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In this emergency pandemic, the federal government says it will spend about $82 billion over and above its 2020-21 $180 billion budget.

In Alberta, the province pegs the direct cost of fighting the pandemic at $500 million, above and beyond its $56 billion 2020-21 budget.

On top of that $500 million,  Alberta Premier Jason Kenney has announced a provincial government  “investment” (i.e. repayable if all goes well) of $1.5 billion to get TC Energy’s Keystone XL pipeline built, plus $6 billion in loan guarantees, i.e. if TC Energy goes bankrupt, the government of Alberta is on the hook to pay its outstanding bills.

Where does all this money come from?

It’s borrowed! For years and years, both governments have been spending more than what’s coming in from taxes. Before the pandemic, Ottawa had accumulated $713 billion in debt, Alberta about $85 billion.


Both governments cover their annual shortfalls by “selling” that debt, through promissory notes called bonds and treasury bills.

Both the governments of Canada and Alberta can keep raising more money until the cows come home … or until the international lenders get worried about the governments’ ability to make annual payments, i.e. to service the debt.

But why worry?  “The Government of Canada continues to receive triple-A (the very best) credit ratings, with a stable outlook, from major rating agencies,” says the Government of Canada’s Budget 2019 website. “Strong political institutions, economic resilience and diversity, well-regulated financial markets, and monetary and fiscal flexibility …  contribute to stable financing demand from long-term investors.”

In other words, borrow away!

For Justin Trudeau’s Liberal government, borrowing money is no big deal. His financial advisors have thrown conventional economic wisdom out the window, i.e. the old-fashioned notion that the government should save money in good times, to be spent in bad times.

His government believes Canada can continue to borrow lots more money for social programs; that it’s easy enough, out of a $180 billion budget, to earmark $30 billion to pay the interest on the ever-mounting debt.

There’s another wrinkle in all this. The Bank of Canada is a crown corporation (i.e. government-owned),  entrusted with managing Canada’s money supply. On behalf of the Government of Canada, it sells those promissory notes – i.e. the government’s bonds and treasury bills – on international financial markets.

Here’s the biggest wrinkle of all: The Bank of Canada is also expected to buy a minimum of one-fifth of those bonds or T-bills issued by the government of Canada.

And where does the Bank of Canada get the money to buy one-fifth of the Government of Canada’s bonds and T-bills?

It makes it!

Literally – The Bank of Canada prints enough Canadian dollar bills to buy one-fifth of the government’s bonds or treasury-bills up for sale that day.

In effect, the Canadian government, through the Bank of Canada, is borrowing vast sums of money from itself.

As long as global lenders have confidence in Canada/Alberta’s ability to keep up its loan payments, our governments can/will keep borrowing until the cows come home – unless our manufacturing, services, high-tech, tourism, energy, mining and lumber industries all collapse at the same time as a pandemic shows up.

As is happening in Alberta.

Alberta Premier Kenney and his United Conservative Party, by philosophy and ideology, are far more fiscally conservative than their federal counterparts or their  New Democrat opposition. It must aggravate Kenney no end, that out of a $56 billion budget, $2.5 billion is being spent on debt servicing.

But such beliefs go out the window in emergencies – this pandemic, coupled with the lowest of low oil prices and the inability to get pipelines built – constitutes an emergency second only to a declaration of war.

That Kenney would go against his free-market principles to plow a billion bucks of (borrowed) provincial money into a pipeline, plus $6 billion in loan guarantees, tells me these are truly desperate times in Alberta.