Episode Summary Monetary policy is set by a small committee meeting eight times a year, while fiscal policy is a budget debated in Parliament by hundreds of elected representatives. Yet bond markets care deeply about the budget because the Bank of Canada borrows nothing, whereas the federal government borrows constantly—making the bond market its active counterparty. Every deficit is a bond issue that must find a buyer at a price. In this episode, John and Jane clear up the confusion between deficits and debt, explain how a growing economy can shrink its debt burden without paying back a single dollar, and look at why any serious analysis of Canadian public finance must look past the federal ledger to include the provinces.

Key Concepts

• Deficit vs. Debt: A deficit is a flow measu ...