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Pink Elephant

THE WHOLE PICTURE

But of course. In order to understand where we stand we need to look at the whole picture, a picture that governments don't want you to see. They will distract you with endless and ongoing meaningless details, meanwhile they will sneak a gigantic wild pink elephant called debt right behind you your back. Nothing to see here…keep looking at the balanced budget… nothing to see here.

Take a look at the picture below.

This is a somewhat complex picture that requires a few explanations. We overlapped several pieces of data in order to understand how they interact with each other.

Coloured areas:

  • Red represents Liberal governments (theoretically left-oriented)
  • Blue represents Conservative governments (theoretically right-oriented)

Coloured lines:

  • Red represents debt
  • Blue represents Federal surplus or deficits

Both lines are calculated in $CDN Billions per 10 million people and in constant currency to 1966. We did so to account for population growth and inflation.

Circled area:

  • Area of particular interest

Federa Balance and Debt

The lesson from this graph is that whether the budget is balanced or not, the amount of debt keeps growing. We would expect that if the budget is negative (i.e. unbalanced) debt would increase (money has to come from somewhere) but when there are budget surpluses, we would expect the debt to decrease (i.e. being paid off). Alas, this is not the case.

Take a look at the area circled in black. This is an area marked by surpluses. Yet, even in those conditions, debt increased. Granted, it increased less than in other areas but it continued to increase! Furthermore, debt increased regardless of the type of government Canada had! Liberals and Conservatives they all behave like socialists when it comes to spend, spend and then spend some more followed by borrowing, borrowing, borrowing and then borrowing some more. This is the real problem, not whether or not the budget was balanced. Balanced or unbalanced budgets are just mirages! They are political and economic illusions!

Is this a surprise? Not at all. We came to the exact same conclusion using data from the IMF. We described our conclusions in the article You The Tax Collector. Interestingly enough, all our Socialism Indices also point in the same direction. However, there was one study performed by the Montreal Economic Institute which was specific for Canada and also arrived to the same conclusion! (if you are interested please see Politicians Cant Be Trusted - Again).

CONCLUSION

Government budgets are pure and simple bollocks! They are misdirection strategies to make you look in the wrong places while politicians continue to do their deeds. The Canadian example is just one of such examples, but every single government on earth behaves in the same manner to one degree or another. Why is this so? Because when it comes to spending, they are all socialists. Because when it comes to spending, they are all Keynesians and they all use their Central Banks to do so. Because when it comes to spending, they are all in favour because it is the only sure way to retain their cushy jobs. The moral of this article, if any, is "beware of kind politicians carrying glittering balanced budgets". Always do a political pat-down looking for economic weapons of mass destruction in hidden pockets. You will be surprised… just not pleasantly…

And, as always, perhaps you believe that you are entitled to all those wonderful "social services" that you receive for "free" from your balanced-budget government because it is your "right" as "social equality" is the most ethical goal there is. OK. No problem. Your choice. Just one thing, the next credit crunch (and there is one just waiting around the corner), when you lose your job, your livelihood, your house and everything else in between, don't come crying to us. Remember. It was your choice to do nothing. Now bear the consequences like an adult and take you bitter medicine. And no tantrums!

Note: please see the Glossary if you are unfamiliar with certain words.

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