Reality and the Bank of Canada
During this first year of the Covid pandemic the Prime Minister made sound decisions to support much of the workforce by distributing money (credits actually) in order to alleviate some of the problems that loss of income and employment had caused. ..Really, the government simply had to act: and it did, and on the whole did so pretty well. This was unusual for Justin T, who often exhibits remarkably poor judgement.
Creating this money to meet this exceptional situation was the right thing to do. The same was done in most other countries. …Unfortunately, though in keeping with usual practice, the created credits (or ‘money’ most would say) was matched with creation of debt in the form of Government of Canada bonds. Which, for this highly unusual situation, was really the wrong thing to do.
The credits created are not debt creation, but emergency income replacement. That is not debt, and it should not be treated as if it was. ..It is pretend debt, much of it held by the Bank of Canada. There is no need for it to exist and it should not exist. It is not normal government expenditure, but emergency credits creation to meet a highly unusual and exceptional situation. Pretending it is debt is a major error.
In order to correct this anomaly, the Bank of Canada should gift at least 300 billion$ of this pretend debt to the Government of Canada, thereby removing that much from the books of them both.
No consequences of any significance will come of such an action. Of course, such gifting is unprecedented in this country, but so was the need to create the credits involved. Time to correct the error of viewing this as debt.