Not merely the sort of individual giving many of us will be engaging in this holiday season, but the collective giving we do as a society through the instrument of government: investments in infrastructure, public services, the social safety net, a clean environment.
Unfortunately it seems none of our governments anywhere in Canada have been in a giving mood of late. To the contrary, the politics of austerity have meant that taking is now the order of the day: taking our pensions, our quality public services, our investments in infrastructure. Over and over again our politicians play the role of scrooge, pointing to growing government debt and telling us we can’t afford to give each other such gifts anymore.
Many Canadians are aware that it doesn’t have to be like this.
Fiscal proposals such as raising taxes on corporations and the rich occupy much of the public discussion over alternatives to austerity.
While fiscal measures are certainly part of the solution, there’s another important alternative to the politics of austerity that seems to get far less attention.
It’s an alternative that gives the government of Canada the powers of a real-life Santa Claus.
In the period between 1935 and 1974 this real-life Santa Claus created enormous prosperity in Canada by facilitating massive investments in public infrastructure and social programs, all without government incurring significant debts.
Unfortunately, Canada’s real-life Santa was taken hostage by international banking interests in 1974 and has been forced to work for them ever since; a mere shell of his former jolly self, Canada’s real-life Santa traded in his suit of red for one of grey.
Our real life Santa is the Bank of Canada.
This public bank was created to do much more than its current grey-suited role as inflation policeman. It was initially created to lift Canada out of the Great Depression and help us win the Second World War. It accomplished these goals by printing money and lending it at little to no interest to federal, provincial and municipal governments.
Following the war such lending facilitated the construction of hospitals, schools, memorial hockey arenas and much of Canada’s transportation infrastructure, all without significant increases to Canada’s debt.
This all came to an end in 1974 when Pierre Trudeau’s Liberal government signed on to the Basel Committee of the Bank for International Settlements, of which Canada was a member. This committed Canada’s central bank to stop doing the thing for which it was created: lending money to Canada’s governments at little to no interest. The bank’s role was henceforth strictly related to controlling inflation by setting interest rates.
The consequence of this decision was that, beginning in 1975, Canada’s debt began to rocket steadily upward as the government had to resort to private banks or foreign governments for its borrowing needs. Of course all such loans came with interest. According to the Committee on Monetary and Economic Reform (COMER) government’s across Canada are currently paying $60 billion a year on interest payments alone.
It is outrageous that the hundreds of billions we have paid in interest on our debts to private companies all could have been saved by borrowing from our own central bank instead. It is even more outrageous that these debts are now being used by neoliberal politicians as the pretext for taking away the social spending that drove much of Canada’s post-war prosperity and created our middle class.
This very situation is the subject of a lawsuit launched by COMER and two concerned citizens in December 2012. The lawsuit’s aim is to return the Bank of Canada to its original purpose: providing interest-free loans to the various levels of government in Canada. After receiving an initial setback in the courts the Plaintiffs have now been cleared for an appeal which will be heard by the Federal Court of Appeal in January 2015.
The critics of restoring the Bank of Canada to its original role will of course scream that government printing money leads to inflation. This has become a sort of mantra for many. What such critics neglect to mention is that limiting the public creation of money is not the only means of controlling inflation. Inflationary pressures can also be tamed by the regulation of the private creation of money. For example, by raising the reserves banks need in order to make loans, the government could slow down private lending leaving more room for the public creation of money without provoking significant increases to inflation.
The other problem for those claiming that the public creation of money will lead to economic disaster is that there are many examples illustrating that this is simply not true. The period during which Canada borrowed from its own bank saw massive improvements in people’s living standards and relatively low rates of both inflation and government debt. The state of North Dakota has a public bank that makes low interest loans to students, entrepreneurs and municipal governments. It was the only State in the US to emerge from the 2008 economic crisis with a budget surplus.
The question we should be asking ourselves is not whether or not we should be creating money in the public interest. The real question we should be asking is why we allow any money at all to be created for exclusively private interests.
When children first learn about money they often express fantasies about having a machine that could print as much money as they want. Though we assure them that that’s not the way things work, that no one can just print their own money, we aren’t exactly being truthful. The reality is that there are privately owned institutions in the world right now that can do just that. They’re called banks and every time they issue a loan they are creating money that they don’t have, out of thin air. Currently about 97% of Canada’s money supply is created in this manner.
The fact that Canada has abdicated its responsibility to ensure that at least some of the money in circulation is created in the public interest is really at the root of so many of our problems from decaying infrastructure to ballooning deficits to eroding social programs to growing inequality.
As Prime Minister Mackenzie-King said in 1935:
Once a nation parts with the control of its currency and credit, it matters not who makes that nation’s >laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is >restored to government and recognized as its most conspicuous and sacred responsibility, all talk of the >sovereignty of Parliament and of democracy is idle and futile.
To illustrate how the Bank of Canada could play a critical role in solving many of our current problems I will conclude this column with a letter to Canada’s real-life Santa:
Dear Santa:
The people of Canada await your liberation! We are outraged that you have been forced to don a grey suit and abandon your giving ways. Here is a list of things we would like to accomplish with the help of your interest free loans once we have succeeded in restoring you to your former jolly self. It may look ambitious but when compared to your many past accomplishments, I think you’ll agree this list is in fact quite modest:
- Massive investment in the infrastructure of First Nations communities
- A program to convert all of Canada’s publicly owned buildings to geothermal systems for heating and cooling.
- Massive investments in all forms of public transit including a high speed train in the Quebec-Windsor corridor
- A program to rebuild public buildings contaminated with mould, asbestos or other toxins
- A program to build high quality public retirement residences and long-term care facilities to meet the needs of seniors and those suffering from chronic illness
- The creation of a national child-care program
- A program providing low interest loans to small businesses and green entrepreneurs
massive investments in high quality social housing - An interest-free student loan program
- A program to gradually increase funding for post-secondary education while phasing out tuition.
In short Santa, all we want for Christmas is our public bank back!
Sincerely,
The People of Canada
