By Noe Chartier
June 27, 2025
Excerpt from article:
Stephen Johnston, private equity manager and director at Omnigence Asset Management, told The Epoch Times in an interview he doesn’t see how Canada and other NATO countries will be able to fund their defence commitments without causing economic harm.
“I just view these announcements as highly stagflationary because they can’t be funded,” he said. “And so how will they be funded? They'll be funded with expansionary monetary policy, and it’s an investment into what effectively is dead capital.”
‘Stagflation’ is the combination of inflation, slow economic growth, and high unemployment. Johnston’s reference to “dead capital” relates to the fact that what the defence industry produces has no downstream benefit and leads to the destruction of capital when it’s put to use.
Johnston said social programs will be very difficult to cut, especially given the aging demographics.
“So they either print the money or they raise taxes to a level that I don’t think are sustainable. It will have very, very negative impacts on their economies,” he said, referencing NATO countries.
As for funding new defence spending through the development of the critical minerals industry, as suggested by Carney, Johnston expressed doubts, saying it would need to generate $300 billion a year in before tax profits to generate $100 billion in additional federal tax revenues, an unrealistic amount 10 percent the size of Canada’s GDP.
Johnston said that the United States under the Trump administration is causing this refocus on defence and on rebuilding industrial capacity in allied countries, “because you can’t be a military power, unless you’re an economic power first.”
This requires investments in fixed capital and the “hard economy,” he said, such as mines, oil wells, and hydroelectric.
Johnston said the Liberals now seem to be embracing that idea.
Original article here