there's a fiscal update today and it's going to be very scary and everything, but something that hasn't been reported on is that the government created this debt by printing money through the bank of canada rather than by borrowing it on the market from private banks. in printing this money interest-free, the government did the right thing in picking the more responsible way for governments to pump money into the economy; the result is internal national debt and not private or external debt, so the primary longterm issue surrounding this debt, namely interest payments, is of a very different nature than the type of debt we're used to talking about.

normally, when the government borrows money, it does so by taking a private loan out from a private bank, which many people (myself included.) think is sort of insane. they just borrow money on the market like everybody else, and then have to pay interest on the amount borrowed from the bank to the bank. there is some shoddily written theory underlying this to poorly justify it, but it's obvious that the truth is just that the bankers run the world and have designed the system so that they can get their pound of flesh.

that's not what this debt is. instead, the government printed bonds and then printed money at the central bank, interest free, to buy those bonds. in a modern economy, buying up bonds with printed money is what the government does when it seeks to expand the money supply, not what it does when it seeks to go into debt; this would have been less unusual before the nixon shock, but this is an unusual step to take in the post bretton woods system, where debt is supposed to be privately held. what it indicates is the severity of the situation, and how the pandemic is different than a budget deficit.

the bank of canada is in complete control of this debt, because it’s entirely of it’s own creation; they're in debt to themselves. they could, in the end, just destroy the bonds, which would undo the expansion of the money supply. more likely is that the bonds will be sold to mutual funds, meaning that this is likely to work out to a strict expansion of the money supply, as the assets just get shifted to the markets, albeit in slow motion. the bank of canada will then recover the debt it incurred to buy the bonds when it sells the bonds, and we just end up with more money in circulation, in the long run. money creation of this sort is broadly inconsequential, and largely good for the economy, as it’s just fiscal stimulus.

as mentioned, taking on this kind of debt is unusual in the really existing system of global capitalism, for shaky economic reasons that have really just been speciously upheld by the media-academic complex to ensure that the bankers get their cut. frankly, in terms of actual economic outcomes, the most lasting effect is likely to be a decreased level of competitiveness for the canadian dollar; actual inflation in the price of goods doesn't seem to ever happen from macreoeconomic effects. that’s an entirely debunked pseudo-academic non-theory with absolutely no empirical and absolutely no theoretical basis. it’s a total mythology derived from absolutely nothing.

yes, these numbers are going to be scary and, in response, you're going to see certain segments of the elite attempt to exploit and capitalize off of the crisis as they argue for the need to implement budget austerity and sell-off publicly owned resources to the private sector in order to implement a shock doctrine of structural readjustment programs, like the imf just woke up from a wet dream. this is coming. it’s the reason why i was so apprehensive about creating so much debt, as i didn’t want it to lead to a backdoor for the imf into the country.

however, the government actually created this debt responsibly. this debt is not real, it's just a slow motion expansion of the money supply. there is no justification for the imf to stomp it’s way in here and start smashing skulls and bludgeoning everything.

that said, certain metrics do need to be kept within certain limits in order to keep the imf away and it is imperative that everybody realizes that and seeks to hold the government to reasonable budget restraints that mostly have to do with debt-gdp ratios. this doesn’t apply to the united states, but canada has bondholders out there, and those bankers need their flesh.