared to the Americans we're still way better off but I don't want to use them as an acceptable standard, that's a dumpster fire I want no part of but when looking at places like China & Australia who were both at or just below 50% in previous years maybe it's not all that bad?

So Beyond, are you okay with your government owing four times every dollar they bring in from you?

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My view right now is that we need to make the best of a bad situation. I am not okay with the defecit or the debt, but I also can't say I'd have done anything different if put in the libs position. Keeping the country afloat had to happen because decades of terrible fiscal policy (globally, not just us) has left the average person completely unable to weather the storm. So the alternative was mass financial crisis.

In one scenario, we wind up paying for these people anwyay. In the other, at least we are in front of it.

At least, that's what I'm telling myself as I brace for an increase in taxes to support a bailout that I did not qualify in any way for and did not directly benefit from. lol

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Originally Posted by Masked Bandit

So Beyond, are you okay with your government owing four times every dollar they bring in from you?

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No.

The biggest concern for me though is not even the absolute numbers it's that in 6 months all our Finance Minster could muster up was a snapshot.

Where the hell is his plan to see ourselves out of the other end?

Only in government is that acceptable if I provided that level of service in my role it would be an indefinite can but it's totally acceptable in his capacity as finance minster....

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Originally Posted by A790

My view right now is that we need to make the best of a bad situation. I am not okay with the defecit or the debt, but I also can't say I'd have done anything different if put in the libs position. Keeping the country afloat had to happen because decades of terrible fiscal policy (globally, not just us) has left the average person completely unable to weather the storm. So the alternative was mass financial crisis.

In one scenario, we wind up paying for these people anwyay. In the other, at least we are in front of it.

At least, that's what I'm telling myself.

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The problem with the COVID response is really just an extension of the problem with global policy. The best way for elites to scoop wealth is to employ government to do it on their behalf. The bigger the government the more wealth gets concentrated. The great liberal lie (error?) is that big government assists in wealth redistribution and reduction in inequality. This holds true in general, but also in specific: big government interventions also create wealth concentration. Exhibit A: the stock market going bananas despite the world falling apart.

The big gov't interventions of our lifetimes: 2008 and now 2020 are not designed to "save the economy", pe se. They are designed to head off social unrest and chaos. The problem is that it will further ossify our already zombie-fied economy....er...kleptocracy.

The other big problem is that post-crisis I believe it will push people in exactly the wrong direction to solve the problems: bigger government, more intervention, marxism, more crony capitalism etc. This just compounds the problem. The real solution to the problem will be spoken by a drowned-out minority: a return to individual responsibility, true free markets and capitalism.

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Originally Posted by Buster

The problem with the COVID response is really just an extension of the problem with global policy. The best way for elites to scoop wealth is to employ government to do it on their behalf. The bigger the government the more wealth gets concentrated. The great liberal lie (error?) is that big government assists in wealth redistribution and reduction in inequality. This holds true in general, but also in specific: big government interventions also create wealth concentration. Exhibit A: the stock market going bananas despite the world falling apart.

The big gov't interventions of our lifetimes: 2008 and now 2020 are not designed to "save the economy", pe se. They are designed to head off social unrest and chaos. The problem is that it will further ossify our already zombie-fied economy....er...kleptocracy.

The other big problem is that post-crisis I believe it will push people in exactly the wrong direction to solve the problems: bigger government, more intervention, marxism, more crony capitalism etc. This just compounds the problem. The real solution to the problem will be spoken by a drowned-out minority: a return to individual responsibility, true free markets and capitalism.

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We are close to alignment but different on the last bit. I believe that unrestricted capitalism is a bad thing. Guiderails need to exist.

But I do believe and have been preaching to anyone who will listen that this is a massive wakeup call to anyone that does not save. Individual fiscal intelligence is needed to endure and survive this. You can't rely on the government to save you when things go wrong every time they go wrong.

I guess a trillion dollar debt is the new normal.

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Originally Posted by A790

We are close to alignment but different on the last bit. I believe that unrestricted capitalism is a bad thing. Guiderails need to exist.

But I do believe and have been preaching to anyone who will listen that this is a massive wakeup call to anyone that does not save. Individual fiscal intelligence is needed to endure and survive this. You can't rely on the government to save you when things go wrong every time they go wrong.

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This is quite true. (Although I don't think I've been a proponent of unrestricted capitalism. But that's a larger conversation).

Interestingly your solution regarding saving is the opposite of what gov't policy is trying to accomplish. They are lowering rates to kickstart inflation. What recent data seems to show, however, is that once rates go below a certain point (it appears to be 4%), then peoples' psychology changes and they go from "cheap rates, let's spend" to "I can't get a yield on my investments, so I must save more."

So you're solution is exactly what the gov't does NOT want to hear or have people do.

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Originally Posted by Buster

So you're solution is exactly what the gov't does NOT want to hear or have people do.

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I know. But at the same time, healthy individual finances is the only true long-term solve if we want to get off the government band-aid bandwagon.

EDIT: Also, it occured to me just now that I don't think I actually know your view on capitalism. I have inferred that you are libertarian leaning and assumed that meant free capitalism. Sounds like a good topic to share a beer over.

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Originally Posted by A790

I know. But at the same time, healthy individual finances is the only true long-term solve if we want to get off the government band-aid bandwagon.

EDIT: Also, it occured to me just now that I don't think I actually know your view on capitalism. I have inferred that you are libertarian leaning and assumed that meant free capitalism. Sounds like a good topic to share a beer over.

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While I hate to paraphrase people, in my view you are suggesting a solution which is equivalent to "let interest rates float so people can decide if they should save or spend or invest".

Markets!

It’s all fun and games till everyone is reset to zero and the new currency is wakeboard boats and lifted trucks... then who will be laughing??!! :rofl:

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Originally Posted by A790

I know. But at the same time, healthy individual finances is the only true long-term solve if we want to get off the government band-aid bandwagon.

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Sooooo much of this! Largely though people don't want to hear it. They DESERVE that new car, they DESERVE to live in the nice part of town, they DESERVE to take a vacation and they DESERVE to have the government bail them out when the storm hits. The idea of personal responsibility especially in the realm of finance seems to be less & less common.

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Originally Posted by Masked Bandit

Sooooo much of this! Largely though people don't want to hear it. They DESERVE that new car, they DESERVE to live in the nice part of town, they DESERVE to take a vacation and they DESERVE to have the government bail them out when the storm hits. The idea of personal responsibility especially in the realm of finance seems to be less & less common.

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CC companies and car sales.... no one that makes sub $50k/yr should have CC’s with combined limits over $80k, when the new financed vehicle cost is DOUBLE the MSRP for the vehicle you’re buying? Just say no!

The “debt consolidation” companies play a role too... “oh, you don’t want to pay back that messily $10k? No worries, consumer proposal!”

.... then they go out and still get a new vehicle, it’s okay... their partner who works part time for $10k/yr can have the east side dodge $60k caravan under their name so they can still go and refinance the house :rofl:

...the shit I see

Justin Trudeau: “We took on debt so Canadians wouldn’t have to.”


https://twitter.com/BNNBloomberg/sta...170201601?s=20

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Originally Posted by Buster

While I hate to paraphrase people, in my view you are suggesting a solution which is equivalent to "let interest rates float so people can decide if they should save or spend or invest".

Markets!

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You may recall my reaction when the government dropped interest rates like two weeks into the market "crash". I'll paraphrase: "this is fucking stupid".

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Originally Posted by RawB8figure

Justin Trudeau: “We took on debt so Canadians wouldn’t have to.”


https://twitter.com/BNNBloomberg/sta...170201601?s=20

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IS that the dumbest thing I've said? Maybe.

Trillion dollar debt? Just introduce negative interest rates. Problem solved.

I don't know who's most fucked, Feds, provinces, or the cities, but in the end, it's the taxpayers. Truly fucked. Better get used to a much higher percentage of your earnings going to all the governments, and keeping very little for your own needs.

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Originally Posted by ExtraSlow

I don't know who's most fucked, Feds, provinces, or the cities, but in the end, it's the taxpayers. Truly fucked. Better get used to a much higher percentage of your earnings going to all the governments, and keeping very little for your own needs.

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Increasing tax rates doesn't increase tax receipts that much.

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Originally Posted by ExtraSlow

I don't know who's most fucked, Feds, provinces, or the cities, but in the end, it's the taxpayers. Truly fucked. Better get used to a much higher percentage of your earnings going to all the governments, and keeping very little for your own needs.

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Taxpayers are always fucked.

How much extra will we pay a year in debt servicing? Is it a significant part of the budget? My assumption is it won't make a drastic change.. not like any government plans to pay down debt

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Originally Posted by Buster

Increasing tax rates doesn't increase tax receipts that much.

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True, nothing a government does really increases government revenue. External forces are larger factors.

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Originally Posted by Masked Bandit

I hadn't thought of that angle but wouldn't the Americans have the same problem at the state vs. federal level? I truly don't know anything about that kind of finance.

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Probably not to the same extent, especially since were going to have an additional burden on the provincial level from the healthcare sector (the initial federal money won't cover it all), while a lot of that is picked up by the private sector in the states. Then there's our provincial debt loads. The debt to GDP for all US states is between 5-22%. Only Alberta, BC, and Saskatchewan would fall in that range, the rest of Canada has debt to GDP ratios of 34 to 50%.

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Originally Posted by Buster

Exhibit A: the stock market going bananas despite the world falling apart.

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It's just the game. I don't make the rules obvs but I'll play along. :eek:

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Originally Posted by Buster

Increasing tax rates doesn't increase tax receipts that much.

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Maxis taught me that.

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Originally Posted by kenny

Maxis taught me that.

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they will still try

The world is just going to go Zimbabwe.

Governments of the world will just print cash, devalue their currencies, monetize debt, and say FU to retirees and savers. After all, debt creates economic growth so good on those who leverage themselves up to the tits and F-those who try to responsibly save and rely on the pensions provided to them by previous governments they voted for to fund their retirement. Public debt and generous handouts will fund their retirement. Who cares. Why bother working or saving at all?

People are so busy worrying about pulling down historic statues and taking offence at a 140 character tweet that they have no idea how money, taxation, economics, or debt works.

Fuck this. I'm buying a farm somewhere sunny.

I sort of agree. The world is not setting up to reward savers or those who accumulate wealth. If you are anything approaching middle-class, barriers are increasing, and benefit decreasing to moving upwards any reasonable amount.

It kind of flies in the face of conventional personal finance thinking of the last several decades, but maybe spending every penny makes more sense? I don't know.

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Originally Posted by ExtraSlow

It kind of flies in the face of conventional personal finance thinking of the last several decades, but maybe spending every penny makes more sense? I don't know.

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I sure as hell wouldn't be owning bonds based on a % of my age. Although I guess if yields go negative in more countries the "risk free" rate of 1% may be desirable to those funds who are stuck in pre-Zim times.

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Originally Posted by davidI

Fuck this. I'm buying a farm somewhere sunny.

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Just be careful, you don't want to be a land owner when communist revolution comes.

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Originally Posted by davidI

The world is just going to go Zimbabwe.

Governments of the world will just print cash, devalue their currencies, monetize debt, and say FU to retirees and savers. After all, debt creates economic growth so good on those who leverage themselves up to the tits and F-those who try to responsibly save and rely on the pensions provided to them by previous governments they voted for to fund their retirement. Public debt and generous handouts will fund their retirement. Who cares. Why bother working or saving at all?

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THIS is becoming a genuine concern of mine.

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Originally Posted by Masked Bandit

THIS is becoming a genuine concern of mine.

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The real concern is no one seems to care if we do go that way

$340B spent, 8500ish people died so that's like $40million a person. Job well done.

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Originally Posted by kenny

Maxis taught me that.

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https://66.media.tumblr.com/tumblr_l...4w1go1_400.png

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Originally Posted by jutes

$340B spent, 8500ish people died so that's like $40million a person. Job well done.

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I don’t think I could come up with a worse way to describe the situation. Bravo on that.

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Originally Posted by D'z Nutz

https://66.media.tumblr.com/tumblr_l...4w1go1_400.png

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Nothing a bulldozer couldn't fix.

I feel like this is relevant to this thread: https://www.ctvnews.ca/mobile/politi...orts-1.5015665

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Originally Posted by kenny

Nothing a bulldozer couldn't fix.

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Even if it can't, for those demolition prices you can afford to make as many mistakes you want.

If its the young ones that end up surviving, they should be the ones paying, because they are the only ones left to pay. Logic.

The biggest problem is I genuinely don’t think that the majority of Canadians even care about what the deficit or debt level is. Until you have a debt crisis or rampant inflation, I doubt anyone even bats an eyelid. Sunny ways ...

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Originally Posted by dimi

The biggest problem is I genuinely don’t think that the majority of Canadians even care about what the deficit or debt level is. Until you have a debt crisis or rampant inflation, I doubt anyone even bats an eyelid. Sunny ways ...

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I don't think the majority of Canadians care about what their personal debt level is, let alone the debt they have zero control over.

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Originally Posted by Tik-Tok

I don't think the majority of Canadians care about what their personal debt level is, let alone the debt they have zero control over.

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That's the winning attitude. Debt is what a bank has. People have stuff.

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Well, get used to it. For example, the coming budget is likely to increase the capital gains inclusion rate (to 75%, if the NDP gets its way), which means you’d be wise to lock in some gains before that happens. We might well see a new tax bracket created to further ensnare and drive off the 1%ers. Self-employed who pay themselves exclusively through dividend income, rather than salary, might come to regret that choice. Or there could be a lifetime cap placed on TFSA contributions or (more draconian) on accumulated tax-free balances. The feds could simply decide – since we don’t have enough rich people – to shift more tax from income to consumption, and bring the sales tax back up to pre-Harper levels.

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https://www.greaterfool.ca/2020/07/08/neck-deep/

*sigh*

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Originally Posted by finboy

https://www.greaterfool.ca/2020/07/08/neck-deep/

*sigh*

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Don't get too worked up over one random internet dude's speculation. Blogs like this throw stuff at the wall to see what sticks, then proclaim themselves oracles if anything is even close.

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Originally Posted by JustinL

Don't get too worked up over one random internet dude's speculation. Blogs like this throw stuff at the wall to see what sticks, then proclaim themselves oracles if anything is even close.

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He was a conservative mp who helped create the Tfsa and consulted with the liberals under Ignatieff

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Originally Posted by dimi

The biggest problem is I genuinely don’t think that the majority of Canadians even care about what the deficit or debt level is. Until you have a debt crisis or rampant inflation, I doubt anyone even bats an eyelid. Sunny ways ...

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We have become to desensitized to the massive numbers being thrown around by the media with no concept of scale and real world impact.

Government: "We have pledge $8billion for XXXXXXXXXX"
Canadians: "Neat!"

When you read stats like the average Canadian spending 180% of the money they earn, its no wonder we are in the situation we are today. We are in a "look what I have" society and most people are unable to support it with their income.

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Originally Posted by killramos

The real concern is no one seems to care if we do go that way

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I care but I can only take care of my own house lol Good luck everyone else!

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Originally Posted by finboy

He was a conservative mp who helped create the Tfsa and consulted with the liberals under Ignatieff

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He still is going to be wrong about most of those predictions like many of the other ones in his previous blog entries. It gets clicks and gets people worked up, but I don't believe his crystal ball is any more clear than mine.

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Originally Posted by finboy

https://www.greaterfool.ca/2020/07/08/neck-deep/

*sigh*

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The 75% cap gain inclusion has been rumored for at least a couple of years in a row now. But there is a play there that could be done.

- Announce an increase to the cap gain inclusions to 75% starting Jan 1, 2021
- Everyone sells their winners (2020), and has to pay taxes on it because they don't want to pay capital gains tax at 75%
- Government gets their money by April 30, 2021
- Budget 2021 is released in May 2021 saying the cap gain inclusion rate is going to drop back down to 50% starting Jan 1, 2022

Profit!

If you spent 180% of what you earned, and then kick the bucket... Isn't that a win?

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Originally Posted by ZenOps

If you spent 180% of what you earned, and then kick the bucket... Isn't that a win?

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Exactly. Die broke is old fashioned. Die heavily indebted!

Ethics scandals and deficits are not news worthy it seems. That said, why is Scheer even around still?
https://www.facebook.com/CTVNews/vid...type=2&theater

Millennials are definitely in the front running for most screwed generation ever. But the future may still hold a California earthquake for Gen Z. I got sympathy, but don't be surprised if there is a 200% debt to GDP to contend with, every generation for themselves!

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Originally Posted by ZenOps

Millennials are definitely in the front running for most screwed generation ever. But the future may still hold a California earthquake for Gen Z. I got sympathy, but don't be surprised if there is a 200% debt to GDP to contend with, every generation for themselves!

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If it get's too big we'll just eat the bankers

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Originally Posted by phreezee

Ethics scandals and deficits are not news worthy it seems. That said, why is Scheer even around still?
https://www.facebook.com/CTVNews/vid...type=2&theater

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Scheer not wearing a mask is not news. It's media bullshit. People are human and fuck things up. I'm giving the guy the benefit of the doubt.

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Originally Posted by dubhead

If it get's too big we'll just eat the bankers

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Yup, eventually millennials will be making the laws - so they can decide how to move forward.