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The above chart illustrates the history of Canada’s federal debt (not including provincial and municipal debts: debtclock.ca). Obviously something went terribly wrong after 1974. Over a 108 year period (1867-1974) the accumulated debt shows as nearly a flat line growing to only $21.6 billion. But around 1974, the debt began to grow exponentially and, over a mere 39 years, it reached over $600 billion in 2013.
What happened in Canada in 1974? See: chriswick.ca/who-changed-the-bank-of-canadas-policies-in-1974-and-why. Also, in 1974 the Basel Committee was established by the central bank Governors of the group of ten countries of the member central banks of the Bank for International Settlements (BIS) ccc4mr.wordpress.com/bis/ which included Canada. A key objective of the Committee was and is to maintain “monetary and financial stability.” To achieve that goal, the Committee discouraged borrowing from a nation’s own central bank interest-free and encouraged borrowing from private creditors, all in the name of “maintaining the stability of the currency.”
The presumption was that borrowing from a central bank with the power to create money on its books would inflate the money supply and prices. Borrowing from private creditors, on the other hand, was considered not to be inflationary, since it involved the recycling of pre-existing money. What the bankers did not reveal, although they had long known it themselves, was that private banks create the money they lend just as public banks do — out of thin air. The difference is simply that a publicly-owned national central bank (Bank of Canada) returns the interest to the government and the People of the country, while a privately-owned bank siphons the principal plus interest into its capital account, to be re-loaned at further interest, progressively drawing money out of the productive economy.1
Paul Hellyer,2 also notes that lobbying by the banks and adoption of monetarism — the idea that “markets know best” and should be “without regulation,” and that public services should be privatized — took hold.
In 1974, the Government of Canada began to borrow all of the monies to cover its shortfalls from the private sector: chriswick.ca/who-changed-the-bank-of-canadas-policies-in-1974-and-why/ at interest rather than creating money through the Bank of Canada interest-free: prudentpress.com/finance/history-bank-of-canada/
Since 1974, the Bank of Canada has not been acting in the best interest of its shareholders: the People of Canada.
To understand how ridiculous the present situation is, consider the 1993 Auditor General of Canada report (Section 5.41)3 which states:
The cost of borrowing is the third area that affects the annual deficit. In 1991-92, the interest on the debt was $41 billion. This cost of borrowing and its compounding effect have a significant impact on Canada’s annual deficits. From Confederation up to 1991-92, the federal government accumulated a net debt of $423 billion. Of this, $37 billion represents the accumulated shortfall in meeting the cost of government programs since Confederation. The remainder, $386 billion, represents the amount the government has borrowed to service the debt created by previous annual shortfalls.
Of the accumulated debt of $423 billion, the government really needed to borrow only $37 billion—accumulated over 127 years—to cover its shortfalls on real spending for goods and services. The rest of that accumulated debt was monies borrowed to service the debt, essentially a payment of interest on interest to the private sector when the government could have created the money to cover the shortfall at what amounts to be no interest.
According to Paul Hellyer, from 1974–1975 to 2010, Canadian taxpayers have paid over one Trillion, 100 billion dollars ($1,100,000,000,000) in interest alone on the federal debt to private lenders.4 In 2011, alone, Canadian taxpayers paid the private banks an estimated $37.7 billion to service the federal debt—over $103 million each and every day of the year! 5 These are tax dollars that, ceteris paribus, could have gone towards infrastructure, health care, education, and other social needs, if the Government of Canada used it’s own national, public Bank of Canada to create the money to cover its shortfall. Ultimately, the government could pay off the federal debt through the same means.
And consider this: from the time of confederation until 1974, Canada fought two world wars, went through a major depression, constructed major infrastructures such as the St. Lawrence Seaway, Trans-Canada Highway, International airports, Canadian National Railway, and brought in social welfare programs such as Family Allowance, Old Age Security pensions, Canada Pension Plan, Universal Health Care and wound up with a total accumulated debt of only $21.6 billion. Today (as of 2015) Canada’s total debt (federal, provincial and municipal) is already over one TRILLION dollars (and growing); total compounded interest on the debt paid to private banks since 1974 was also already over one TRILLION dollars, and the government is continually cutting services in order to be able to keep paying off the rapidly growing debt and the compounded interest on it, while our infrastructure is not being maintained. Meanwhile, the private banks keep increasing their already obscene profits. This unconstitutional “subsidy” to the private banks must end.
The solution to this problem is simply for the government to stop borrowing money from the private banks at interest and borrow from the Bank of Canada at no interest. The private banks should also be prevented from creating money. That right should be returned to the People of Canada through the Bank of Canada.
1 Brown, E. 2012. “Oh Canada! Imposing Austerity on the World’s Most Resource-rich Country” http://www.commondreams.org/view/2012/04/01-4
2 Hellyer, P. 1999. “Stop: Think.”, Chimo Media Ltd, Toronto. pp. 15,19, 20, 80 (Chapters 2 and 6)
4 Hon. Paul Hellyer — “The Bank of Canada: The people’s bank?” http://www.youtube.com/watch?feature=player_embedded&v=p8mlwxBpaTU
The Bank of Canada should be a lender
By André Marentette
“There must be a discussion, to show how experience is to be interpreted. Wrong opinions and practices gradually yield to fact and argument: but facts and arguments, to produce any effect on the mind, must be brought before it.”
– John Stuart Mill, 1806-1873
With the onset of the federal election, the following information should be known by all candidates and taxpayers alike.
In 2009, Canadians paid $160 million per day, $58,7 billion for the year, in interest on federal, provincial and municipal debt. These costs lead to higher taxes and fees, cutbacks in public services and deterioration of public infrastructure. Much of this debt-service cost could be eliminated by greater use of the Bank of Canada to finance government investments.
Because the bank is wholly owned by Canada, all profits on its lending activity go to the government. This means that borrowing from the bank by the government is almost costless.
For years, the government borrowed from the Bank of Canada and, during that time, contrary to t he fears raised by opponents of the idea, run-away inflation never occurred.
By 1975, federal net debt amounted to $19 billion. Then, the government began to shift more of its borrowing from the Bank of Canada to the private sector – especially chartered banks, insurance companies and other large corporations.
By March 31, 2010, the net debt had ballooned to $583 billion and interestbearing debt had reached $763 billion.
The interest cost to taxpayers for the federal government’s debt is currently a $29 billion drain on federal revenues.
In addition, the use of the Bank of Canada to finance public debt would reduce the influence of large corporations on government policy decisions.
We should only vote for candidates who support the use of the Bank of Canada for the purposes described above.