no instead we have WEF puppets sucking the life out of Canadians, at your expense just as much as mine, but you’re too blind to see it. I feel sorry for you. What colour is your hair this week? Is it pink or is it blue?
2024 Canadian Political Thread
- Thread starter licks2nite
- Start date
- Status
You forgot to throw a Soros reference in there and something about Antifa/BLM.
If you're looking to blame someone, blame the Fed- their goto inflation buster is to tank the economy for the little guy. Bust consumer demand and they figure it will trickle up; cant let the plebes have too much buying power, gotta keep wage inflation down dontcha know.And when they sneeze Canada catches the cold.
"This is why debt is the best hedge against inflation".
Lol !!!!
Another graduate of the Karl Marx school of economics.
Sure... This right here is why I love capitalism. Myself and my clients get richer while you lot complain about rising cost of living and degrading quality of life. Most people have a very backwards and toxic relationship with debt.
Your figure of $16,899 (I assume) is what $20,000 2024 dollars would be worth in 2020 (using 2024 as a base year). What you are ignoring is that when you borrow $20,000 in 2020, you are buying some thing in 2020 that is worth $20,000.
Moreover, borrowers, all borrowers pay back the face value of debt (which you seem to understand). However, it is asinine to state debt is an inflation hedge for the borrower - because what exactly do you think interest on borrowed money reflects? Interest reflects all risk, and one part of that risk is the time value of money. Govt debt has (basically) zero default risk but it still pays interest, because that interest is compensation to the lender for term risk, i.e. the time value of money. If I buy $100,000 worth of govt of Canada bonds at initial issuance, I am lending the govt of Canada $100,000 and the bond is paying me interest, let's say the coupon yield is 4% and the bond matures in 10 years. That 4% interest is the govt compensating me for the term risk, i.e. in 10 years (due to inflation) $100,000 in 2034 is not the same thing as $100,000 in 2024. The lender is hedged for inflation because the interest earned/charged on debt is attempting to compensate me for the term risk. The borrower is not hedged for inflation, they are paying inflation by virtue of the term risk component of the interest. So yes, I guess debt can be a hedge against inflation, FOR THE LENDER NOT THE BORROWER - the borrower is paying for inflation via the interest charged on their borrowings! LOL
Last edited:
Glad to hear that you're doing well.
Inflation has many causes, market forces, supply and demand etc.
It's also caused by debt created by left leaning governments.
Borrowing effects the money supply by devaluing the money already in circulation.
Your money loses it's buying power.
I think you fall into that catagory of people that think that they're a lot smarter than they actually are.
I think that could be a problem for you.
Its also caused by right leaning governments giving sweatheart deals to their coporate buddies , allowing consolidation and reduced competition , and lavish gold toilets at embassies.
Precisely.
I am not ignoring this. It is simply not relevant. If I were to save up and buy it in 2024, it would cost me $23,670 in 2024 dollars. If I borrow to buy it in 2020, I am repaying the borrowed funds with dollars worth less than what I borrowed. The real value of the thing bought is the same in 2024, but the nominal value is increased, whereas the nominal value of the debt is the same, but the real value has decreased. To the debtor, whatever was bought with the principal is worth more than the cash flow used to repay interest, while the interest income is worth more than the principal to the lender. The flows into my next point to follow.
Not all borrowers repay principal. Both governments and sufficiently large corporations usually reissue their bond debt on maturity, allowing them to use time value of money to zero the real value of their debt (it's asymptotic, so it never actually reaches zero, but it eventually reaches a point where it's effectively indistinguishable from zero).
Did you never read Rich Dad, Poor Dad? I see that being shilled to you ilk all the time; a book that only lightly touches on a pair of very good ideas — developing passive income streams and adopting an understanding of debt that realizes that the best debtor is one that always pays interest but never repays principal — to sell real estate investment.
Why do you think it is that credit scores penalize low utilization and closing out accounts by repaying debts? If this seems counterintuitive, that's because you're looking at it wrong. Most assume they're a measure of how reliably you repay, but they're actually a measure of how reliable a source of interest revenue you are.
Bond debt is sold with a fixed coupon rate. If inflation exceeds the coupon rate, the borrower is the beneficiary of the economic profit that results. If the coupon rate exceeds inflation, the lender benefits. That, however, assumes repayment of principal. Infinite reissuance of principal means the debtor never realizes the cost of principal, and so the interest cost is their only realized cost of debt and they can use inflation to reduce the value of the debt. As long as the debtor reliably pays interest, this is not an issue, and the debtor realizes a benefit against inflation.
Some say if the liberals lose the upcoming by-election in Toronto riding of St Paul’s there will be a move by the party to get Trudeau to resign as leader.
LOL! It is relevant, because you are purposefully (or ignorantly) conflating price and value. Value is a concept, it's abstract (often) due to subjectivity. Whereas price, is what you pay. Simple example, I'm at the airport at 4:30 am for an early flight, there is a coffee shop, they sell me a latte for $9. The price is $9. The value of that latte to me is not simply $9, it's value may be "high" because it's 4:30 in the morning and I'm tired. Whereas, if it were 4:30 pm, that latte's value to me is "low" because it's not early in the morning and I'm not groggy as if it were 4:30 am vs pm. But the price is still $9.
Debt is paid with dollars, the interest and the principal. Debt is NOT paid with some abstract/subjective concept of value. It matters NOT what a dollar can buy you in 2020 vs 2024. That type of comparison is a good exercise to understand purchasing power and the effects of inflation. HOWEVER, it does NOT change what needs to be paid in 2020, 2021, whatever year. Because the price is what you pay and "value" is a subjective/abstract concept.
That you would conflate value and price is either a) ignorance, you truly don't know the difference between price and value and/or b) you are purposefully conflating the two in an attempt at PR. Just like debt to gdp ratio is merely presenting debt in a certain way as to undertake a PR exercise.
If a govt or corp merely pays coupon on their bonds (i.e. debt) that is basically paying interest only. Paying interest only means you will never pay down the debt (i.e. principal). You believe that are using "time value of money to zero the real value of their debt...". But again, the "value" of their debt (a subjective/abstract concept) DOES NOT CHANGE THE PRICE THEY ARE REQUIRED/OBLIGATED TO PAY. They are obligated to pay the periodic coupon and face value at maturity. That they roll the debt, simply means they are paying the Amex with their Visa.
No.
This is patently false. Too low of a utilization rate means the repayment history is unreliable. If I have a credit card with an $80k limit, have had said credit card for 12 years, never use it except to pre-authorize my monthly $17 Netflix subscription, that would be very low utilization. That would mean someone reviewing my credit worthiness via my credit report could not reasonably rely on my $17 per month payment on my $80k credit line to forecast if I could handle, let's say a $600 per month car loan. Using some reasonable level of utilization of your existing credit lines helps your credit score because it shows material payment history.
Nonsensical drivel. The coupon rate is fixed wrt the face value of the debt. The government PAYS whatever that is, regardless of what is happening with inflation. There is no "benefit" to the borrower if inflation is high. If the coupon on a govt of Canada bond is 10% of face value paid twice yearly and the face value is, let's say $1000. The govt pays $50 in interest semi-annually. It DOES NOT matter what inflation is later on. And the reason you can't/don't want to see that is that you are (again) conflating value and price. Value is a concept and the price is what you have to pay!
This is the closest I've ever seen someone on the right come to the reality. Usually I see the old "inflation is always caused by government printing money" line. You actually show an understanding that is more in line with the equation of exchange.
Need I remind you that since 1926, conservative governments have delivered deficits in roughly 90% of their passed budgets and Liberal governments have delivered deficits in only about 75% of passed budgets.
Only when the debt is issued by a bank. Bond debt sold on securities markets does not affect money supply, it simply moves money around.
I think it is you who falls into that category... If you're going to attack someone's intelligence, you should really not be making such simple mistakes as misspelling category and using "effects" where the contextually proper term is "affects".
Much of what I've shared here is a mix of content covered in lower year undergrad accounting courses and upper year undergrad economics courses. Having said that, it's mostly all above the level of an MBA.
EDIT: Corrected quote tags.
Last edited:
I think you have mixed up me and appleomac.
Nevertheless, I'm flattered by your attention ( this may be sarcasm)
In the spirit of a good discussion, do you think it's possible for a person to be over educated?
All transactions are trades in value. The seller sets the price at $9 because that is what the value is to them. You will only buy the coffee if you value it more than your $9. Price is a derivative of value. Therefore, price is irrelevant in the long-run.
If your income is $50k one year and $50k the next, you are getting poorer. I think you understand that. Yet you seem to have this conception that there is a disconnect between time value of money and price where no such disconnect exists.
Debt-to-GDP is the government equivalent of debt-to-income. All government taxation revenue is derived from economic output, which is what GDP measures, making GDP the most reliable indicator of government income.
If I borrow $100 and inflation averages 2% annually, after 30 years, inflation will have eroded that $100 to a real value of about $55. Yes, it's still $100, but $100 only buys what $55 bought when I took out the loan. How hard is that to understand? The bottom line is that the money you are required to repay becomes increasingly worthless the longer you hold off on repayment. Further, if they are issuing a new bond to pay the old, the buyer of the new bond is the one paying the cost of the debt, not the debtor, so the only way there is a new cost to the debtor is if there is an increase in coupon rate.
There is absolutely no difference between using the entire $80k limit of the card and having a "$17 Netflix subscription" on it if, in both cases, I'm repaying before the statement date — the statement utilization is in both cases $0. The typical advice is "always pay your balance in full". This is bad advice for building credit, since it's optimal for your credit score to be maintaining a roughly 30% utilization and be paying interest. In other words, as I initially stated, behaviours that result in your being a reliable source of interest revenue are favoured in credit scores over reliable repayment of principal balances.
I won't respond to the rest, since I've already covered it in other points in this reply.
Last edited:
No, my intent was to respond to you. There was an error with the copying and pasting of the quote tags. I'm responding from my phone, and I guess a quote tag that I had saved to my clipboard from a response to appleomac got pasted instead of the tag from your post, and I failed to notice it.
No, I do not think it is possible to be overeducated. That said, schooling and education are not the same thing. I would say that it is possible to spend too much time in school.
And transactions only occur if there is some alignment in value. If I value that latte at $6, no trade can occur because the buyer and seller have a disjointed perception of that latte's value. Ergo, the price is the price. In other words, exchange only occurs on agreement on PRICE.
Mate, I'm not the one with the disconnect. You are basically, basterdizing the notions of inflation/purchasing power parity/other corporate finance topics into the notion that inflation reduces debt. It does NOT. You are merely (probably due to ignorance) conflating many different topics into an erroneous "theory". As an example, the notion that corps roll debt is NOT because corp's believe inflation "takes care of debt." It's because the largest and most sophisticated corp's target an optimal capital structure (i.e. mixture of debt and equity) to have some optimal (i.e. lower their) cost of capital. That is a corporate finance concept that is NOT applicable to the government. Likewise, the continued erroneous claim that gov't debt is reduced by inflation. No it is NOT. The obligation remains. You are merely presenting the obligation in a way that "values" it differently. Again, price and value are NOT the same thing.
No it is not. The government's income is the revenue it brings in. GDP is the size of the economy, measured in a specific way. The govt DOES NOT get GDP as it's income. They get revenues as per their tax policies/rates.
Loss of purchasing is NOT hard to understand. Conflating that to mean the debt is "magically" reduced due to inflation is erroneous.
And FYI, borrowed funds that have been spent when received does NOT erode, because you no longer have the cash (i.e. the borrowed funds). That's generally the case for the govt. They borrow for, generally, current expenditures. They DO NOT borrow, take the proceeds and hold onto it. If they did that, yes, the dollars would erode in value due to inflation. But again, that is NOT generally what the govt does. That you can't see that/understand that is another example of you conflating things to make erroenous statements like "debt is hedge against inflation." No. An asset can be a hedge against inflation. An asset can be financed via debt. AND, to the extent that said purchased (via debt) asset appreciates sufficiently enough, it can possibly hedge inflation AND cover the cost of the debt. That's the case for leverage and trying to profit on spreads. BUT THAT IS NOT WHAT THE GOVERNMENT DOES. The govt merely borrows for current expenditures, they do NOT borrow to invest in assets to hedge inflation in an attempt to profit off rate differentials (i.e. spreads).
Moreover, if you understand what interest is, compensation for risk (which includes term risk), well, what is the normative situation when it comes to interest rate on debt in relation to inflation. Simple example, today, prime rate is 6.95% and the latest CPI numbers were what, 2.7 or 2.8% inflation - that's the normative situation i.e. interest rate on debt (generally) will be higher than inflation because the rate will need to compensate for all risk, including inflation and therefore, any interest rate on debt incorporates inflation expectations.
So, using your example, of $100 borrowed for 30 years (and apparently interest is only paid). Let's assume interest is 4%, payable once a year for simplicity. That's $4 in interest every year for 30 years. That's $120 of interest paid, plus the principal of $100. So, a total of $220 PAID. And $100, 30 years ago (in 1994) is worth today in 2024, using 1994 as a base year (according to the BoC inflation calculator) $188.06. So, as the borrower, assuming you paid off the debt in 30 years, you PAID $220 which more than covers the 30 years of inflation. Which highlights a point I made previously, the LENDER is hedged by the asset which is the loan. The borrower is NOT hedged, you in fact PAID inflation. And somehow, you believe the debt is lower because you want to conflate price and value! LOL
No. The (monetary) cost of the debt is the interest, which is paid by the bond issuer (in the case of federal govt bonds, the govt of Canada). And FYI, interest is always a monetary cost, regardless of if rates go up, down or stay the same.
Utilization rate/ratio is NOT about holding a balance (i.e. not paying by the due date). Utilization is simply balance divided by limit. By balance, it means current balance. In other words, one does not have to carry a balance past the due date to have a utilization rate. Wow! What a foolish notion - carry a balance past the due date on your credit, pay whatever credit card interest rate is (19%, 21% whatever) because you erroneously believe utilization rate is about holding a balance past it's due date! LOL
So you repeat what I stated, then restate your point that price and value are not the same while ignoring my point that price is merely a derivative of value, and you call that an argument? No, an argument would be refuting the point that price is derived from value. You have not only failed to refute the point, you have very obviously failed to understand it.
First off, purchasing power parity has never been part of this discussion, as a second economy has never been part of the picture. Second, you have repeatedly stated that government debt is not reduced by inflation, yet have provided no refutation of my point that if the dollar I borrowed had more buying power than the dollar I repaid it with, I have derived a benefit. You are simply countering with, "No, that's not true!" which is not an argument.
Are you fucking stupid? I never said GDP is government income, I said it is an indicator of income and that taxation revenue derives from it. Because GDP is the measure of the economy's output of goods and services, all taxation revenue comes out of GDP in some form or another. Income tax comes out of incomes generated by productive output. Sales and excise taxes comes out of transactions of the goods and services that constitute output. Therefore, GDP is the most accurate reflection of a government's income capacity.
I'm just going to ignore most of the rest, since a lot of it is just parroting of business school tropes with minimal actual insight into what any of it actually means. My bet is you probably have an MBA. I've stopped hiring MBA's because I've found people with BBA's and BA's in economics have better business sense these days.
Statement date and due date are not the same thing... I never said carry a balance past the due date, I said you need to be carrying a balance at the statement date. You are mischaracterizing my point, which is dishonest argumentation. Frankly, I'm not interested in carrying on a discussion of you're going to be pulling that kind of nonsense.
No, I'm not repeating what you are saying. The price is not derived from value in the case of the latte. I would imagine the price is derived from their costs (which have a price) and some rational return they require (which also is a price). That a transaction occurs means that the I have some sort of intrinsic value for that latte that makes me willing to pay the price. Using the 4:30 am example, I'm bloody tired, need a shot of caffeine, ergo I might intrinsically value it at $20, meaning a transaction can occur because my intrinsic value comports in a specific way with that price of $9.
I demonstrated that you received no benefit, ie. the $100 borrowed for 30 years. You paid $220 to borrow/use $100, that $100 in real dollar terms being 188.06 in 2024.
No. The indicator of govt revenues is the money coming in, as various tax dollars come in regularly (i.e. payroll withholdings being remitted, GST being remitted periodically, etc) and that can easily be extrapolated and estimated. It's much easier to estimate government revenues based on actual money coming in rather than trying to estimate the economy writ large (i.e. GDP).
I'm sure you love BBA's that read the Rich Dad, Poor Dad or whatever book you think is relevant! LOL
Yes you did...
You only pay interest on a card if you don't pay the balance in full on the due date. So, when you say that it is "bad advice" to always pay your balance in full and optimally one should "be paying interest", that can only mean not paying balances fully before the due date. Because again, paying interest on a credit card only occurs if you don't pay the full balance by the due date.
- Status
