Fiscal Sustainability

Fiscal Sustainability
Posted on April 6, 2016 | Larry Kazdan | Written on April 6, 2016
Letter type:



Re:  Investors, rating agencies see Liberal deficit plan as manageable, BILL CURRY,  Mar. 30, 2016

The Canadian federal debt is fiscally sustainable because our government owns a central bank which allows any size debt denominated in Canadian dollars to be paid. The federal government is the issuer of Canadian currency; the important question is really what those issued dollars will buy. Canadian money will keep or increase its value as long as the resources of the country are neither overused causing high inflation nor underused allowing significant lost production.

Forget about interest rates, credit ratings, the fiscal balance and the debt-to-GDP ratio. The Canadian government is a monetary sovereign and the risk of default on federal government bonds is zero. Federal spending should be increased as long as there are unused resources, including the talents of 1.4 million unemployed, that could be mobilized to create a more vibrant and prosperous economy.


1. William Mitchell is Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), University of Newcastle, NSW, Australia

"In a fiat monetary system where the national government issues its own currency and floats it on international markets:

A sovereign government is not revenue-constrained which means that fiscal space cannot be defined in financial terms.

The capacity of the sovereign government to mobilise resources depends only on the real resources available to the nation.

A currency-issuing government can always meet the liabilities it issues in its own currency.

Nations that have ceded their sovereignty by entering currency zones (such as the Eurozone); by dollarising their currencies; by running currency boards; and similar arrangements clearly are not sovereign and face the same constraints that a country suffered during the gold standard era.

2. Alan Greenspan, "We can always print money..."

"The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default."


Larry Kazdan CPA, CGA,



Modern Monetary Theory in Canada

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Larry Kazdan has undergraduate degrees in history and sociology, is a retired Chartered Professional Accountant and runs the website
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