Once again we can see private sector and some public sector economists over estimating or historically exaggerating the risk factor in the large debts growing out of the covid-19 crisis. The Government very wisely and the Bank of Canada with their use of quantitative easing have together managed the crisis very prudently.
Contrary to the conventional wisdom derived from a bygone era the debt to GDP ratio is nowhere near historical maximums. For example the current net debt to GDP ratio is about 40 % . During the second world war the ratio rose to over 100% .During the Great Depression of the 1930s it peaked at close to 70 %. Canada and its currency survived and the country‘s economy thrived after the war under a post war Keynesian policy. It will again so long as we don’t foolishly implement austerity or budget balancing reductions. Also remember that in calculating net debt the Government typically under-estimates the value of public sector assets.
There is no sign of inflation as oil prices have slumped and there are still disinflationary tendencies. Hence the government‘s fiscal policy and the Bank of Canada‘s monetary policy are appropriate.
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About haroldchorneyeconomist
I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
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