Some Canadian conservatives were predictably angry last week when the Federal Liberal government highlighted Canada’s relatively low net debt. They want to instead focus on the gross debt, which moved in a different direction. (The figure above shows the gross and net financial liabilities of the “general government” — includes provincial governments. Canadian provincial governments have a big economic footprint, and in order for the debt figures to be comparable to international peers, you want to look at the general government. Otherwise, the Canadian government looks to be a misleadingly small part of the economy.)
Interesting to see the difference in the 'underlying trend' in your leading figure pre- and post-2008: pre-2008 gross debt tracked well with net financial liability; post-2008 the structural effect is of a divergence between gross debt and net financial liabilities. I assume that this is a result of central bank ZIRP policy where central bank balance sheets were expanded but government debt could be rolled over at lower interest rates?
There is a fourth way - just pay pensions, ie, with no premiums whatsoever. As we all know, by now, Federal government cheques can never bounce. So just have the Canadian government spend money directly into retirees bank accounts and have done with it. Most of the money will be immediately recycled back into the economy and what isn't can be taxed back. Premiums (and all other pay cheque deductions) are simply payroll taxes - the most regressive taxes imaginable.
The problem with option 3 - pension funds - is that they're compelled to take risks to make money to pay pensions. We saw the consequences after Liz Truss's budget in the UK - illiquid pension funds having to be shored up by the Central Bank. It makes a mockery of the whole scheme. If the state has to bail out pension funds, why not just have the state print pension cheques in the first place?
One might argue that pension funds invest in the stock market but if they are speculative rather than productive and if they, too, are held aloft by Central Bank's quantitative easing, you again come full circle to just having the Federal government directly providing pensions. And a wholly beneficial effect would be to reduce secondary markets, which would go a long way to stabilizing the financial system. Mind you, it would also eliminate a lot of well paid but essentially pointless fund manager jobs, which is why is quite unlikely to happen.
Interesting to see the difference in the 'underlying trend' in your leading figure pre- and post-2008: pre-2008 gross debt tracked well with net financial liability; post-2008 the structural effect is of a divergence between gross debt and net financial liabilities. I assume that this is a result of central bank ZIRP policy where central bank balance sheets were expanded but government debt could be rolled over at lower interest rates?
There is a fourth way - just pay pensions, ie, with no premiums whatsoever. As we all know, by now, Federal government cheques can never bounce. So just have the Canadian government spend money directly into retirees bank accounts and have done with it. Most of the money will be immediately recycled back into the economy and what isn't can be taxed back. Premiums (and all other pay cheque deductions) are simply payroll taxes - the most regressive taxes imaginable.
The problem with option 3 - pension funds - is that they're compelled to take risks to make money to pay pensions. We saw the consequences after Liz Truss's budget in the UK - illiquid pension funds having to be shored up by the Central Bank. It makes a mockery of the whole scheme. If the state has to bail out pension funds, why not just have the state print pension cheques in the first place?
One might argue that pension funds invest in the stock market but if they are speculative rather than productive and if they, too, are held aloft by Central Bank's quantitative easing, you again come full circle to just having the Federal government directly providing pensions. And a wholly beneficial effect would be to reduce secondary markets, which would go a long way to stabilizing the financial system. Mind you, it would also eliminate a lot of well paid but essentially pointless fund manager jobs, which is why is quite unlikely to happen.
Pension are same as insurance under Buffet which is also USA rule based system in Canada
Insurance model
"collect premiums, deny claims" invest premium's in stock market house gets ROI,
Pension
'collect premiums, deny pension' , house invests premiums in stock market, keeps ROI
The system was always a ponzi
...
The good news is that Canada has enough mineral&timber wealth to sell or lease country to China and make good on Public pension obligation
The bad news for USA is they have nothing of value for Chinese/Saudi investors;