Another side of the debate is that the federal government doesn’t need to collect taxes or borrow from our savings to fund government expenditures (private savings are a result of government deficit spending); and the federal government doesn’t technically “borrow” money from the central bank or commercial banks because banks create money when they create loans.
But the interest payments are definitely part of the problem because every dollar is basically created and “loaned” into existence on the basis of interest-bearing debt, which creates an artificial scarcity of money and transfers wealth to those who simply create money. Perhaps the Bank of Canada should provide interest-free financing to the federal government for productive purposes (to build infrastructure or provide services).
I checked the latest Department of Finance budget update. Public debt charges are projected at 58.7 billion dollars for 2026-27. The Bank of Canada already buys new federal bonds at auction and creates the corresponding deposits for the government. For the portion it holds, most of the interest comes back as profits, but a large share of the debt is held by private investors and non-residents who keep theirs. Expanding direct low-cost financing from the Bank for infrastructure could trim that real cost.
Another side of the debate is that the federal government doesn’t need to collect taxes or borrow from our savings to fund government expenditures (private savings are a result of government deficit spending); and the federal government doesn’t technically “borrow” money from the central bank or commercial banks because banks create money when they create loans.
But the interest payments are definitely part of the problem because every dollar is basically created and “loaned” into existence on the basis of interest-bearing debt, which creates an artificial scarcity of money and transfers wealth to those who simply create money. Perhaps the Bank of Canada should provide interest-free financing to the federal government for productive purposes (to build infrastructure or provide services).
I checked the latest Department of Finance budget update. Public debt charges are projected at 58.7 billion dollars for 2026-27. The Bank of Canada already buys new federal bonds at auction and creates the corresponding deposits for the government. For the portion it holds, most of the interest comes back as profits, but a large share of the debt is held by private investors and non-residents who keep theirs. Expanding direct low-cost financing from the Bank for infrastructure could trim that real cost.