"Why was a much larger national debt shrugged off in 1945, while today's much smaller debt (as a percentage of GDP) is being used as an excuse to let the economy stagnate?"
"The answer can be found at the Bank of Canada. During the war, and for 30 years afterward, the government could borrow what it needed at low rates of interest, because the government's own bank produced up to half of all the new money. That forced the private banks to keep their interest rates low, too.
"Since the mid-1970s, however, the Bank of Canada, with government consent, has been creating less and less of the new money, while letting the private banks create more and more. Today «our» bank creates a mere 2% of each year's new money supply, while allowing the private banks to gouge the government and of course you and me, as well with outrageously high interest rates. And it is these extortionate interest charges that are the principal cause of the rapid escalation of the national debt. If the federal government were paying interest at the average levels that prevailed from the 1930s to the mid-1970s, it would now be running an operating surplus of about $13 billion!"
..... "Clearly the current problem of the Canadian government's deficit is not its absolute size, or its size relative to the GDP, but the insane way it is being financed. A return to the policies of the World War II era, when the Bank of Canada produced almost one-half of the new money at near-zero interest, would do wonders for the economy, while greatly shrinking the deficit... The first order of business for a post-Mulroney- era government must be to regain effective control of the Bank of Canada and make it the primary source of money creation.
"It is ludicrous for the government to put billions of dollars into circulation by borrowing from the private banks, when it can create the extra money it needs, virtually free. "(by Harold Chorney, John Hotson, and Mario Seccareccia)