Canada is passing many third-world African nations to become one of the most indebted countries in the world. After Trudeau’s mind-boggling C$314 Billion budget deficit for the fiscal year 2020/21, up from ‘just’ C$21.77 billion in the previous year, don’t expect the spending to stop anytime soon.
Here is the scary thing. $21.77 billion deficit used to be a bad year. Now, after a $314 billion print, $154 billion doesn’t sound so bad. That’s right,
“The federal government plans to run a $154.7-billion deficit in fiscal 2021-22, which will steadily decline throughout the forecast horizon to a $30.7-billion shortfall in fiscal 2025-26,” according to a recent BNN Bloomberg article.
Five years from now, which is highly optimistic at best, we’ll still be running deficits about 50% higher than we were before the pandemic. However, in the meantime, Canada appears destined to become one of the most indebted countries on earth.
Experimental Deficit Spending to Overheat Canada’s Economy?
Former Quebec Premier Jean Charest, now a partner at law firm McCarthy Tétrault LLP believes Canada is in for a rocky ride if the spending continues, explaining in a BNN Bloomberg article by Ian Vandaelle, that,
“I think a lot of us who went through the years where the deficit and the debt was a big issue are very concerned,” he said. “What we’re doing now, in Canada and good parts of the world, is actually experimental. The amount of stimulus going into the economy, both in the United States, Canada, and Europe, is unprecedented, and this is going to overheat the economy.”
Every inflationary boom begins well enough. People appear richer on paper as their assets expand in value. But, as the price of consumer goods soar faster than incomes, the populace becomes enraged and desperate. We are not there yet, but Canada’s spendthrift ways have the country on the path to instability.
The Most Indebted Countries: Canada to Join Top 10 List?
What scares me about Canada is our rate of increase. Canada’s debt increased from 86.8% debt to GDP in 2019 to 117.8% in 2020. From a % increase, this is a more significant move than any country I’ve seen. According to Trading Economics, the UK, for example, went from 84.4% in 2019 debt to GDP to 97.2% in 2020. Likewise, Germany went from 59.7% debt to GDP in 2019 to 69.8% debt to GDP last year, according to Trading Economics.
Canada’s more than 30% increase to its total debt-to-GDP ratio in one year is startling. But, even with inflation at its highest levels since 2003, few seem concerned. The real estate market remains on fire, and the Canadian currency has remained relatively stable. Sadly, with more than $150 billion in deficits planned for this fiscal year, Canada’s 117% debt to GDP will be looked at with envy by this time next year. As a result, expect Canada’s debt to GDP ratio to easily surpass 130% in the next 12 months. As our debt ratio expands above 130%, we will likely pass countries like Bhutan (current debt-to-GDP ratio of 123%), Zambia (current debt-to-GDP ratio of 119%), Spain (current debt-to-GDP ratio of 118%), and Mozambique (current debt-to-GDP ratio of 125%).
Canada to Enter World’s Top Ten Most Indebted Nations
Canada will soon be among the ten most indebted countries of the world (measured by debt-to-GDP), which currently consist of:
- Japan at 257%
- Sudan at 212%
- Greece at 210%
- Eritrea at 176%
- Suriname at 157%
- Italy at 157%
- Barbados at 143%
- Maldives at 140%
- Cabo Verde at 138%
- Belize at 135%
To see more, check out Visualizing the Snowball of Government Debt, published by Marcus Lu of Visual Capitalist on May 31, 2021.
I fully expect Canada to debut on this list of the world’s top 10 most indebted nations in 2022.
Canadian politicians should be ashamed of themselves. They are spending with reckless abandon and writing checks they can’t cash. All of these debts will either be inflated away by our monetary overlords or paid for by future generations. If history is any guide, politicians and bankers will do everything in their power to inflate the debt away, which will crush those with little or no physical assets from which to hedge against. Spending money we don’t have is no way to run a country. Unfortunately, with Trudeau and the Liberals at the helm, this seems to be a forgone conclusion.