Another timely warning

David Dodge, who is a former deputy minister of finance and was the governor of the Bank of Canada, and is, now, senior adviser with Bennett Jones LLP, writes in the Globe and Mail (in an excerpt from a longer essay published by the Public Policy Forum) that “Canada must come to grips not just with a massive fiscal shortfall ($343-billion and counting) but also with a second deficit that speaks to continuing economic weaknesses we can no longer tolerate.

He explains that “The current account, the sum of our trading and investment relationship with the rest of the world, has been in deficit for 11 consecutive years, a situation made more serious in a highly indebted post-COVID world. One problem cannot be addressed in isolation from the other … [and, he adds] … To avoid future spending cuts or tax hikes or both of the 1990s variety, we must move quickly to tame these twin deficits. That will require directing much of today’s government borrowing to raising future productive capacity – and therefore growth – and not just supporting present-day consumption.” That should be the focus of the forthcoming Throne Speech, not some globalist rubbish about addressing, as Prime Minister Trudeau is reported (in a different Globe and Mail article) said, “the inequalities that the pandemic laid bare – for example, the disproportionate effect on women in the work force, systemic racism and poverty.”

Mr Dodge says that even our trade in automobiles is now running a $22-billion deficit. He says that “Practically the only bright spot in the Canada story has been energy exports, which contributed $76-billion to the positive side of the ledger last year, covering net consumer imports ($55-billion), travel services ($11-billion) and half those autos. About 90 per cent of that $76-billion came from the beleaguered oil and gas industries … [which is the sector that Justin Trudeau keeps trying to sabotage, but, ironically without that surplus] … we would lack the revenue necessary to decarbonize production and develop replacement exports … [and he goes on to say that] … Canada’s brand is tarnished; in the face of regulatory uncertainties, we are no longer seen as a great place to invest. Even Canadian businesses are increasingly looking beyond our borders. By the end of 2019, Canadian direct investment assets abroad outweighed foreign direct investment into Canada by $804-billion.”

What’s need in the next Throne Speech is an economic strategy that puts Canada’s needs and the needs of ordinary, hard working Canadians first. That will not come from Justin Trudeau. He is manipulated by a cabal of progressive, green, globalists who put the interests of the Laurentian Elites, the United Nations and other, shadowy foreign groups ahead of the interests working and middle class Canadians.

So,” David Dodge ~ a real economic policy expert, asks, “how do we avoid such an eventuality?” His answer, and he says it is “the only answer to our twin deficits – is to take measures to accelerate economic growth by increasing export earnings and re-attracting productive investment. Governments can help by creating a more hospitable climate for investment and by investing themselves in productivity enhancing physical and human capital.

Do you think Justin Trudeau plans to offer that?

I don’t …

Canada needs a leader who will offer a coherent, fiscally responsible Canada First Economic Strategy … one that, unlike Donald Trump’s America First strategy is grounded in reality and good common sense:

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David Dodge says that we can manage our ballooning debt if we keep our national economic growth rate (G) higher than the rates of interest (R) we pay on our debts. He explains that “In order to keep interest rates safely below growth, we need to scale borrowing back over the next two to three years. But a realistic plan to rein in borrowing cannot be too jarring as the uncertain effects of COVID-19 on workers and businesses is likely to stretch out into 2022. Thus the federal government should taper its borrowing requirements in deliberate steps over the next fiscal years to arrive at 1 per cent of GDP in 2023-24 and following years. By this time, the debt-to-GDP ratio will be back to 1990s levels, but debt service costs will be tempered by lower interest rates … [and] … Under this scenario, the share of government revenue devoted to debt servicing would stabilize at a manageable 10 per cent of annual revenue in the early 2020s, about double the level of 2017 but well within international norms and dramatically below the 35 cents on the dollar at the peak of the 1990s crisis. I would suggest that a 10-per-cent debt servicing target should become the federal government’s new fiscal anchor, providing assurance to the marketplace and transparency to voters that the government is tied to the discipline of a fiscal plan over future borrowing, expenditures and revenue.I hope Mr O’Toole’s economic planning team is listening to Dr Dodge because I am certain that Team Trudeau is not.

A key stipulation, David Dodge says, is that: “For G [that’s economic growth, remember] to remain greater than R [that’s the interest rate ~ the interest we must pay on our national debt, no matter what our dimwitted prime minister might think] over the medium and long term, government borrowing must be primarily used to finance investments that will augment the growth of domestic production and the global competitiveness of Canadian industry – thus shoring up the current account and warding off the penalties of diminished confidence. Following this course will allow us to get the twin deficits under control without resorting to the drastic measures of 25 years ago.” In other words we have to invest in selling what other people ~ Americans, Brits, Chinese, Danes and so on ~ want to buy, not on the industries that the Laurentian Elites want to subsidize.

Canadians, broadly and generally, need to heed David Dodge’s warning. Our country does not have to drift towards economic ruin. Canada can survive the pandemic and recover and grow our economy … but to do that Canada needs a new, Conservative, government:

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