Mr. Speaker, recently I received numerous suggestions for getting Canadians to buy government debt now held by foreigners. While tax concessions or special interest rates can bring home the bonds, Canada's vulnerability to falling and fluctuating exchange and interest rates will not be eliminated.
First of all, the purchase of these government bonds from foreigners will crowd out other domestic securities. Therefore, net foreign indebtedness will not change.
Second, the existing vulnerability would exist even if foreigners held no Canadian obligations at all. Both foreigners and Canadians could still speculate in spot and futures markets.
The simple fact is that Canada's exchange and interest rates respond to news about the government's ability to service the debt. The downward trend in exchange rates will end, interest rates will stop rising and fluctuations will become less severe only when government deficits are eliminated.
As much as we all wished it were true, financial gimmicks cannot alter this basic truth.