For those of us in Toronto, maybe go to the event. For the rest of us, we can talk about it here!

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Video: Negative Effects of a Privatized Money Supply

Tuesday, February 20, 2007, 7:30
30 Gloucester St

Canadians are in debt. The City is in debt. The Province is in debt. The Federal Government is in debt. If we're all in debt, who's got the money? Come and find out.

Location: The recreation building accessed through 30 Gloucester St - 2 blocks north of the Wellesley subway station. The buzzer code is 333. This month's video is from Sydney White's lectures at the University of Toronto's Free University, The Negative Effects of a Privatized Money Supply.

Bring a food bank donation.

For info call Anne or Paul 416-536-9789

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An interesting Bank of Canada tutorial

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The Use of The Bank of Canada, 1938 - 1974

The 'nationalization' of 1938 perfected the mechanism that allows the central bank to create money to finance federal projects on a near interest-free basis. It may make loans to the Govt. of Canada or any province (BoC Act Article 18 (c), (i) (j) or guaranteed by Canada or any province (c). This is explained fully in our "Article 18" link here.

Initially, the bank fullfilled its mandate. It was of great assistance in getting Canada out of the Great Depression, financing the war, and building infrastructure and social systems in Canada into the 1970s. But then things began to change.

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[ 15 February 2007: Message edited by: Fidel ]

That's interesting timing, Mr. Gordon. I'm just reading Polanyi's take on the necessary interuption of the self-regulating market by means of central banking.

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Originally posted by Stephen Gordon:
Oh dear lord. Social Credit rides again...

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The usual response from the government is that borrowing from the Bank of Canada would cause inflation, even though it did not for 35 years. The government controlled inflation through the use of statutory reserves. (These were removed by Brian Mulroney’s Conservative government in 1991 and would have to be reinstated.)

In 1974, the accumulated federal debt since confederation had reached $18 billion. By 1997, after the government reduced its use of the Bank of Canada to carry public debt, it had jumped over 3,000 percent to $588 billion. This led to the downloading which has left municipalities with heavy responsibilities and high taxes to pay for them. Municipal councillors should demand that the Association of Municipalities of Ontario and the Federation of Canadian Municipalities lobby the governments of Ontario and Canada to borrow from the Bank of Canada and to pass the savings to municipalities.

When will our elected officials learn about our most valuable asset, the Bank of Canada, and use this knowledge in the public interest?

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If we remember correctly, the two old line parties came to believe that lavish social spending was the root cause of inflation in the 1970's. After an expensive war in Vietnam, oil shocks of the 70's, and a resultant economic recession spanning two decades in North America and resulting in skyrocketing unemployment and debt growth in Canada and Reagan's economy, we know now that they were wrong.

[ 15 February 2007: Message edited by: Fidel ]

It's never a surprise to see the same diversionary attacks (like saying it's a So Cred idea) whenever this issue is raised instead of dealing with the issue. How much are we getting gouged by voluntarily giving up our right to control our nation's money supply? How much have the private banks made through this giveaway?

I've never been able to confirm it but have always been under the impression the bulk of our public debt is owned by the Canadian banking system anyways. The damage being done, I really don't care WHICH fortunate son owns me.

As long as SOMEBODY in Ottawa still has the God-given right to slap David Dodge upside the head for taking his cues from Wall Street when the greenback finally stops defying gravity everything else is pure detail.

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Originally posted by BitWhys:
Considering doing so would isolate us internationally in the eyes of the trend-setters (half the money equation - being fiat doesn't help, either) as well as bureaucracy's propensity to play dead for vultures, I'm not at all convinced the other 70% of profits realized by nationalizing the banking system would be worth the discontent.

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As far as I can tell, the Bank of Canada is not a private bank, it still belongs to the people of Canada. The Chief banker is appointed by any of our two old line parties, who are themselves elected usually with a minority of the eligible vote in Canada. The Chief of our Central Bank is a patronage appointment, like past leaders of Hong Kong were non-elected, white, and often times born in Britain right up to the handoff to China.

I don't think these crazy people are talking about printing more fiat money with wreckless abandon, just allowing the Central Bank to issue a little more of the total money supply instead of chartered banks creating it as credit with interest owing right off the bat. Chartered banks are said to be creating 95 percent of our money supply as credite and interest-owing loans. Big banks are wanting to merge and eliminate competition. Some 800 bank branches have closed in Canada since 2001, and poor neighborhoods are typically thrown to the wolves that are no-name ATM's and payday loan sharks. Credit card interest rates are very much higher than The Bank's prime rate.

To say that we must allow ourselves to be bullied by international money markets is capitulation. People and their lives aren't reducable to money transactions. We are more than just self-interested prisoners of our own greed. The economy should serve people not an international cabal of banking elite. Like sheep which eventually come to depend on their masters in white aprons hanging them on high hooks in the valley of steel, we should realize there are other ways. We should want to break free.

Viva la revolucion!

[ 16 February 2007: Message edited by: Fidel ]

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Originally posted by BitWhys:
capitulation my ass. (triple) bottom line there's nothing I've seen convinces me the costs of nationalizing are outweighted by the benifits.

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I agree. (sextuple) I think we should not nationalise what already belongs to the government and people of Canada. It's an outrageous idea and totally unnecessary.

[ 17 February 2007: Message edited by: Fidel ]

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I agree. (sextuple) I think we should not nationalise what already belongs to the government and people of Canada. It's an outrageous idea and totally unnecessary.

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What a refreshing surprise to see Fidel taking this position.

The vast majority of the assets of Canadian chartered banks do not belong to the banks themselves, but rather to the tens of millions of Canadians who deposit their money there, or are the banks' shareholders.

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One can be very critical of some of the practices of both the chartered banks and the Bank of Canada, without getting side-tracked into the fanciful notions of the funny money theorists.

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The core argument of the funny money theorists is that the Bank of Canada should expand the money supply to pay off the remaining national debt, finance its own operations, and/or lend money to the provinces and municipalities on an interest-free or near interest-free basis.
http://comer.org/boc.htm

The core problem with expanding the money supply for these purposes is that it reduces the value of the rest of the money already in circulation, including the money in your and my bank account.

To protect the value of the remaining currency, the Bank of Canada would need raise interest rates resulting in higher borrowing costs thereby slowing down economic activity, negatively impacting employment. A worst case scenario would be the type of hyperinflation that occurred in Weimar Germany because devalued dollars are chasing a fixed amount of goods and services.

It's not surprising that funny money theories had "currency" a decade ago when Canada's federal public debt reached record levels. I'm surprised they would have any "currency" today when the federal debt is manageable and declining due to a decade of surplus budgets.

Restricting the amount of money banks can lend so the BoC can create money instead would be foolish. It would increase the interest charged on mortgages and other forms of credit that Canadian families and businesses rely on.

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Originally posted by John K:
And why should Canadian governments not be required to borrow money on commercial terms like anyone else, especially when most of the money they borrow is owed to fellow Canadians?

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Why should we have to pay for the corporate profit margin when funding hospitals, schools, emergency and social services. the list of necessary public services goes on and on, and i don't think any private/for profit entity should be making money off them that doesn't then return to the public fold, as would the money from the BoC.

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Thankfully, these days the federal government is using tax revenues to fund these vital services, and no longer relying on deficit financing to do so.

While the overall level of external government debt is in decline due to a decade long string of surplus budgets, the government does have to issue new debt securities to replace some of those that are maturing.

The federal government doesn't borrow money from the bank in the way you and I are used to thinking of it. But it does use banks and other financial institutions as distributors of Government of Canada debt securities.

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So why would the amount of new currency being generated from the public BoC necessarily be any greater than that being currently generated in loans by the private banks?

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Originally posted by John K:

Thankfully, these days the federal government is using tax revenues to fund these vital services, and no longer relying on deficit financing to do so.

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Originally posted by John K:
LTJ, I tried to answer your question several posts above.

Perhaps I'm not understanding what you're trying to get at with this question.

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Originally posted by John K:
In reply to LTJ.

The core problem with expanding the money supply for these purposes is that it reduces the value of the rest of the money already in circulation, including the money in your and my bank account.

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Comer isn't talking about expanding the money supply. They're talking about allowing the BoC to create a little more of the money supply as interest-free money specifically for program spending. And they aren't talking about printing money with reckless abandon.

[ 27 February 2007: Message edited by: Fidel ]

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They're talking about allowing the BoC to create a little more of the money supply as interest-free money specifically for program spending.

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Unless someone can tell me why it's not a good idea, I'd rather see the funds go to those in need than go to corporate welfare payments to the international banking system.

[ 28 February 2007: Message edited by: Lard Tunderin' Jeezus ]

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So far as I can tell, they aren't talking about creating additional money, only about creating the current amount themselves rather than borrowing it from private creators of capital

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but around the world economists have judged the Friedmanite experiments in monetarism a failure.
So why would a money supply controlled directly by the BoC (as opposed to indirectly via interest rates) be a problem?

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Originally posted by John K:

Except that it was Milton Friedman who advocated that central banks regulate economic activity by directly controlling the money supply. Friedman's theory has been discredited, and that's why central banks today (including the Bank of Canada) rely on inflation rate targets instead.
Bank of Canada Monetary Policy

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But the BoC didn't abandon Friedman's ideas entirely. From 1939 to 1974, the BoC financed infrastructure projects in Canada on behalf of the federal government and people of Canada. But with more private bank created money in circulation, Canada's national debts and total debts have soared into the hundreds of billions of dollars. The Friedmanite policies abandoned by the BoC was the practice of raising lending rates as a sole means of controlling inflation. That resulted in a policy-induced recession in the 1980's, the likes of which we hadn't endured since the deep economic depressions leading up to the collapse of laissez-faire in the 1930's.

The BoC is still targeting inflation through interest rates, just not Friedman's unrealistic zero inflation targets which result in strangling the economy and driving up national debts. They only abadoned half of his failed right-wing ideology.

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Originally posted by Lard Tunderin' Jeezus:
So far as I can tell, they aren't talking about creating additional money,...

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And I don't even think they are talking about taking over money creation from private banks altogther, just a certain amount. Although we would all love to see mafia-style usury eliminated altogether, for sure.

Like Mackenzie King said: at some point it doesn't matter who makes the laws when a country loses control of its money supply to private banking interests.

mafia + usury = "free market economy"

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Originally posted by Lard Tunderin' Jeezus:
If they finance the majority of their debt through financial instruments (bonds), then they have abandoned their own printing press in favour of the commercial markets.....

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Yes, the whole point is, they are not financing infrastructure and program spending like they should be doing. We've got shortages of everything from new hospitals and doctors to public transit, "EI surpluses", skyrocketing post-secondary costs, and crisis shortages of affordable housing and daycare. And P3's became AFP's at the provincial level. The feds can borrow money more cheaply than flybynight private enterprise outfits wanting to profiteer from the common good. It's the ideology.

One of the problems with debt-based BCM in many opinions is that that the only way for a country to get out of debt is to produce and export more than they buy from other countries. Produce more, and use up finite resources and pollute more. The Liberals may have put a small dent in Mulroney's national debt ball and chain, but the overall debt in Ottawa, provinces and personal debt is enormous. The banks and their shareholders will live off a nation's sweat, blood and tears forever with this scenario.

[ 28 February 2007: Message edited by: Fidel ]

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One of the problems with debt-based BCM in many opinions is that that the only way for a country to get out of debt is to produce and export more than they buy from other countries.

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Notwithstanding the "many opinions," there is NO debt-based Bank of Canada monetary policy. Figuring out why the federal government (and some provinces), still have substantial debt is NOT rocket science.

For several decades until the mid-1990s, the federal government spent substantially more than it took in through taxes and other revenues. It made up the shortfall by borrowing (mainly from Canadians but also from foreigners).

For the past ten years, the federal government has been taking in more revenues than it has been spending allowing it to pay off a significant portion of this debt. As revenues increase due to a growing economy the remaining debt becomes more and more manageable. Money is saved on debt servicing that can be then used for other priorities.

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The Liberals may have put a small dent in Mulroney's national debt ball and chain, but the overall debt in Ottawa, provinces and personal debt is enormous. The banks and their shareholders will live off a nation's sweat, blood and tears forever with this scenario.

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There is NO conspiracy afoot - by the banks or anyone else - to keep Canadians perpetually in debt. For everyone who owes a debt, there is someone else to whom that debt is owed.

Anyone who owns a mutual fund, or participates in a pension plan, likely owns a piece of the remaining federal government debt. Those who own Canada Savings Bonds, treasury bills or federal bonds directly hold a piece.

Canadians have a lot of personal debt, no question. BUT they own way more assets (equity in homes and business, shares, bonds, GICs, savings, etc.) than they owe in personal debt.

In 2005, Statistics Canada found that family units had $5.62 trillion in assets and $760 billion in debts for a positive net worth of $4.86 trillion.
Net Worth of Canadian Families

The problem I have with the funny money theorists is the same problem I have with 9/11 conspiracy theorists. They obscure the real issues.

The real issue for federal budgets is the relative priorities to give to debt paydown, tax cuts and investing in important programs (as well as priorities within each of these areas).

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Originally posted by John K:
For several decades until the mid-1990s, the federal government spent substantially more than it took in through taxes and other revenues. It made up the shortfall by borrowing (mainly from Canadians but also from foreigners).

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Yes, and of the $608 billion dollar debt, they paid down $53.2 billion. (table #9). And some $30 billion of that was stolen from public service pension funds The money still needs to be paid out.

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For the past ten years, the federal government has been taking in more revenues than it has been spending allowing it to pay off a significant portion of this debt.

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The truth is, Canada is under-spending on social programs compared with OECD averages. If Ottawa was to spend just the OECD average on social programs as a percentage of GDP, they'd be forking out another $47 billion. And if they collected the average OECD tax revenues, again as a percentage of GDP, the feds would have another $29 billion to fritter away on the same advertisement companies patronized by both old line parties in recent years.

The Liberals slashed thousands of public service jobs, cut social spending to the bone, and downloaded responsibilities to provinces-municipalities, and all the while cutting transfer payments. The Liberals set unnecessary goals to reduce "debt to GDP ratios" at the expense of poor and unemployed Canadians.

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There is NO conspiracy afoot - by the banks or anyone else - to keep Canadians perpetually in debt. For everyone who owes a debt, there is someone else to whom that debt is owed.

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Sure there was. It happened in the 1970's when political conservatives in North America blamed social program spending for rising inflation. Our Liberals freaked out and started slashing and burning without realizing that social spending had very little to do with stagflation of the 70's. From Confederation to Trudeau's time in the sun, national debt in the early 70's was below $90 billion. By the time the Liberals and Conservatives were through 20 some years later, it was over $600 billion!

Joseph Stiglitz said that the WTO and World Bank really have conspired to enslave the third world in a debt trap. Stiglitz says the formula for conspiring to destroy third world economies is a four-step program:

• privatize(briberize)
• capital market liberalization( deregulation)
• market led policies (raising prices)
• and "poverty reduction strategy" (Free Trade rules by WTO and World Bank that favour MNC rights over the many, colonialism)

Stiglitz said in an interview, "Every time their free market solutions failed in developing countries, the IMF simply demanded more free market policies."

Our own governments agreed to WTO and big bank's agenda for relinquishing our ability to issue publicly-created money for vital program spending and infrastructure. Selling off crown corporations and Canadian assets for less than market value means someone is receiving a kick-back. It happened in Russia, Africa, Latin America. What makes anyone think our Libranos or old Irish Eyes weren't on the take ?. Our Liberals are proven crooks and liars, and Brian Mulroney's crooked dealings sank the conservative party's re-election hopes for the next 13 years. The ReformaTories still only managed to cop less than 24 percent of the eligible vote in 2006.

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Canadians have a lot of personal debt, no question. BUT they own way more assets (equity in homes and business, shares, bonds, GICs, savings, etc.) than they owe in personal debt.

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Total Canadian debt is over a trillion dollars in spite of the Liberals paying down a few billion on the backs of poor and unemployed Canadians. To toss in assets of Canada's highest net worth billionaires distorts the overall picture, just like soaring GDP's have everything to do with a single sector of the economy doing well: oil and gas/energy exports on the cheap to corporate America.

Personal savings rates are nil next to nothing in Canada and the U.S. And child poverty rates in Canada are among the worst in the developed world. Other rich countries which do not have the same unparalleled natural wealth that Canada enjoys have shown that child poverty can be solved easily.

In 1999, Lorne Nystrom compiled a book of essays by several authors called “Just Making Change”. In the book it is stated, “We simply must have access to government created zero-cost money. There is no other way to find the resources necessary for health care, education, environmental protection and housing.”

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"Anyone who understands that banks create the money they lend can see that it makes no sense for a sovereign government, which can create money at near zero cost, to borrow money at high cost from a private bank. The fact that most governments do borrow from private banks is one of the greatest errors of our times." -- John H. Hotson was professor emeritus of economics University of Waterloo and executive director of the Committee on Monetary and Economic Reform (COMER), a Canadian based network of economists working for economic and monetary reform.

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[ 28 February 2007: Message edited by: Fidel ]