THE JOURNAL OF THE COMMITTEE ON MONETARY AND ECONOMIC REFORM

$3.95 Vol. 29, No. 3 • MAY–JUNE 2017 CONTENTS The COMER Lawsuit: What Now? 3 A Fresh Start? News Release: Supreme Court Denies Re- rized in the following original copy of the Jagmeet Singh and Niki Ashton: A Choice of Flash Versus Vision quest for Bank of Canada Lawsuit to Proceed news release issued on December 19, 2011.) for the NDP Toronto, May 31, 2017 – After nearly While COMER is disappointed in the Open Letter to 2017 NDP 5½ years of contentious litigation between Supreme Court’s failure to comply with its Leadership Candidates, to the the Committee On Monetary and Econom- perceived duty to the plaintiffs and to the Federal NDP Caucus, and to All ic Reform (COMER) and the Government citizens of Canada under the Constitution Members and Friends of the NDP of Canada involving three separate Federal and the Bank of Canada Act, two things are 7 It IS Happening! Court and two additional Federal Court of undeniable: Ecuador’s Economics Lessons Appeal hearings resulting in contrary deci- 1. Through this long judicial odyssey, for Canada (and the World) sions, on May 4, 2017, the Supreme Court public knowledge, awareness and conscious- Sovereign Debt of Canada dismissed COMER’s “leave” ness of the vital issues have been raised im- Jubilee, Japanese‑Style (permission to appeal) application from the measurably, not only in Canada, but abroad. Debt or Democracy: Public Money second judgment of the Federal Court of We know this from the significant feedback for Sustainability and Social Justice Appeal. Following established practice, the and informed commentary COMER and its 13 Social Progress Derailed: federal Supreme Court does not issue rea- legal counsel have received. The New Gravy Express Train sons when it dismisses a leave application. 2. The current Supreme Court dismissal Canada Needs Infrastructure The dismissal by the Supreme Court of is not the end of the struggle over these Bank Now the Leave application, means only that the critical issues! Programmed Response? Court does not want to hear the appeal. The proposed Canada Infrastructure An Open Letter to the Minister The jurisprudence on this is clear: it does Bank makes crystal clear the urgent need to of Finance Bill Morneau not mean that the lower court decisions now concentrate efforts within the politi- Publications Mail Agreement No. 41796016 are correct in law. The possible reasons for cal arena. In its arguments, the Crown has the Supreme Court not wanting to hear the contended that the Government’s decision case are many and various, including the to drastically reduce its borrowing from the washing of their hands or “deference” to the Bank of Canada was made by the people political process – hence, this is why reasons of Canada through the political process are not issued by the Supreme Court in leave although the changes made were never de- dismissals. bated publically nor in Parliament. This We believe that the case has ample legal failure of the political process has led to the merit, and should have proceeded to trial. It exponential growth of Canada’s debt in- is not uncommon for the Supreme Court to curred by all three levels of government due refuse leave on a given issue multiple times, to accumulated deficits and compounded finally to grant leave, hear the appeal and interest charges as well as to significant fis- the case then succeed. The Supreme Court cal restraints on funding government pro- controls its own agenda, both in its timing grammes and infrastructure expenditures. and on the merits of issues it will or will not hear. (Annually, fewer than 8–10% of all Our Comment cases filed are granted permission and heard I once had two kittens – brothers. Their at the Supreme Court of Canada.) names were Picar and Esquie. It should be noted that throughout this I bought them a toy, a “cat-dancer.” It arduous and expensive legal process, the consisted of a highly pliable wire, at one substance of this lawsuit initiated in the end of which was what looked like a moth; public interest has not been addressed. (The at the other end was a handle. When one matters raised by the lawsuit are summa- Continued on page 2 Lawsuit from page 1 emeritus and senior scholar at Osgoode Hall jerked the handle, the “moth” flew – and so Law School, York University. His recently did the cats! published book is entitled: Class Privilege: Now, were Esquie still here, he would How Law Shelters Shareholders and Coddles still be chasing that “moth”! Capitalism. FOUNDING EDITOR Picar, however, after a few frustrating at- Glasbeek points out that, “the mecha- John Hotson 1930–1996 tempts, sat still and observed intently; first, nisms we have are not working.” He traces the “moth”; then the wire; then the handle. the inadequacy to the fact that “all of the PUBLISHER–EDITOR Finally, he made the connection between law’s instruments and implementing institu- William Krehm the movement of my hand and the antics of tions are based on the mistaken premise that ([email protected]) the “moth.” With impressive feline aplomb, we owe shareholders a debt of gratitude” INFORMATION SECRETARY he than rose and simply walked away. that “justifies a reward or, as it turns out, Herb Wiseman From time to time, I am reminded of many rewards. Most pertinently, limited fis- ([email protected]) Picar’s “AHA.” The culmination of the cal liability and legal immunity.” Economic Reform (ER) COMER lawsuit, it turns out, is one such He asks, “why is it that, if we sincerely (ISSN 1187–080X) is published bi- time. The lawsuit inspired hope and in- desire corporations to behave better, we do monthly by COMER Publications volvement at home and abroad, expressed not try to change the shareholders’ under- 27 Sherbourne Street North, Suite 1 through supportive donations and – often standing of what are and are not appropriate Toronto, Ontario M4W 2T3 Canada deeply moving – messages of thanks and interests to pursue?” His answer is that “the Tel: 416‑924­ -3964, Fax: 416‑466‑5827 encouragement. Canadians are deeply in- legal conventional wisdom does not counte- Email: [email protected] debted to those who rallied to the cause. nance this possibility because of the way in Website: www.comer.org William Krehm’s initiative will have far- which it conceptualizes the corporation. But reaching effects. He has never wavered in really, this wisdom is intended to preserve COMER Membership: Annual dues backing this extraordinary and financially the privileges of capitalists, of shareholders. (includes ER plus 1 book of your choice): daunting project and, thankfully, has seen it It is an argument of political convenience CDN$50 through to its end. At almost 104, he con- that must be rejected if real political change Economic Reform subscription only: tinues to follow COMER’s progress with is to be put on the agenda. One year (6 issues): in Canada, CDN$20; keen interest and continued support. And because the argument to be con- Foreign, CDN$40 The Supreme Court decision is not the fronted is cloaked in legal garb, it is that end of the struggle! legal garb that must be ripped off.” He then Send request and payment to: Importantly the lawsuit has tested one tries to do just that. COMER Publications of the institutions in which we have placed Disappointed? Of course! Discouraged? 27 Sherbourne Street North, Suite 1 Toronto, ON M4W 2T3 much trust. The outcome has raised sig- Quite the contrary! This historic challenge nificant questions which, otherwise, might has raised enormously the level of awareness ER Back Issues: CDN/US$4, includes never have come to our attention. on the issue, across Canada and around the postage; additional copies same I am one such example. Recently, a friend world and has led to new insights that may issue, $2; additional issue same order, gave me a book that she thought I would well provoke a decisive step from debt to $3. Send requests for back issues to find interesting. It was not one that, until democracy. Herb Wiseman, 69 Village Crescent, now, I’d ever have thought to open. Its title Unlike Picar, we cannot simply walk Peterborough ON K9J 0A9. certainly caught my attention: The Failure away! of Corporate Law: Fundamental Flaws and Élan Copyright © 2017 Progressive Possibilities. COMER Publications The author, Kent Greenfield, is profes- A Few Examples of Donors’ All rights reserved sor of law at Boston College Law School, Comments Permission to reproduce is granted and has served as a law clerk under Supreme 1. I can think of no greater cause to sup- if accompanied by: “Copyright © 2017 COMER Publications. Court Justice David H. Suter. port. This is about the survival of our Reproduced by permission of One of the claims made for this book is country. COMER Publications” that it “shows that changing certain founda- 2. Keep up the great work; this is the finan- tional assumptions about corporations and cial “revolution” we need! Postmaster, please send address the law that rules them is critical to reining 3. Please keep up this very worthy struggle. corrections to: in corporate power. Throughout, Greenfield 4. If you can imagine our government’s not COMER Publications proposes concrete achievable adjustments to having to pay interest to use our own 27 Sherbourne Street North, Suite 1 law and policy that would create real, posi- money for the good of the nation then Toronto, Ontario M4W 2T3 tive change.” donate to this cause. Intrigued, I read. What I read was down- PRINTING AND DISTRIBUTION right exciting and flooded my head with a Press Release Toronto, Ontario, Watt Solutions Inc., London spate of questions! December 19, 2011 Printed in Canada on recycled paper. Subsequently, I discovered a book on Two Canadians and a Canadian economic the same theme by a Canadian Professor of think tank confront the global financial pow- Law, Harold Glasbeek, who is a professor Continued on page 6

2 | Economic Reform May–June 2017 www.comer.org ton’s take is more substantive: “In the 2015 election, we allowed the A Fresh Start? Liberals to out-left us. In the last little while we have lost our sense of being a move- Jagmeet Singh and Niki even been featured in the Washington Post. ment…. We need to reconnect with activists Ashton: A Choice of Flash But his flash fell short when he was and community leaders who share our same interviewed by CTV’s Evan Solomon. Af- values…. We need to build the NDP as a Versus Vision for the NDP ter saying “Glad to be here, man,” Singh movement for social, environmental, and By Murray Dobbin, Posted: May 26, 2017 looked very uncomfortable when Solomon economic justice.” As the mainstream pundits are putting pressed him three times on his position on While we have to wait for Singh’s answers it, the NDP leadership race just got more the Kinder Morgan pipeline. He dodged to fundamental questions, Ashton’s answers interesting with the declaration that Jag- it three times, falling back each time on a seem instinctive but rooted in policy depth. meet Singh, an Ontario NDP MPP, is in nearly identical rehearsed answer: “We are She has served as NDP critic for Aboriginal the race. He has real charisma and would going to come out with a comprehensive Affairs, Status of Women and Post-Second- break the white-only leadership barrier for plan…” He similarly dodged a question on ary Education and Youth. As the NDP’s the first time. whether he would support retaliatory ac- critic on Jobs, Employment and Workforce There seems at first glance to be little in tion against the US for its softwood lumber Development she led a countrywide, 11-city the way of major policy differences between tariff. When Solomon pressed him on what tour engaging young people on the issue of the four candidates who preceded Singh in kind of leader he was going to be, he fell flat, precarious work faced by millennials. the race. While all are smart, able politicians suggesting that he was not ready for prime- Perhaps the strongest symbol of Ashton’s with a solid understanding of the issues, time questioning. boldness is her stance regarding the conflict there seems to be scant recognition of the Singh’s discomfort with these questions between Israel and the Palestinians. After need for the NDP to distance itself from (and one on immigration levels) reveals a posting support for Palestinian indepen- the Layton-Mulcair period wherein the politician who is a bit of a blank slate. In dence she was, of course, subjected to the party decided to go for power and made the fact, there is a certain irony in his eager- knee-jerk bullying from B’nai Brith which inevitable rush to the centre to do so. ness to take on Justin Trudeau – another “demanded” an apology – which it never The Liberals won that race and now have politician who, when he went for the Liberal got. Under both Mulcair (a proud Zionist) an almost unshakable grip on the centre. Party leadership, seemed to have few ideas and Layton, the party was terrified of the The overarching purpose of the NDP is of his own. The other candidates have been issue. As I detailed in this column a few perhaps the most important issue of all and immersed in these issues and their positions months ago, Canadians’ views on the con- it’s not being debated. Will the new leader seem rooted in personal conviction. flict are clearly in line with Ashton’s. follow in the footsteps of Mulcair and his When you haven’t developed a clear vi- Jagmeet Singh might well be the ideal political whiz kids and go for the ring or will sion of the party you want to lead, you end candidate to continue the party’s centrist they decide to reinvent the party as a prin- up relying on others, which is exactly what quest for power. He has charisma, he’s a cipled, unabashedly left-wing party eager to Trudeau did – and it’s largely why he has social media star, young people love him, actually challenge corporate power? broken the specific promises he has. They and breaking the white-only barrier is a very The two candidates who stand in great- were never his in the first place. It begs the attractive proposition and would be a huge est contrast on this all-important issue are question with Mr. Singh: who is he going step forward in Canadian politics. If the Manitoba MP Niki Ashton and newcomer to rely on for his vision of the party and the party wants to try for a quick comeback in Jagmeet Singh. Singh is eagerly poised to fill country? 2019 they could certainly do worse. the role as the man who can take down Jus- One of the people he is relying on is But if the party wants to rebuild, return tin Trudeau (literally it turns out, claiming none other than Brad Lavigne, Jack Layton’s to its social democratic roots and show the his mixed martial arts would be too much and Tom Mulcair’s strategic genius – you boldness that will be required to seriously for Justin) and become prime minister. He remember, the guy who thought it was cool challenge climate change, inequality, recon- oozes self-confidence but gets close to being to work for Hill and Knowlton, the people ciliation with Indigenous peoples, and peace a bit too attracted to himself. He doesn’t who brought you the first Gulf war. While in the Middle East they will need to take quite refer to himself in the third person, Lavigne is only a volunteer and there are the long view and build a movement. That’s but he gets close, as in this Toronto Star in- other people advising Singh, there is little Niki Ashton’s pledge though she would have terview: “If people see that I’m dynamic and doubt that Lavigne will be hard-selling the to take on the party establishment to do it. exciting and approachable, that’s a good “we can win” Kool-Aid again. We’ll just have to wait to see what NDP thing.” Niki Ashton is about as different from members decide they want their party to be. But while charisma is an important as- Jagmeet Singh as you can get – about the pect of leadership it has to be matched by only thing they share is that they are both Our Comment policy depth and transparency. Singh is fa- young. Where Singh has given no sign The NDP has lost its way. It has become, mous in Ontario for his expensive, perfectly of how (or if) he would rebuild the post- less and less, a real alternative to Tweedle tailored suits and his brightly coloured tur- Mulcair party, Ashton has been clear that Dum and Tweedle Dee. bans. But he is a provincial politician with she wants to transform the party into a Until it remembers its roots and its no experience in federal government issues. movement. Whereas Singh attributes the founding principles it will remain an “also He has been given an easy ride by the To- loss of the 2015 election to the fact that ran” – if it remains at all. ronto Star (no friend of the NDP) and has Mulcair didn’t “connect emotionally,” Ash- On the other hand, it has never had a www.comer.org May–June 2017 Economic Reform | 3 better opportunity to become a viable chal- Especially perilous for our democracy social programs. But, under intense pressure lenge to corporate power and an exciting are so-called “free trade agreements” which behind the scenes from private banking in- option. come down the pipe one after another, terests, our federal government abandoned We are struggling through a defining warmly welcomed by Conservatives and this practice, and began borrowing from pri- moment. The party doesn’t need to trans- Liberals alike. These are sold on the ground vate banks and other private money-lenders, form into a movement. It needs only to that they promote jobs for Canadians even incurring growing interest payments for all engage in a movement already afoot – to though they have in the past destroyed and levels of government – recently between $50 rally behind a clear and promising program downgraded jobs. The trade agreements are and $60 billion per year, and at the federal for fundamental change the disparate forces obviously designed to promote corporate level alone over $1.1 trillion in cumulative already active. rule. They allow foreign corporations, en- interest payments since 1974. This practice Incentives abound! couraged to operate in Canada, to bypass has resulted in our huge government debts, Élan our democratically established court system thus justifying the austerity agenda, and in order to sue, through tribunals set up by leading to ever growing pressures to cut Open Letter to 2017 NDP the trade agreements themselves, for loss of funding for public services, and to privatize anticipated profits resulting from actions public resources. Leadership Candidates, to taken in the public interest by our demo- Families carrying excessive debt need to the Federal NDP Caucus, cratically elected legislative bodies. We are practice austerity. But government finances and to All Members and already subject to such abuse of our democ- work differently. When a government cuts racy through NAFTA. jobs, it saves much less than the full amount Friends of the NDP Fuelling the corporate agenda is our that it was paying those jobholders. It loses The NDP leadership campaign this sum- growing public debt burden. We are con- the taxes they paid, and the taxes of peo- mer of 2017 is especially crucial. It sets the stantly told that reduction of this debt is ple supported by their spending. Austerity tone for the 2019 election at a time when imperative. And we are told that there are drives the economy down. Increasing taxes, the corporate agenda has built up alarming only two possibilities; either raise taxes or however difficult, is necessary. But the third momentum – with the recent support of the cut spending. Somehow the notion of rais- alternative of returning to use of the Bank Harper Conservatives and the present support ing taxes, even on the rich, remains unac- of Canada, almost entirely excluded from of the Trudeau Liberals, both with majority ceptable. So we are left with the alterna- public discussion, is the only method that governments. Canada is in the process of sur- tive of cutting spending, bringing on the is sufficiently powerful to overcome our rendering to corporate rule ever more of its devastating austerity agenda, which leads to public debt burden while maintaining and precious democratic institutions, along with justification for the privatizations sought by improving social programs and funding their public services. corporations. Hence the new infrastructure infrastructure without privatization. But the Clearly the NDP understands this dan- bank, and such transactions as sale of 60% advantages for the NDP and the Canadian gerous trend, as was apparent at a recent of highly profitable Ontario Hydro to pay public of returning to such use of the Bank session of Parliament when NDP MPs elo- down debt, leaving the Ontario government of Canada go well beyond the prospect of quently opposed the Liberals’ proposed to fund unprofitable projects. overcoming the austerity agenda, and hav- infrastructure bank which would turn over As the corporate agenda gains momen- ing access to money for abundant funding to private banks and other financial institu- tum, we are increasingly facing an emer- of public needs. Recognition of these ad- tions, foreign as well as domestic, control of gency situation. It is becoming ever more ditional advantages requires understanding public assets in order to use them for profit. difficult for us to reverse the drive for corpo- of how our money system works, and how This is one of numerous public-private part- rate rule supported so heartily by the other damaging it is. nerships (PPPs), although perhaps the most major political parties. In our currently prevailing money sys- egregious, which past experience has shown What is to be done? A good start for the tem, nearly all the money in existence, to be more expensive, abusive of labour, and NDP is to focus on the Liberals’ infrastruc- about 97%, money we all depend upon for less reliable than traditional public institu- ture bank, as the NDP has already done. economic transactions, has been created tions. But an additional step must be taken. The as computer entries by the private banks Other indications of this trend include NDP, through its leadership candidates, in their normal process of making loans. cuts and creeping privatization of our trea- needs to point out forcefully and repeatedly Contrary to public opinion, the banks do sured public medical system, pressure to that Canada already has a superior infra- not lend out the money of depositors. When privatize CBC, and the Canada Pension structure bank: our publicly owned Bank of they make loans, they create new money. Plan, and even our profitable postal service, Canada. Without any new legislation, the They require that borrowers put up valuable and public liquor stores. Banks profit from Bank of Canada could be used immediately collateral, and then they get to create money student debt. Labour unions are losing to provide abundant, essentially interest- they “lend” and require to be repaid, with ground. Taxes have been cut for the wealthy free funding to all levels of government for interest. If borrowers fail to pay back on and corporations while needs of indigenous much-needed infrastructure, while freeing time both principal and interest, the banks people and the poor are overlooked. The tax revenues for social programs. get to take over their collateral – a power 2013 and 2016 Federal Budgets even au- The Bank of Canada has a great history. that is derived from their privilege of creat- thorize major private banks, in case they fail Between 1938 and 1974 it was used effec- ing money out of nothing. What an unjust from their own hazardous gambling with tively to get us out of the Great Depression, system! derivatives, to take over through “bail-ins” through World War II, and for thirty post- But this is not all. Banks create money for their clients’ assets – our deposits! war years to fund new infrastructure and the principal of their loans, but they do not

4 | Economic Reform May–June 2017 www.comer.org create money for the interest they demand. Further explanation is needed here. degree of public awareness regarding how Borrowers must compete with each other to The power to create money out of noth- our money system works. We will need pro- get enough money, which has been created ing is awesome. Whoever gets to benefit from cedures to assure that accurate information only as principal, in order to pay the banks the first use of newly created money gets a free on the functioning of the system is publicly both principal and interest. Meanwhile benefit! The process is essentially the same as available, and widespread commitment to people who owe nothing are also using this when counterfeiters print and successfully assuring that the system is benevolently and same limited money supply, making it even pass off cash. But they face the difficulties responsibly used. Strong public understand- more difficult for borrowers. It isimpossible of devising convincing facsimiles of mod- ing and support are necessary to resist the in this debt-money system for all borrowers ern cash, and they run the risk of arrest intense opposition that banks, supported by to find enough money to make the required and punishment. Commercial banks can, Liberals and Conservatives, can be fully ex- payments. Some will do further borrowing entirely legally, quickly create any desired pected to mount against monetary reform. at further interest. But this remedy is obvi- quantity of money with simple computer Chief among the arguments and ridi- ously unsustainable. Inevitably those who entries. This is easier than picking money cule that will be brought against any NDP are more vulnerable economically default, off trees! And they tell us there is no such call for return to such use of the Bank of bringing a cascade of defaults resulting in thing as a free lunch! Canada is the claim that this would inevi- recession. Mainline economists describe this Our Bank of Canada could use this same tably be inflationary. In response, we need as the normal business cycle. But they fail simple process to create money for public to emphasize how damaging our present to explain that our perverse money system benefit, as it did in the past. It canlend bank-created debt-money system itself is. It makes such cycles inevitable. And they fail money into existence – say, for investment in has its own long record of promoting steady, to point out that this system is the most much-needed infrastructure, thus creating ongoing inflation, as already explained here, basic driver of inequality – an issue that the high quality jobs. At present governments and as all seniors are well aware from per- NDP has been attempting to address with- borrow at interest and pay for such projects sonal experience. Moreover, there is much out tracing inequality to its most basic roots two or three times over. Interest-free loans evidence to indicate that when governments in the money system. would make it possible for them to pay for have controlled their own money-creation Strangely this chronic scarcity of money the projects just once out of tax income over they have managed their economies with connected with our debt-money supply is the lifetime of each project – perhaps 30 to very little inflation, as Canada did between a more consistent contributor to inflation 50 years. This would free large amounts of 1938 and 1974. The record shows that hy- than an excess of money – which is usually tax revenue for current program spending. perinflations, including that of Germany in identified as the culprit. Businesses push to There is another astonishing possibility. the 1920s, were not driven by government raise prices to cover their interest burdens When additional new money is needed in irresponsibility, but by wealthy speculators, along with other expenses, and workers do the economy, as now, our federal govern- including banks, manipulating national their best to push wages up to keep pace. ment through the Bank of Canada could currencies to their own great advantage (see On average about 40% of the prices of all simply spend money into existence as a free Ellen Brown, The Web of Debt). We need to the goods in our society results from our benefit for public use. Whether government- emphasize our own creative history of using debt-money’s compounding interest ex- created money is lent or spent into exis- the Bank of Canada with minimal inflation. penses, (see www.converge.org.nz/evenz/ tence, debt-free money is injected into the Some people even on the left think that money.pdf .), a further inflationary pressure. economy, making possible great reductions we should not use the Bank of Canada for Moreover, the interest burden is a factor in in the far-reaching problems resulting, as public funding because politicians will use pushing businesses to pursue unlimited and already explained, from our present destruc- its largesse irresponsibly. But do we really unsustainable economic growth in our finite tive debt-money system. And our govern- want to continue with our current money global ecological system. ments could have access to abundant funds system which operates beyond democratic When borrowers pay off their loans the for initiating creative measures for social control, and is managed by institutions banks keep the interest as their own, but and environmental welfare, while gradually designed increasingly to exploit us, and they destroy the principal. The creators of reducing their past debts. subject us to debt slavery – here in Canada money are also its destroyers! This is an enor- At the heart of the power of wealthy elites and beyond? Do we really want a system mous additional source of power often used and their drive for corporate rule is their con- designed to stimulate relentless inflation, to public disadvantage. If all borrowers – trol through the banks over money creation. inescapable episodes of recession, unsustain- governments, businesses, and individuals Gaining control through our federal govern- able exponential economic growth in our – strove to exercise the virtue of thrift by ment over the power to create money out of finite environment, and rapidly increasing paying off their debts, long before succeed- nothing for public benefit is the key to our be- inequality? Do we really want private banks ing they would have driven the economy ing able to reverse the corporate agenda. to monopolize creation of money for their into deep depression. Having money-creation under govern- own benefit while depriving the public Through pervasive debt we are all in ment control is no panacea. Spending for of this advantage? Do we really want our thrall to the banks – even those of us who human and environmental abuse, as in war, governments shackled to the devastating carry no personal debt. We could gradually remains possible. Any campaign for mon- austerity agenda? Do we really want to leave reverse this and all the other damaging im- etary reform is a struggle for democratization the corporations free to pursue ever more pacts of our money system by returning to of our money system, and such a campaign abusive corporate rule? In so far as there are using our publicly owned Bank of Canada can readily be integrated with the wider risks in using the Bank of Canada, they are to provide interest-free loans and grants to struggle for greater democracy. Along with subject to democratic control – as our cur- all levels of government for public benefit. monetary reform we need to develop a high rent money system definitely is not. We can www.comer.org May–June 2017 Economic Reform | 5 establish open, democratic institutions to against the government for failure to carry funding they need for their various causes. manage responsibly a government-created out the mandate of the Bank of Canada Act When an all-out NDP campaign for money system. has also helped, even though the Supreme monetary reform evokes the opposition The NDP already favours public postal Court recently declined to hear the case. we can fully expect, let us welcome this as banking for people lacking banking services The crucial task of achieving a return to our an opportunity to state our case ever more and vulnerable to abuse from loan sharks. desperately needed use of the Bank of Can- incisively to a public eager for relief from Postal banking could also be recommended ada is now left to political action. The NDP, ever greater inequality and impoverishment. for all of us as providing a safe haven for our through its leadership campaign, now has This 2017 NDP leadership campaign and personal bank deposits from the threat of the opportunity to kick-start this process. the following campaign for the 2019 elec- failing bank bail-ins. But especially crucial Voters have withdrawn much of their tion offers us a great historic opportunity now, the NDP could be vigorously advocat- support from a timid, cautious NDP. We to reverse the momentum of the corporate ing use of the money-creation powers of the now have a chance to campaign boldly, agenda, and to move toward rescuing our Bank of Canada for funding public services forthrightly, and courageously for the mon- democracy from corporate rule. Let us take provided by our governments. A great many etary reform which could jettison the auster- advantage of it! Canadians, including heavily indebted ity agenda, and harness the power of money (For information and confirmation, see university graduates, are unemployed or creation to build steady momentum for Joyce Nelson, Beyond Banksters, and the under-employed, but eager to work for our public benefit. websites of COMER and Canadian Bank common welfare. With abundant funding Canada has hundreds of activist orga- Reformers.) through the Bank of Canada, exciting, ful- nizations, working in many ways for so- filling opportunities for our people to find cial justice and environmental protection, In solidarity, George Crowell (member of work meeting urgent unmet needs could which have not yet joined the call for mon- COMER since 1994, who taught Social Ethics be made available without limit. Monetary etary reform. Surely they will rejoice in in the Religious Studies Department, Uni- reformers have long been pointing out that seeing the NDP ardently campaigning for versity of Windsor, 1968-96, now living in anything people are capable of doing can be the monetary system which can provide the London, Ontario. made financially possible. There is another major reason for the Lawsuit from page 2 terests contrary to the Bank of Canada Act. NDP to call forcefully for massive public ers in the Canadian federal court. The Plaintiffs state that the Bank of In- funding through the Bank of Canada. Large The Canadians plead for declarations that ternational Settlements (BIS), the Financial numbers of voters do not trust the NDP would restore the use of the bank of Canada for Stability Forum (FSF) and the International to manage government spending responsi- the benefit of Canadians and remove it from Monetary Fund (IMF) were all created bly. We promise all kinds of much-desired the control of international private entities with the cognizant intent of keeping poorer and much-needed public services, but do whose interests and directives are placed above nations in their place which has now ex- not explain convincingly how we can fund the interest of Canadians and the primacy of panded to all nations in that these financial them. Higher taxes on the rich are certainly the constitution of Canada. institutions largely succeed in over-riding necessary, and in the last election the NDP Canadian constitutional lawyer, Rocco governments and constitutional orders in rather hesitantly suggested them. But the Galati, on behalf of Canadians William countries such as Canada over which they NDP also promised to maintain balanced Krehm, and Ann Emmett, and COMER exert financial control. budgets – which are recognized to be insep- (Committee for Monetary and Economic The Plaintiffs state that the meetings of arably connected with the austerity agenda. Reform) on December 12, 2011 filed an the BIS and Financial Stability Board (FSB) Meanwhile the Liberals boldly announced action in Federal Court, to restore the use (successor of FSF), their minutes, their that they would increase deficits in order of the Bank of Canada to its original pur- discussions and deliberations are secret and to provide essential infrastructure. After its pose, by exercising its public statutory duty not available nor accountable to Parliament, disastrous 2015 loss, the NDP needs to con- and responsibility. That purpose includes the executive, nor the Canadian public not- vince the public that there is, through the making interest free loans to municipal/ withstanding that the Bank of Canada poli- Bank of Canada, an overlooked alternative provincial/federal governments for “human cies directly emanate from these meetings. funding option much more powerful even capital” expenditures (education, health, These organizations are essentially private, than improved tax policies. other social services) and/or infrastructure foreign entities controlling Canada’s bank- Legislators are generally reluctant to take expenditures. ing system and socio-economic policies. bold stands without the assurance of strong The action also constitutionally chal- The Plaintiffs state that the defendants public support. Perhaps this explains why lenges the government’s fallacious account- (officials) are unwittingly and /or wittingly, the NDP, despite decades of constant prod- ing methods in its tabling of the budget by in varying degrees, knowledge and intent ding from monetary reformers, has not not calculating nor revealing the true and engaged in a conspiracy, along with the BIS, taken up this cause. But awareness of the is- total revenues of the nation before transfer- FSB, IMF to render impotent the Bank of sue and support for it has been growing. The ring back “tax credits” to corporations and Canada Act as well as Canadian sovereignty Canadian Labour Congress at its conven- other taxpayers. over financial, monetary, and socio-eco- tion this spring passed a resolution calling The Plaintiffs state that since 1974 there nomic policy, and bypass the sovereign rule for return to the use of the Bank of Canada, has been a gradual but sure slide into the re- of Canada through its Parliament by means as had already the National Farmers Union, ality that the Bank of Canada and Canada’s of banking and financial systems. the Council of Canadians, and the Green monetary and financial policy are dictated Further information about this case is Party. Publicity for the COMER lawsuit by private foreign banks and financial in- available at www.comer.org.n

6 | Economic Reform May–June 2017 www.comer.org when it was best to ignore the majority of the profession.”5 It IS Happening! In a February 2013 report called “Ecua- dor’s New Deal: Reforming and Regulating Ecuador’s Economics in poverty reduction, wage growth, reduced the Financial Sector,” Weisbrot and two Lessons for Canada inequality, and great social inclusion could CEPR colleagues had examined this change, be eroded by a return to the policies of which was “hugely important” for many (and the World) austerity and neoliberalism that prevailed in of the other policy changes instituted by By Joyce Nelson, June 2017 Ecuador from the 1980s to the early 2000s,” Correa. Ecuador’s new president, Lenin Moreno, they wrote.2 They wrote: “One of the fundamental was officially inaugurated on May 24. After A self-declared “21st century socialist,” principles of the neoliberal economic or- a hard-fought, two-stage election process, Correa had been elected in 2006 after a thodoxy that has prevailed, increasingly, Moreno defeated his opponent, former in- severe economic crisis and 1999 banking since the 1970s has been that central banks vestment banker Guillermo Lasso, on April failure that caused a previous Ecuadorian should be ‘independent.’ The reasoning 2 with 51.14 percent of the vote. Moreno government (in January 2000) to adopt the behind this argument is that a central bank has promised to continue and expand the US dollar, ostensibly to control inflation.3 that is responsible to the executive or legisla- policies and programs introduced under Despite the hindrance of that dollarization, tive branch of the government will succumb outgoing President Rafael Correa, for whom Correa and Moreno were able to make to political pressures and allow inflation Moreno served as vice-president from 2007 major economic changes that dramatically to get out of control, or at least to rise to 2013. Having held the post for ten years, stabilized and benefited the country. quickly enough that it will hurt economic Correa was ineligible to run again. But as the 55 economists wrote, “Un- growth. There are many problems with this Although Moreno’s win is tremendous fortunately, there is much confusion and argument, from an empirical, economic, news for progressives across the planet, misinformation about Ecuador’s achieve- historical, and political point of view. From you’d never know it from mainstream media ments in recent years. It has all but become the point of view of political democracy, it coverage in North America, which has been conventional wisdom that the economic is important to note that this is not an ar- muted to say the least. That may be because and social progress in Ecuador, such as it gument for independence of an institution the Citizens’ Revolution undertaken by is recognized, resulted simply from a com- such as the judiciary, which is based on a Correa and Moreno since 2007 has involved modities boom and a spike in oil revenues. theory of checks and balances, in order to some major challenges to neoliberal eco- This explanation ignores the innovative and protect constitutional rights or the rule of nomic orthodoxy. important reforms that the Ecuadorian gov- law. The argument for the independence of Indeed, in many ways, Rafael Correa ernment has enacted that have played an in- the central bank is more of an elitist argu- (himself an economist) has changed the strumental role and allowed the country to ment; it is essentially saying that monetary paradigm for what is possible economically, emerge, relatively unscathed, from the 2009 policy is too important to be influenced by and not just in Ecuador or Latin America. Global Recession and the more recent col- the view or desires of the electorate.”6 That’s quite an accomplishment for a small lapse in oil prices. These reforms included Having highlighted the “elitist” nature country of about 12 million people. But bringing the central bank into the govern- of the standard argument, Weisbrot and apparently, the powers-that-be would rather ment’s economic team, a tax on capital exit- his colleagues then note: “Having a central ignore such a paradigm-shift than call at- ing the country, a large increase in public bank that is unaccountable to the elected tention to it. investment, re-regulation of the financial government can be quite harmful; an ex- sector, and countercyclical fiscal policy…. treme case can be seen in the eurozone today Economists’ Open Letter Our goal is not to tell Ecuadorians whom [2013], where the European Central Bank In the first round of presidential vot- to vote for, or to interfere in Ecuador’s has played a major role in pushing Europe ing (February 19), Moreno had faced eight political processes. With the proliferation into its second recession in three years, with other candidates and fell just short of a vic- of misinformation and misunderstanding record levels of unemployment. In most tory, meaning that the top two candidates – about Ecuador’s economy, however, we felt cases, being ‘independent’ does not mean Moreno and Lasso – would have to contend it necessary to correct the record.”4 being independent of political influences; in a second round of voting on April 2. For- more often, central banks tend to favor the mer investment banker Lasso had pledged Central Bank “Independence” interests of the financial sector.”7 to undo the economic changes made over One of the economists who signed the Because Ecuador’s central bank had the previous ten years. Open Letter is Mark Weisbrot, Co-director been made formally independent of the Before that crucial second vote, 55 of the US-based Center for Economic and government under the 1998 constitution, economists from 11 countries published Policy Research (CEPR). In 2013, Weisbrot Correa’s administration had to change the an Open Letter on March 26, warning of called the reforms instituted by Correa constitution, which it did in 2008 after the “danger” of a return to Milton Fried- “possibly the most comprehensive financial approval by the electorate through a refer- man’s neoliberal economics in Ecuador.1 reform of any country in the 21st century” endum. “Thus the Central Bank was made Their Open Letter explained some of the – especially Ecuador’s revoking of the “in- part of the executive branch’s economic “major economic and social advances” that dependence” of its central bank, an inde- team, which also included a new Economic had been achieved in Ecuador because of pendence which is “considered sacrosanct Planning Ministry…created by President Correa’s economic policies. “We are con- by most economists today.” But, Weisbrot Correa during the second month of his ad- cerned that many of these important gains added, “Correa, a PhD economist, knew ministration. These changes, especially with www.comer.org May–June 2017 Economic Reform | 7 regard to the accountability of the Central ruary, I contacted Mark Weisbrot by email sip champagne with the global elite gathered Bank, have proven very important to the and asked him: Is Ecuador’s Central Bank in the Swiss Alps, Prime Minister Selfie implementation and coordination of new publicly-owned, or does it have private realized that it might be better to “remain economic policies in Ecuador.”8 shareholders like the US Federal Reserve? connected with Canadians,” as his spokes- Some of those policies included: increas- Was Correa able to change the “indepen- man put it. “This tour will provide many ing taxes on the rich, cutting down on tax dence” of the central bank because it is great opportunities to engage directly with evasion, instituting a tax on capital flight, publicly owned? Canadians,” his press secretary explained.18 requiring the Central Bank to repatriate Weisbrot responded: “It’s publicly One possible reason for the tour: there billions in assets held abroad, doubling the owned, but the [US] Fed could also be is a growing cross-country movement to re- minimum wage, making education (includ- made accountable, and in fact the limited turn Canada’s publicly-owned central bank, ing university education) free, investing bil- accountability that it has under current law the Bank of Canada (BoC), to its pre-1974 lions in education, health care, housing, and is not fully utilized.” mandate and practice of lending nearly in- much more.9 As Stansfield Smith recently Perhaps not surprisingly, Lenin More- terest-free money to federal, provincial, and wrote, “Correa’s government carried out no’s opponent in the April 2 presidential (potentially) municipal governments for in- programs that peoples in progressive social election, former investment banker Guill- frastructure and healthcare spending. Spear- movements have advocated throughout the ermo Lasso, had pledged to restore the headed by the Committee on Monetary and West, if not the world. Ecuador provides an “independence” of Ecuador’s central bank, Economic Reform (COMER), Paul Hellyer example for what Greece could have done thereby making it (as critics noted) “an in- and Canadian Bank Reformers, and oth- when its crisis hit, if it had a firm anti- strument of the big bankers.”15 ers, this movement is questioning why our neoliberal, anti-imperialist leadership.”10 The changes under Ecuador’s Citizens’ federal and provincial governments must But the change in the accountability of Revolution have been profound. Not only is borrow from private lenders (and pay debt- the central bank – making it answerable to, education free, including university, but “to servicing charges to the banksters of more and part of, the Correa administration – was reduce barriers for low-income students the than $60 billion per year) when the BoC especially crucial to a major policy decision government provides free school supplies, had a successful history of public lending enacted by the government. books, uniforms, and meals. Now more to governments from 1938 to 1974 without than 300,000 children who used to have to triggering any inflationary problems. Money-Creation work go to school.” As well, Ecuador has Now the Trudeau cabinet is bypassing Just before the first round of presiden- built 15 schools “focused on teaching and the BoC to set up a different Canada Infra- tial voting on February 19, 2017 CEPR preserving the country’s various ancestral structure Bank that was designed by an advi- issued another report on Ecuador, called ethnic languages.” Environmentally, Ec- sor from Bank of America Merrill Lynch and “Decade of Reform: Ecuador’s Macroeco- uador has constitutionally enshrined the will increase the debt by many billions while nomic Policies, Institutional Changes, and rights of Mother Earth, and has managed complicating Canada’s monetary problems Results.”11 As CEPR’s Mark Weisbrot wrote to cut the rate of deforestation in half, and privatizing public assets.19 for The Nation, in the midst of economic while paying communities in the Amazon So in mid-January, when PM Trudeau shocks such as the world-wide recession to protect forests. Ecuador even has a living was “reconnecting” with the people of Pe- and the collapse in oil prices, the Correa wage policy: private companies cannot pay terborough, Ontario at a town hall meeting, government made “creative” decisions and dividends to their shareholders until all their a curious thing happened. Trudeau was “smart” policy choices that defied economic employees are provided a living wage.16 talking about an economic matter when orthodoxy. “Ecuador’s central bank created As Weisbrot has written, “…Ecuador’s COMER’s Herb Wiseman shouted out: billions of dollars that it lent to the govern- experience shows that much of the rheto- “Use your central bank.” To which Trudeau ment for spending (and also to state-owned ric about how ‘globalization’ restricts the promptly responded: “That doesn’t work.”20 banks). This was unexpected for a govern- choices of governments to those that please It was a stunning remark, blithely deny- ment that did not even have its own cur- international investors is…exaggerated. It ing 35 years of Canadian history. Moreover, rency, but it proved to be very helpful in the turns out that even a relatively small, mid- Ecuador has just proven over the last several recovery.”12 The CEPR 2017 Report states dle-income developing country can adopt years that using the central bank still actu- that “…from 2011 to 2016, the Ecuador- workable alternative policy options – if ally does work to put money into the real ian central bank created about $6.8 billion people can elect a government that is in- economy without taking on debt to the dollars” that was spent into the economy.13 dependent and responsible enough to use banksters or causing an inflationary spiral. As a result, “Public investment as a them.”17 But Trudeau’s casual dismissal fits with percent of GDP more than doubled, and his role. the results were widely appreciated in new Canadian Interlude (1) There’s a reason why Justin Trudeau has roads, hospitals, schools, and access to elec- During the run-up to the first round been so lionized by the globalist elite and tricity,” as well as “a 38 percent reduction of Ecuadorian voting, a curious moment the corporate press. Remember the IMF’s in poverty and a 47 percent reduction in occurred in Canada that is well worth ex- Christine Lagarde exulting over his elec- extreme poverty,” with “large increases in amining. tion, or The Economist’s October 2016 cover spending on education and healthcare” that Prime Minister Justin Trudeau (elected announcing “Liberty moves north,” accom- led to the creation of tens of thousands of in 2015) had decided to cancel his plans to panied by an image of the Statue of Liberty jobs, all without saddling the government attend the January 2017 World Economic wearing a maple-leaf crown? And then there with new debt to private lenders.14 Forum in Davos and instead make a cross- was US Vice-President Joe Biden remarking After reading the CEPR Report in Feb- country tour through Canada. Rather than at an Ottawa state dinner in his honour in

8 | Economic Reform May–June 2017 www.comer.org December 2016 that Trudeau would be cen- Empire Strikes Back tral to “astronomical” changes in the world. About Our Commenter Perhaps not surprisingly, there was a “The progress is going to be made,” Biden Élan is a pseudonym representing two of the ferocious backlash by the elites, and a 2010 said, “but it’s going to take men like you Mr. original members of COMER, one of whom coup attempt on his life. Prime Minister, who understand it has to is now deceased. The surviving member On September 30 of that year, “a police fit within the context of a liberal economic could never do the work she is now engaged strike ended up in a violent revolt against order, a liberal international order, where in were it not for their work together over President Correa, who was held hostage in there’s basic rules of the road.”21 many years. This signature is a way of ac- a hospital for several hours. The clashes re- Of course, Biden means a neoliberal eco- knowledging that indebtedness. sulted in 10 deaths including a presidential nomic order, where the “rules of the road” guard. Documents emerged showing mas- are: free-market capitalism, deregulation, almost eliminated Ecuador’s small middle- sive US funding for policemen and opposi- austerity budgets, privatization, free trade class. In the second edition (1998) of his tion groups, through USAID. Despite this deals, corporate tax cuts, tax havens, and the blockbuster Killing Hope, William Blum direct threat, Correa continued to assert an “independence” of central banks. wrote that the “tiny nation” of Ecuador re- independent foreign policy; one of his bold- Most Canadians aren’t aware of it, but mained “a classic of banana republic under- est moves was granting Julian Assange asy- for a decade Canada has been considered development, virtually at the bottom of the lum in the Ecuadorean embassy in London “the standard bearer” of neoliberalism, re- economic heap in South America,” where 1 in 2012, fearing his extradition to the US placing the US in that function. As the percent of the population was very well-off for the role that WikiLeaks played in expos- Latin Business Chronicle enthused in July (from oil and other commodities export), ing war crimes” and other issues.30 2011, “Since neoliberal economics policies while “two-thirds of the people had an aver- In October of that same year, Ecua- (including the ‘Washington Consensus’) age family income of about ten dollars per dor suffered another economic blow. The are associated with the Reagan-Thatcher month.”25 government had annulled a contract with years, one would deduce that on this side After the banking crisis in 1999 – which US-based Occidental Petroleum because the of the pond, the United States remains the caused the currency and people’s savings to company had violated a clause stating that it standard bearer of this philosophy…. No, lose more than half of their value – at least would not sell its drilling rights to another The standard bearer, advocate, celebrant of 2 million Ecuadorans (out of a population firm without permission. But because Ecua- trade and investment liberalization is not of 12 million) left the country for economic dor had a bilateral trade agreement with the the United States but its neighbor north of reasons, especially to find employment.26 US, Occidental launched a lawsuit against the 49th parallel – Canada.”22 The writer As Stansfield Smith has written, “after the country at the International Centre for added, “While there are regimes that bla- nine presidents in ten years,” the Ecuadoran Settlement of Investment Disputes, based in tantly reject this course (Cuba, Venezuela, people in 2006 elected Rafael Correa in “a the World Bank. Ecuador, Bolivia, Nicaragua), their eco- popular repudiation of neoliberalism and It was a classic investor-state dispute nomic performance (not to mention capital neocolonialism,” as had happened in Ven- settlement (ISDS) arbitration, and while the flight – physical and human) is testimony to ezuela and Bolivia with the election of Hugo tribunal agreed that Occidental had violated the folly of their policy choices.”23 Chavez and Evo Morales.27 its contract and broken the law, it judged So when Trudeau says “That doesn’t Besides initiating his pathbreaking eco- that the annulment was “not fair and equi- work,” he is neatly summarizing the script nomic reforms, Correa also directly took on table treatment to the company.” In 2012 he’s been given. the entrenched elites. One of his first acts the dispute tribunal awarded a judgement was to shut the US military base in the city against Ecuador in the amount of US $1.8 Banana Republic of Manta in 2007. When criticized for that billion – the largest-ever ISDS award to that To really appreciate Correa and More- daring move, Correa said he would allow a date – and also required the country to pay no’s Citizen’s Revolution, it’s important for US navy base in Ecuador if the US would $589 million in backdated compound inter- readers to know something of Ecuador’s allow an Ecuadorian navy base in Miami. est, along with half of the costs of the court not-so-distant past. After all, it’s one thing Correa also asserted control over the coun- case, bringing the total penalty to about to be creative and smart about challenging try’s oil and other natural resources, “taking $2.4 billion.31 neoliberal economic orthodoxy. It’s another them away from domination by multina- Not surprisingly, Ecuador (like Venezu- thing to be creative and smart about chal- tionals” and renegotiating contracts.28 ela and Bolivia) subsequently refused to sign lenging that orthodoxy while you’re dread- In another brave move, Correa also trade agreements that include an investor- ing assassination at every turn. cancelled about one-third ($3.9 billion) of state dispute settlement mechanism, spark- In 1981, when Ecuador’s president Jai- Ecuador’s foreign debt – the portion found ing a worldwide resistance to such clauses me Roldos refused to cooperate with “eco- to be illegitimate – and showed the world contained in major trade agreements. nomic hit men” by indebting his country to that, as he put it, “government has the When a 7.8 magnitude earthquake foreign lenders like the IMF and the World power to cancel debt,” with obvious lessons struck Ecuador in Spring of 2016, killing Bank, he was killed in an airplane “accident” for Greece, Spain, Ireland and others.29 Cor- hundreds and causing billions of dollars in – later revealed by declassified documents to rea felt strongly that debt-servicing charges damages, Ecuador was nonetheless ordered have been part of the CIA’s Operation Con- – one of the top items in virtually every to pay the final payment of US $180 million dor, against leftist South American leaders.24 neoliberal government’s budget – are a ma- to Occidental. As Cecilia Olivet, researcher Subsequent Ecuadorian presidents took jor drain on social investment. He used the with the Transnational Institute, stated, on IMF indebtedness, leading to years of savings from these interest-payments to help “Urgently needed public resources are being neoliberal austerity and privatization, which the poor. channelled to an oil multinational during www.comer.org May–June 2017 Economic Reform | 9 an emergency because of a decision by for- precedents you are expected to resign your socialist” is indicative of a worldwide recog- profit arbitrators at a secret international portfolio forthwith.”34 nition that yesterday’s models cannot meet tribunal.”32 Hellyer’s lengthy letter explained the the needs of our time. Through all these tribulations (and historical period in Canada from 1939 to The reforms cited could be mistaken for more), Correa did not waver in his dedi- 1974 when the Bank of Canada “created a list of what Canada is currently giving up: cation to Ecuador, delivering remarkable very large sums of what you call ‘new Ca- a public central bank; an increase in public changes to the poor majority. “People must nadian currency’…[and] at no time during investment; re-regulation of the financial prevail over capital,” he said in 2014, and he this 35-year period did the Bank of Canada sector…! questioned just whose interest governments create ‘excessive’ inflation. The experience Correa’s administration had to change the should serve: “Elites or the majority? Capi- was comparable to the average of 15 OECD constitution, to retrieve the country’s central tal or humankind? The [financial] market (Organization for Economic Co-operation bank so crucial to positive change! or society?”33 and Development) countries.”35 We, on the other hand, have elected suc- Hellyer only refers to Canada’s past cessive governments who have mothballed Canadian Interlude (2) monetary experience, but we can also look our central bank and are now end-running it On November 2, 2016 an e-petition at the recent years in Ecuador, where the with the Canada Infrastructure Bank! (CIB) (#421-00858) bearing 1,268 signatures and government’s money-creation by the central The Equadorian government has more sponsored by Elizabeth May, leader of the bank for spending into the real economy than doubled public investment as a percent Green Party of Canada, was presented to has been very effective at challenging deep of GDP, and made all that infrastructure the Canadian House of Commons. The e- inequities and transforming the country, possible without incurring new private debt. petition (which was initiated in BC) called without causing “excessive inflation.” We are rushing to sell off public assets for the Government of Canada “to restore and settle for a toll-road economy. Shame the use of the Bank of Canada to its original In Solidarity on us! purpose…[which] includes making interest By challenging neoliberal economic Canada, equipped as it is with a tried- free loans to the municipal, provincial, and orthodoxy, Correa and now his successor and-true public central bank, and what’s left federal governments for ‘human capital’ Lenin Moreno are showing the way out of of its social infrastructure, has a special role expenditures (education, health, other social the indebted mess that most countries are to play in developing an exemplary model of services) and/or infrastructure expendi- in, including Canada. It will be up to the a 21st century political economy. tures.” The e-petition expressed the frustra- rest of us to push for the needed changes. We have only to elect “a government that tion that since 1974 Canadian taxpayers As Hellyer writes: “It just so happens is independent and responsible enough” to have been “needlessly paying” billions of that Canada is the only country in the G20 adopt those “workable alternative policy dollars annually in compound interest to group of countries that is in a position to options.” “international financiers” because of debt- act quickly. Parliament could enact the few Élan servicing charges. necessary changes in the statutes in a few Canada’s Finance Minister Bill Morneau weeks – certainly less than a month. So we End Notes officially responded to the e-petition with a have not only the good fortune, but also a 1. 55 Economists, “Economists from US and 10 Other Coun- very baffling reply (tabled in the House of profound responsibility to the rest of the tries Warn of Danger of Return to Neoliberalism in Ecuador.” Truthout.org, March 26, 2017. 36 Commons on January 30, 2017) that stated world, to show what can be done.” 2. Ibid. in part: “…the Bank of Canada would have In that sense, we will be following upon 3. Gonzalo Solano, “Ecuador election cliff-hanger: Leader near to create new Canadian currency, which the example and the courage of Ecuador, outright victory.” The Association Press, February 20, 2017. could lead to adverse economic conditions a small country that, against all odds, has 4. 55 Economists, op. cit. and costs. The experience of many nations literally challenged and (so far) successfully 5. Mark Weisbrot, “Why Ecuador loves Rafael Correa.” The , February 15, 2013. has demonstrated that relying on domestic defied the overlords. Guardian 6. Mark Weisbrot, Jake Johnston and Stephan Lefebvre, “Ecua- currency creation to finance government dor’s New Deal: Reforming and Regulating the Financial Sec- expenditures results in excessive inflation, Joyce Nelson’s sixth book is Beyond Banksters: tor.” Center for Economic and Policy Research, February 2013. erodes the value of a country’s currency Resisting the New Feudalism, published by 7. Ibid. and often leads to a misallocation of scarce Watershed Sentinel Books, 2016. 8. Ibid. resources….” 9. Stansfield Smith, “Ecuador’s Accomplishments Under the 10 Years of Rafael Correa’s Citizen’s Revolution.” Counterpunch. In response, Paul T. Hellyer issued an Our Comment org, April 14, 2017. Open Letter to Morneau (March 14, 2017), Equador’s example is both encouraging 10. Ibid. stating that issuing new Canadian currency and embarrassing. 11. Mark Weisbrot, Jake Johnston, and Lara Merling, “Decade (or credit) “makes perfect sense, but you dis- Given the benefits Equadorans have en- of Reform: Ecuador’s Macroeconomic Policies, Institutional Changes, and Results.” Center for Economic and Policy Re- missed it unconditionally on the basis that joyed under Correa’s leadership, and given search, February 2017. it would result in ‘excessive inflation,’ and his favoured candidate’s promise to con- 12. Mark Weisbrot, “Ecuador’s Left-Wing Success Story.” without any evidence to support your state- tinue to expand the policies and programs TheNation.com, February 14, 2017. ment. That, minister, is not correct, and I responsible for them, it gives one pause that 13. Weisbrot, Johnston, Merling, op. cit. have been looking for an easy way to avoid Moreno won by so slim a margin. 14. Weisbrot, “Ecuador’s Left-Wing Success Story,” op. cit. 15. Mark Weisbrot, “Ecuador’s Elections: Why National Sover- saying that it is a lie, but my conscience fi- How heartening the example set by the eignty Matters.” Counterpunch.org, March 23, 2017. nally dictated that there was no escape. You 55 economists from 11 countries, whose 16. Stansfield Smith, op. cit. lied to the House of Commons, and you cooperative intervention weighed in! 17. Weisbrot, “Ecuador’s Left-Wing Success Story,” op. cit. must know that under British parliamentary The emphasis on being a “21st century 18. David Akin, “Trudeau cancels Davos plans, wont’ go to

10 | Economic Reform May–June 2017 www.comer.org Trump’s inauguration, chooses domestic tour instead.” Na- rate of $720 billion (¥80tn) per year. How? productive as anyone in the world.” tional Post, January 6, 2017. By selling the debt to its own central bank, Joseph Stiglitz, former chief economist 19. Joyce Nelson, Beyond Banksters: Resisting the New Feudal- ism. Watershed Sentinel Books, 2016, p. 25. which returns the interest to the govern- for the World Bank, concurs. In a June 20. Herb Wiseman, “Will Trudeau become the next prime ment. While most central banks have ended 2013 article titled “Japan Is a Model, Not minister Canadians campaign to stop?” MyKawartha.com, their quantitative easing programs and are a Cautionary Tale,” he wrote: “Along many January 18, 2017. planning to sell their federal securities, the dimensions – greater income equality, lon- 21. Mike Blanchfield, “Biden asks Trudeau to help lead way Bank of Japan continues to aggressively buy ger life expectancy, lower unemployment, in time of uncertainty.” The Toronto Star, December 8, 2016. 22. Jerry Haar, “Canada: A True Partner.” Latin Business its government’s debt. An interest-free debt greater investments in children’s education Chronicle, July 20, 2011. owed to oneself that is rolled over from year and health, and even greater productivity 23. Ibid. to year is effectively void – a debt “jubilee.” relative to the size of the labor force – Japan 24. Peter Koenig, “Time for Counter-Coups in Latin America? As noted by fund manager Eric Lonergan has done better than the United States.” – and Europe?” Global Research, May 18, 2016. in a February 2017 article: “The Bank of That is not to say that all is idyllic in Ja- 25. William Blum, Killing Hope: US Military and CIA Interven- Japan is in the process of owning most of the pan. Forty percent of Japanese workers lack tions Since World War II, Montreal/New York/London: 1998 Edition, p. 153. outstanding government debt of Japan (it secure full-time employment, adequate pen- 26. Stansfield Smith, op. cit. currently owns around 40%). BoJ holdings sions and health insurance. But the point 27. Ibid. are part of the consolidated government bal- underscored here is that large-scale digital 28. “Ecuador’s Citizens’ Revolution Transformed a Nation: ance sheet. So its holdings are in fact the ac- money-printing by the central bank used to Analysis.” TeleSUR English, November 25, 2016. counting equivalent of a debt cancellation. buy back the government’s debt has not in- 29. Stansfield Smith, op. cit. If I buy back my own mortgage, I don’t have flated prices, the alleged concern preventing 30. “Ecuador’s Citizens’ Revolution Transformed a Nation: a mortgage.” other countries from doing it. Quantitative Analysis,” op. cit. 31. Martin Khor, “The Emerging Crisis of Investment Trea- If the Federal Reserve followed the same easing simply does not inflate the circulating ties.” globalpolicy.org, November 212, 2012. policy and bought 40% of the US national money supply. In Japan, as in the US, QE is 32. “Disaster Capitalism: Ecuador Forced to Pay US Oil Giant debt, the Fed would be holding $8 trillion just an asset swap that occurs in the reserve $180M.” TeleSUR English, April 29, 2016. in federal securities, three times its current accounts of banks. Government securities 33. “Ecuador’s Citizens’ Revolution Transformed a Nation: holdings from its quantitative easing pro- are swapped for reserves, which cannot be Analysis,” op. cit. grams. spent or lent into the consumer economy 34. Hon. Paul T. Hellyer, “An Open Letter to the Minister of Finance Bill Morneau,” March 14, 2017. Eight trillion dollars in money created but can only be lent to other banks or used 35. Ibid. on a computer screen! Monetarists would to buy more government securities. 36. Ibid. be aghast. Surely that would trigger runaway The Bank of Japan is under heavy pres- hyperinflation! sure to join the other central banks and Sovereign Debt But if Japan’s experience is any indica- start tightening the money supply, revers- Jubilee, Japanese-Style tion, it wouldn’t. Japan has a record low ing the “accommodations” made after the inflation rate of .02 percent. That’s not 2 2008 banking crisis. But it is holding firm By Ellen Brown, The Web of Debt Blog, percent, the Fed’s target inflation rate, but and is forging ahead with its bond-buying June 27, 2017 1/100th of 2 percent – almost zero. Japan program. Reporting on the Bank of Japan’s Japan has found a way to write off nearly also has an unemployment rate that is at a policy meeting on June 15, 2017, The Fi- half its national debt without creating infla- 22-year low of 2.8%, and the yen was up nancial Times stated that BoJ Governor Ku- tion. We could do that too. nearly 6% for the year against the dollar as roda “refused to be drawn on an exit strategy Let’s face it. There is no way the US of April 2017. from easy monetary policy, despite growing government is ever going to pay back a $20 Selling the government’s debt to its own pressure from politicians, markets and the trillion federal debt. The taxpayers will just central bank has not succeeded in driving local media to set one out. He said the BoJ continue to pay interest on it, year after year. up Japanese prices, even though that was was still far from its 2 percent inflation goal A lot of interest. the BoJ’s expressed intent. Meanwhile, the and the circumstances of a future exit were If the Federal Reserve raises the fed funds economy is doing well. In a February 2017 too uncertain.” rate to 3.5% and sells its federal securities article in Mother Jones titled “The Enduring Rather than unwinding their securities into the market, as it is proposing to do, by Mystery of Japan’s Economy,” Kevin Drum purchases, the other central banks might do 2026 the projected tab will be $830 billion notes that over the past two decades, Japan’s well to take a lesson from Japan and cancel annually. That’s nearly $1 trillion owed by gross domestic product per capita has grown their own governments’ debts. We have en- the taxpayers every year, just for interest. steadily and is up by 20 percent. He writes: tered a new century and a new millennium. Personal income taxes are at record “It’s true that Japan has suffered through Ancient civilizations celebrated a changing highs, ringing in at $550 billion in the first two decades of low growth…. [But] despite of the guard with widespread debt cancel- four months of fiscal year 2017, or $1.6 tril- its persistently low inflation, Japan’s econo- lation. It is time for a twenty-first century lion annually. But even at those high levels, my is doing fine. Their GDP per working- jubilee from the crippling debts of govern- handing over $830 billion to bondholders age adult is actually higher than ours. So ments, which could then work on generat- will wipe out over half the annual personal why are they growing so much more slowly ing some debt relief for their citizens. income tax take. Yet what is the alternative? than we are? It’s just simple demograph- Japan seems to have found one. While ics…. Japan is aging fast. Its working-age Ellen Brown is an attorney, founder of the US government is busy driving up its population peaked in 1997 and has been the Public Banking Institute, a Senior Fellow “sovereign” debt and the interest owed on declining ever since. Fewer workers means of the Democracy Collaborative, and author of it, Japan has been canceling its debt at the a lower GDP even if those workers are as twelve books including Web of Debt and The www.comer.org May–June 2017 Economic Reform | 11 Public Bank Solution. She also co-hosts a accountable. Hence public services could be best interests. radio program on PRN.FM called “It’s Our funded by public money. Given the politi- Mellor states that the basic question Money.” Her 300+ blog articles are posted at cal will, central banks could reclaim money addressed in her book is, “Why was there EllenBrown.com. creation for the people rather than acting as public money for the banks but none for ❧ ❧ ❧ banker to banks. The book is a competent, the people?” This question, she shows, “is Our Comment. Paul Hellyer has been comprehensible and readable analysis of central to the choice between debt and de- clear on the Bank of Canada’s capacity to local, national and international banking, mocracy.” She argues adroitly that money is deal with Canada’s debt. The Canada Infra- whilst introducing the ways in which such social and public – that “the public currency structure Bank, (CIB) on the other hand, is a democratising of money could give birth in all its forms relies on social and public the best debt traps ever – one with a great to an entirely new post capitalist economy. trust,” and that, “because money systems life expectancy. Élan The private, commercial banking system and their currencies are of necessity public that currently dominates the economy, does and social, they should be democratically Debt or Democracy: Public not, and cannot stand alone. The banking accountable.” Money for Sustainability system of the global market rests entirely She shreds the myth that it is “private upon public trust and public authority. It wealth and private money that drives pros- and Social Justice is necessarily backed by the public capacity perity,” and contends that it is “public mon- Review of a book by Mary Mellor, Pluto, to create public currency free of debt. The ey and public wealth that creates the frame- 2015, ISBN: ISBN: 978-0-7453-3554-4 fact raises the fundamental question of the work for private profit,” and maintains that “For a little while Pooh and The Floating political will. Why do citizens and taxpayers public money must be used to support the Bear were uncertain as to which one of them allow the private finance system to control environment and social justice, “in the same was meant to be on the top, but after trying the public sector? As taxpayer bailouts and way it has been used to save the financial one or two different positions, they settled subsidies to private banks indicate, the logi- system.” down with The Floating Bear underneath cal progression is to bring money creation She makes clear and compelling the and Pooh triumphantly astride it, paddling under democratic control so that it can be case that we must choose between debt and vigorously with his feet.” used to serve public purposes. This conclu- democracy and provides the information A.A. Milne’s charming sketches illustrate sion flows from the fact that, as Mellor con- essential to the task. metaphorically what happens when the tool cisely explains, money creation originally While “it is no utopian dream,” she does seeks to become master. In similar vein, as lay in the hands of the sovereign rulers of not underestimate the challenge. “What is Mary Mellor skillfully demonstrates, the city or nation states. It has shifted from the needed,” she realizes, “is the political will money system is currently dictating the ruling classes to the commercial sector, but to recognize the potential power of public rules to humanity. Why can public money remains necessarily a public resource. The money creation.” be made available for banks, she asks, when central bank must now return the sovereign Two outstanding, pertinent resources are there is none for the people? Her latest book, right of money creation, free of debt, to the Michael Rowbotham’s The Grip of Death: Debt or Democracy is an explanation of the democratic control of the people. A Study of Modern Money, Debt Slavery and nature of money in the 21st century. She ex- In casting a searchlight on the choice Destructive Economics, and Kate Hawarth’s plores the way in which governments create between debt or democracy, Mellor quietly Doughnut Economics. new money (“public money”) arguing that, raises questions which go well beyond the The former is a highly readable back- since money is a public and a social tool, its scope of this fascinating book. What could ground that ought to do much to generate creation should therefore be democratically be done if the money system was under that political will. democratic control? What socially just and The latter is equally accessible. Hawarth ecologically sustainable policies might cease quotes Buckminster Fuller who said, “You to be blighted by the myth of market free- never change things by fighting the exist- BookStore dom backed by the heavy hand of austerity? ing reality. To change something, build a Books by Hazel Henderson, W.F. The answers are all there, sparkling inside new model that makes the existing model Hixson and William Krehm can be the unappetising cover. All you have to do obsolete.” ordered online at www.comer.org. is open it. Taking up that challenge, Hawarth By William Krehm: Frances Hutchinson “[sets] out seven mind-shifting ways in • Towards a Non-Autistic Economy which we can all learn to think like twenty- Our Comment – A Place at the Table for Society first-century economists.” • Babel’s Tower: The Dynamics The chief importance of Mellor’s book is Élan expressed in its title. It states bluntly exactly of ­Economic Breakdown General Comment • The Bank of Canada: A Power where we’re at! Unto Itself We’re living through an exciting age of The greatest feature of a central bank – • How to Make Money in a transformation that, over the past four de- however vigorously it may be denied – has Mismanaged Economy cades has been dragged off course by those been strongly expressed by Joseph Stiglitz in • Meltdown: Money, Debt and who would thwart change and instead, The Price of Inequality. He said, “say what the Wealth of Nations fortify the status quo. To that end, they you like, all central banks are public.” He • Price in a Mixed Economy – have monopolized the sovereign power to went on to argue that they should, therefore, Our Record of Disaster create money and used that power to en- be working for the common good. sure policies that they see as serving their Élan

12 | Economic Reform May–June 2017 www.comer.org I believe this governance structure strikes the right balance between the interests of Social Progress Derailed: taxpayers, and institutional autonomy in the interest of optimal performance. The New Gravy Express Train The argument that the CIB has not been studied carefully enough runs counter to Canada Needs Despite these good reasons, critics have what I’ve seen. In a thorough prestudy of the Infrastructure Bank Now raised a number of concerns. Notably, they bill, the Senate banking committee held six argue that the CIB is not really a bank; that meetings and senators heard from a 29 ex- By Sarabjit (Sabi) Marwah, Toronto Star, there aren’t enough details available on how pert witnesses. This qualifies as a solid review. OpEd, June 20, 2017 projects become eligible; and, finally, that The CIB is a creative, risk-mitigating and The CIB is a creative, risk-mitigating and the Bank’s CEO and its board should not cost-effective way to deliver some of our pub- cost-effective way to deliver some of our public serve at the pleasure of the government. lic infrastructure projects that may otherwise infrastructure projects that may otherwise not With respect to the first argument, as not be built, or be built over an extended be built, or be built over an extended period of a former banker myself, I can attest that period of time. This is in the best interest of time. Delaying the CIB serves little purpose. the CIB is, indeed, a bank. It may not take taxpayers, the overall economy and Canada. Newcomers to the Senate lacking experi- deposits in traditional way that we all know, Delaying the CIB serves little purpose. ence in government often find themselves, but it is very much a merchant bank that like me, absorbing a lot of lessons that might structures projects, takes equity positions Before his appointment to the Senate in 2016 first appear to have little to do with our role and makes investments. as an independent senator from Ontario, Sabi of soberly examining and, when necessary, Second, the fact that there aren’t enough Marwah was the vice chairman and chief op- amending legislation. details on projects that would be eligible for erating officer of the Bank of Nova Scotia (Sco- I’ve learned, for example, that passing a funding shouldn’t be a surprise when estab- tia Bank), a position he had held since 2008. bill can be an often-technical process; that the lishing a major new initiative like the CIB. rules of debate are complex and, even though I have seldom found that all of the details Our Comment this Senate is becoming a more independent of a new institution’s undertakings are laid Of course we need an Infrastructure place, that political matters can sometimes out before the institution itself is enacted Bank! That’s why the Bank of Canada Act obscure what the Senate really does. into law. Furthermore, projects of the CIB enabled the federal government to finance And while I’ve become appreciative that should be funded on a case-by-case basis, projects at the federal, provincial, and mu- these are necessary facets of governing, the and only after careful review by the experts nicipal levels, on a near interest-free basis. recent debate surrounding the Canada In- at the bank. The “real issue” of the senate debate had frastructure Bank (CIB) suggests to me that Lastly, and perhaps most controversially, to do with the bad habit of burying con- perhaps we ought to be talking a little more there are those who argue the bank’s CEO troversial legislation in an omnibus bill to about the substance of this proposal, rather and board should not serve at the pleasure avoid the scrutiny afforded by a proper than having a breathless procedural discus- of the government, because that would pro- debate in the House. sion about how to split this government’s vide elected officials with the temptation to The need for an infrastructure bank hasn’t budget in two. direct the banks’s activities. With this I also been in doubt since 1934, when the Bank of The real issue is that some want the CIB disagree. Canada Act made provision for the Central to take effect as soon as possible, while oth- The legislation contains forward-looking Bank to make loans to the government of ers would prefer to delay it until the fall. Put provisions that require the minister respon- Canada or any province. In 1938, parliament me firmly in category one. sible to consult with the bank’s board of passed Bill 143, Municipal Improvements As- A large part of the 2015 federal election directors prior to any termination, removal sistance Act, an act to assist municipalities to was fought on the critical policy debate or suspension of the CEO or chairperson. make self-liquidating improvements. This over whether Canada should undertake This is a standard higher than that at Act was not rescinded until 1975. investments in productivity-enhancing in- Export Development Canada or Canada In creating the credit to finance such frastructure projects to address the national Mortgage and Housing Corporation and we projects, our public Bank of Canada does infrastructure deficit of $500 billion-plus. have been happy with the governance there what we allow private banks to do, except Canadians decided our country’s roads, for years. Why then would we be unhappy that it does so in the public interest, sub- highways and other infrastructure are in with something that has a higher standard? ject to monetary policy established by the need of massive replacement and upgrade, Moreover, this bank will be a steward of federal government. In 1935 Liberal Prime and the $35 billion proposal the Senate is taxpayer funds and therefore the govern- Minister, MacKenzie King, in a nationwide currently studying is a good start toward ment has a responsibility to ensure it is broadcast said: “Once a nation parts with addressing this deficit. properly managed and in the public interest. control of its currency, it matters not who The CIB will bring in badly needed pri- We cannot risk control of a public institu- makes that nation’s laws. Usury, once in vate capital, reduce risk to government and tion such as this by private interests. control, will wreck any nation. Until the tap valuable expertise from the private and Further, should the private sector have control of currency and credit is restored institutional sectors. It would fund projects the impression that their investments would to government and recognized as its most that are too costly for government alone to be subject to undue political interference, conspicuous and sacred responsibility, all undertake, but also too risky for private sec- the bank’s reputation would suffer and be talk of the sovereignty of Parliament and of tor investors to assume on their own. contrary to its long term success. democracy is idle and futile.” www.comer.org May–June 2017 Economic Reform | 13 From 1938, when the bank was national- Last year an e-petition was submitted to heels for too long Canada threatened to go ized, it was used to create funding for physi- the government requesting that the Bank of it alone13, and the US finally got involved cal infrastructure like the Trans-Canada Canada fulfill its stated role “to promote the because it would not have a claim to any Highway and the St. Lawrence Seaway, and economic and financial welfare of Canada,” revenues if they didn’t share the cost. Either social infrastructure like Medicare and Old by returning to previous levels of monetary Mr. Poloz is intentionally misleading the Age Security – without undue debt or infla- financing and economic activity1, as op- public on this history, or he is unaware of tion. posed to only focusing on inflation through the history of the institution he is leading. Since joining the Basel Committee of the the blunt and indirect instrument of influ- The two most economically beneficial Bank for International Settlements (BIS) encing short-term interest rates in overnight banks in the history of Canada are the Bank in 1974, Canada has borrowed instead, at markets. of Canada and the Industrial Development compound interest. By 2012 this change Minister Morneau’s response to the pe- Bank (now the BDC). Both had the same of policy had cost Canadian taxpayers C$ 1 tition was troubling, as it cites disproven auspicious beginnings with a capitalization trillion in interest – twice the national debt! assumptions about inflation that Cana- injection of publicly created funds14. At That debt has been used to justify a neolib- da’s own history belies. Empirical evidence the same time the BoC was nationalized eral austerity agenda in Canada. shows that higher levels of federal monetary in 1938, the government enacted Bill 143, Ironically, the need for further debate financing did not effect inflation in Cana- the Municipal Improvements Assistance Act, is made clear in comments like: “The CIB da2, the most recent proof being that when, which allowed municipalities to borrow will bring in badly needed private capi- in 20113, Harper increased the monetary directly from the federal government for tal, reduce risk to government, and fund financing of the BoC 33% for three years, building municipal infrastructure15. The projects to costly for government alone to inflation actually decreased4. Careful analy- Bank of Canada was once the largest holder undertake”; “This bank will be a steward of ses of instances of hyperinflation, by institu- of federal debt, using monetary financing taxpayer funds”; “I believe this governance tions like the IMF, have proven that public to bring us into the unprecedented growth structure strikes the right balance between money creation alone is never the culprit; of our golden years in the post-war period, the interests of taxpayers, and the institu- speculation, corruption, a poor understand- funding many important public infrastruc- tional autonomy in the interest of optimal ing of monetary policy and economics, and ture projects like the St. Lawrence Seaway, performance”; “The CIB is a creative risk- market forces are of greater influence5. Trans Canada Highway, and early parts of mitigating and cost-effective way to deliver Claiming that government monetary fi- the 401 Highway. More importantly, we some of our public infrastructure projects… nancing is inflationary, ignores that private, had no problem using the BoC to fund our This is in the best interest of taxpayers, the bank money creation dwarfs government efforts in WWII16. Why can’t we use it for overall economy and Canada.” money creation at approximately 97%6 peaceful purposes as we did until we joined The difference between the Bank of Can- of our money supply created as debt with the Bank for International Settlements’ first ada and the proposed Canada Infrastructure interest attached7. It is their loans and credit Basel Committee in 197417 and proceeded Bank (BIS) is that the Bank of Canada is that have caused consumer debt to rise to to adopt monetarism, the now disproven public and legally committed to serve the nearly 170% of average income and over notion that the money supply is the main public interest. 100% of GDP8, while also inflating as- driver of inflation18. The resulting increase The proposed Canada Infrastructure set prices resulting in the soaring housing in federal debt after 1974 is painfully clear19, Bank is private in its structure and in its prices in Toronto and Vancouver9. The and was a direct and immediate result of operation, and will be used to serve the elimination of reserve requirements at the these policy changes. The following year the perceived best interests of those who have BoC in 1991, replaced by the amorphous government rescinded Bill 143 in line with designed and been put in charge of it. and ephemeral capital requirements, en- the dictates of the BIS. Monetarism forced Graham Towers, first Governor of the sured that what little direct control over increased private sector borrowing instead Bank of Canada, confirmed that “Anything the money supply the BoC had was gone10. of public money creation, and since then the physically possible and desirable can be Also disproving the notion is that the mas- federal share of the total public debt burden made financially possible.” sive amounts of QE injected into various has been downloaded onto the provincial No wonder this government has been economies after the ’08 crisis did not inflate and municipal levels20 and is set to further in such a hurry to establish and staff their to consumer prices either (although it did burden cities now that the 2017 budget has preferred infrastructure bank, and bury its inflate asset prices)11. reduced their access to federal funding21. legislation in a 300-page omnibus bill! However the most alarmingly ironic Let’s say the government needs to build Élan statements come from our current BoC $1 billion in new infrastructure. It can governor Mr. Poloz12. In selling the notion either create the money with the Bank of Programmed Response? that a nation with a public central bank Canada or borrow the funds selling bonds To: counter-intuitively needs foreign invest- in capital markets The Right Honourable Justin Trudeau, ment to fund public infrastructure, he then Either way, $1 billion is spent on public PC, MP, Prime Minister of Canada lists two projects, the St. Lawrence Seaway goods, it will have the same result economi- The Honourable Bill Morneau, PC, Min- and the Trans-Canada Highway, which cally and socially and create exactly the same ister of Finance required no foreign investment whatsoever number of jobs and result in the same physi- Mr. Nathaniel Erskine-Smith, MP, House and were primarily funded through mon- cal asset22. The only difference is that if the of Commons etary financing using the Bank of Canada. money is borrowed, it has to be paid back Dear Prime Minister, Minister, and Mr. The St. Lawrence Seaway did not need US with interest. Erskine-Smith, investment, in fact, after the US dragged its It is most worrying to hear Prime Min-

14 | Economic Reform May–June 2017 www.comer.org ister Trudeau speak to business audiences the projects their communities need.”31 as evidenced by Burger King’s acquisition of wooing them with promises of high returns Multiple studies from around the world Tim Horton’s41, and Canada has now hit an with an unnecessary Canada Infrastruc- have proven that using private investment unenviable milestone, for the first time ever ture Bank23, when, in the Bank of Canada, to build assets, for example P3s, costs the getting more tax revenue from people than we already have one that does not require public more money, as evidenced by On- from businesses42. private investors. The greatest concern of tario’s Auditor General32 and the reversal of We need to provide the public with the all however, comes from the government’s privatizations in Europe33. infrastructure and services needed to ensure admission, allowance, and dismissal of the Are you suggesting an infrastructure bank a high standard of living befitting a country obvious conflict of interest in the govern- to build infrastructure or to provide a new of our wealth. Deficits are mere accounting, ment allowing a council heavily tilted in revenue stream for large institutional inves- and recent economic studies have proven favour of big business interests (representa- tors? How exactly are we supposed to pay that austerity shrinks economies and deficit tives from BlackRock, the world’s largest back investors? Are you planning to saddle spending grows them43. asset manager, and McKinsey & Co.) to the new infrastructure with user fees so that I hope you let evidence and history, devise the plans for the infrastructure bank they become an ongoing revenue stream? and not the specious assumptions espoused that will facilitate the high returns on their Why do documents show that the govern- by neoliberal institutions like BlackRock, investments24. Despite the clear conflict, no ment plans to take on more risk to ensure McKinsey & Co, the Chicago School, the disclosures were made and no one recused that investors get paid first, and the govern- London School of Economics, and the pri- himself for any of the council decisions. ment last34? For how much more debt will vate banking community, guide you to the The government worked for months with taxpayers be on the hook? We already made conclusion that we already have the ultimate these advisors to prepare for the closed door our debt worse when, in February this year, driver of prosperity and growth: The Bank meeting, organized by BlackRock, between the BoC reduced its automatic minimum of Canada. Prime Minister Trudeau and institutional purchase of government bonds from 15% Thank you for your time, investors. BlackRock even tailored and vet- to 14%, increasing our debt burden for no Adam Smith, Toronto, Ontario ted the Infrastructure Minister’s presenta- apparent reason except perhaps to increase tion to ensure it was what investors wanted the available general collateral in overnight Our Comment to hear. Furthering the conflict of interest is markets35. Harper’s first budget in a major- Adam Smith is a young community ac- Michael Sabia, the president of the Caisse ity government cranked the rate up to 20% tivist who works in visual effects for feature who wants $1.3 billion from Ottawa for to suit his needs; the BoC market notice film and television. light rail, leading policy discussions on the makes clear that it was done “to accom- He is working with COMER’s elected CIB as a member of Minister Morneau’s modate the planned increase in government Executive, to further study banking and Advisory Council on Economic Growth. deposits held at the Bank of Canada associ- monetary reform, and to contribute his How are Canadians to have faith in a bank ated with the Government of Canada’s plan considerable skills and abilities to the work structured by the very players that will profit announced in the June 2011 budget to in- of COMER. from it? crease its prudential liquidity over the next 3 He seeks to promote a political economy The manner in which the infrastructure fiscal years”3. Not the BoC’s plan, the Gov- that will provide equality of opportunity for bank was presented in legislation does little ernment of Canada’s plan, so why can’t we all, and function in the best interest of the to inspire faith in it either. Following in do the same? The BoC is not autonomous; common good. Harper’s tradition the CIB was jammed the disagreement with Governor Coyne that It’s especially encouraging to find young into the undemocratic omnibus Bill C-44 necessitated an additional clause in the BoC Canadians taking such quality initiatives. stifling debate25. The Senate is consider- Act proves that36, as does the disagreements It’s hard to believe that any politician ing the need to debate the CIB legislation with Governor Crow that led to his not be- could be so unresponsive as to dismiss a sub- separately26, as such an important change to ing renewed for another term37. mission of such quality, with a stock reply our system should be. Even a KPMG report We don’t need to be a source of unearned that simply ignores or denies the evidence. for Infrastructure Canada itself cautions income for investment funds, and we don’t Adam also emailed every senator. against rushing in, before more impacts can need to sell off public assets. These are capi- Élan be considered27. tal assets. “The cost of acquiring fixed assets is With our debt as high as it is (over $1 treated as expenditure at the time of acquisi- End Notes trillion and counting28) and inequality tion”38 instead of being depreciated over the 1. https://petitions.parl.gc.ca/en/Petition/Details? worsening29, why would we make it worse, life of the asset as private assets are. That Petition=e-337. promising above average returns and mon- capital cost is also accounted for in the same 2. Figure 1: Monetary financing and inflation in Canada, 1958–2012 “Is Monetary Financing Inflationary? A Case etizing public infrastructure into a revenue budget as the operating budget providing Study of the Canadian Economy, 1935-1975” by Josh Ryan- stream for private investors? Even without services, unlike municipalities’ ability to Collins www.levyinstitute.org/pubs/wp_848.pdf. www.thestar. public money creation, we can use tradi- separate capital and operating expendi- com/opinion/commentary/2015/01/17/monetarism-is-dead- finally.html. 39 tional bond issues at a lower rate than inves- tures . The net effect is to make deficits 3. www.bankofcanada.ca/2011/10/change-minimum-nominal- tors would expect from an infrastructure appear worse than they are. If we really need bond-purchases. bank30. The proposed infrastructure bank money we’re not willing to create ourselves, 4. http://thecanadianpress-a.akamaihd.net/graphics/2016/ is a huge deviation from the Liberal elec- we should be going after the billions in tax static/cp-cda-inflation-feb.png. tion platform to “use its strong credit rating avoidance and evasion and closing the loop- 5. Quote about hyperinflation in the Weimar Republic from 40 the IMF: “This episode can therefore clearly not be blamed on and lending authority to make it easier and holes that allow it , or raising corporate tax excessive money printing by a government-run central bank, more affordable for municipalities to build rates. Canada itself has become a tax haven but rather on a combination of excessive reparations claims www.comer.org May–June 2017 Economic Reform | 15 and of massive money creation by private speculators, aided broadband network, it is creating a productive asset. A produc- may find it” Making( Money by John Crow). and abetted by a private central bank” (http://positivemoney. tive asset creates value over many years, providing a continuous 38. www.statcan.gc.ca/pub/68f0023x/2006001/chap/chap7- org/2015/12/hyperinflation-how-the-wrong-lessons-were- flow of increased products and services over time. Money eng.htm. learned-from-weimar-and-zimbabwe-a-history-of-pqe-part- spent on such an asset should thus be able to be absorbed in 39. “An Ontario municipality may issue long-term debt only 2-of-8). to the economy without creating inflation” (http://b.3cdn.net/ for capital purposes and cannot borrow for operations…. nefoundation/e79789e1e31f261e95_ypm6b49z7.pdf). 6. M0 divided by M3. www.tradingeconomics.com/canada/ Repayment of municipal debt is amortized over the term of the money-supply-m3. 23. www.cbc.ca/news/politics/trudeau-public-private- debenture with regular contributions being made to the sinking 7. www.lop.parl.gc.ca/Content/LOP/ResearchPublications/ infrastructure-1.3850155. fund” (www1.toronto.ca/wps/portal/contentonly?vgnextoid= 2015-51-e.html?cat=economics. 24. www.theglobeandmail.com/news/politics/liberals-gave- ace3c1b8c8412410VgnVCM10000071d60f89RCRD). investors-extraordinary-control-over-infrastructure-bank-op- 8. http://business.financialpost.com/news/economy/canadas- 40. www.thestar.com/news/world/2016/06/17/offshore-tax- position/article34910106. www.theglobeandmail.com/news/ household-debt-is-now-bigger-than-its-gdp-for-the-first-time. avoidance-fixing-it-made-it-worse.html. politics/ottawas-dealings-to-secure-infrastructure-funds-raise- 9. http://business.financialpost.com/news/economy/bank- questions/article34904963. 41. http://www.cbc.ca/news/business/burger-king-tim-hortons- of-canada-warns-elevated-housing-market-a-major-risk-with- deal-skirts-taxes-u-s-group-says-1.2871070. high-prices-in-vancouver-toronto-unsustainable. 25. www.theglobeandmail.com/news/politics/ndp-forces- commons-debate-on-infrastructure-bank/article34945759. 42. www.huffingtonpost.ca/2013/11/24/corporate-personal- 10. https://gilliganscorner.wordpress.com/2008/04/06/ taxes-canada_n_4333694.html. canadas-private-banks-have-no-reserve-requirements. 26. www.theglobeandmail.com/news/politics/senators-discuss- removal-of-infrastructure-bank-from-omnibus-budget-bill/ 43. “Since the global turn to austerity in 2010, every country 11. http://tsi-blog.com/2015/11/why-hasnt-the-feds-qe- article35011859. that introduced significant austerity has seen its economy suf- caused-inflation. www.theregister.co.uk/2015/06/07/so_why_ 27. www.theglobeandmail.com/news/politics/be-extremely- fer, with the depth of the suffering closely related to the harsh- didnt_quantitative_easing_produce_huge_inflation. http:// careful-in-launching-infrastructure-bank-internal-report- ness of the austerity… Meanwhile, all of the economic research themarketmogul.com/brief-history-quantitative-easing. warns-ottawa/article34952796. that allegedly supported the austerity push has been discred- 12. www.macleans.ca/economy/for-the-record-stephen-poloz- ited… An economy that is depressed even with zero interest 28. www.nationaldebtclocks.org/debtclock/Canada. on-canadian-economic-openness. rates is, in effect, an economy in which the public is trying 29. www.conferenceboard.ca/hcp/details/society/income- 13. “However, the project was met with resistance from railway to save more than businesses are willing to invest. In such an inequality.aspx. and port lobbyists in the US, and hampered by war and depres- economy the government does everyone a service by running sion in the first half of the century. After rejecting numerous 30. “There’s no shortage of low-cost public financing available deficits and giving frustrated savers a chance to put their money agreements to construct a Seaway, the US Senate finally as- to Canadian governments. Ottawa can now borrow at 0.6 to work. Nor does this borrowing compete with private invest- sented in 1954 when Canada declared it was ready to proceed percent over a year and issue 30-year bonds at 1.8 percent, ment. An economy where interest rates cannot go any lower is unilaterally with its own Seaway.” https://web.archive.org/ with provinces a percentage point higher. Long-term borrow- an economy awash in desired saving with no place to go, and web/20080625044719/www.infrastructure.gc.ca/research- ing rates have never been this low. Meanwhile large private deficit spending that expands the economy is, if anything, like- recherche/result/alt_formats/pdf/hm05_e.pdf. infrastructure investors expect ‘stable, predictable returns in ly to lead to higher private investment than would otherwise the 7 to 9 percent range’…It doesn’t take an economist to 14. “The Prime Minister, as a reflationary measure, introduced materialise” (“The Austerity Delusion” by Paul Krugman in understand it makes no sense to finance projects at seven to legislation calling for an expenditure of $39 million on public www.theguardian.com/business/ng-interactive/2015/apr/29/ nine percent when you can do so at two percent” (https://cana- works to be financed by an expansion of the note issue” The( the-austerity-delusion). http://michael-hudson.com/2017/03/ dians.org/blog/trudeau-government-announces-privatization- Bank of Canada: Origins and Early History by George S. Watts). why-deficits-hurt-banking-profits. bank). “This argument doesn’t hold up. Borrowing money is “The Bank of Canada subscribed for the full initial stock issue largely a balance sheet transaction, and if it’s used to invest in of $25 million and as funds were required drew it down and infrastructure there will be assets to match these liabilities for An Open Letter to the paid for it. By starting off with only equity money and no many years to come,” the report states. Further, they note that borrowed funds, the new Bank (IDB) was to have a favourable Canada has the lowest net debt-to-GDP ratio of the Group of Minister of Finance Bill start and develop some strength and attractiveness in its oper- Seven countries by far. “The case for establishing the CIB is ating record before it should have to borrow and pay interest” not compelling, as it has the potential to increase overall costs Morneau (The IDB: A History of Canada’s Industrial Development Bank to taxpayers while privatizing the most high-return, low-risk by E. Ritchie Clark; for context, that is $652 million and $418 March 14, 2017 infrastructure assets….” (www.theglobeandmail.com/news/ million respectively in today’s dollars). politics/case-for-canada-infrastructure-bank-not-compelling- The Hon. William F. Morneau, 15. “This Bill authorizes the Minister of Finance, with the ap- researchers-warn/article34898110). Minister of Finance House of Commons proval of the Governor in Council, to enter into agreements to 31. www.liberal.ca/wp-content/uploads/2015/10/New-plan- Ottawa, ON K1A 0A6 make loans to municipalities to enable them to pay the whole for-a-strong-middle-class.pdf. or part of the cost of constructing or making extension, or Dear Minister: improvements to or renewals of a municipal waterworks sys- 32. www.theglobeandmail.com/news/politics/private-part- I am writing in respect to your official nerships-cost-ontario-taxpayers-8-billion-auditor-general/ tem, gas plant, electric light system or any other self-liquidat- response to petition 421-00858 sponsored ing project.” www.dropbox.com/s/hftdt0yn5uvzkgo/C-143. article22012009. pdf?dl=0. 33. “A growing number of cities worldwide deciding to end by Elizabeth May, member of parliament for their experiments with privatisation. Since 2007, 170 mu- 16. “During the war period, $517.8 million of securities were Saanich-Gulf Islands, BC, calling upon the nicipalities in Germany alone have brought energy services bought directly from the government with newly created back into public hands. Globally, at least 100 cities have done Government of Canada to restore the use of central bank money and by converting numerous maturing the same with privatised water services over the past 15 years, securities into new Government of Canada issues (Neufeld the Bank of Canada (BoC) to make inter- including dozens of municipalities in France – once seen as a 1958a, 145; Mcivor 1958, 174). As Plumptre (1941, 155–56) est- free loans to governments for “human growing focus for water privatisation” (www.theguardian.com/ remarks, the effect of this increase in note issue was to provide cities/2014/nov/12/hamburg-global-reverse-privatisation-city- capital” expenditures. In your reply dated “a sort of interest-free loan to the Government through the services). medium of the Bank of Canada.” The Bank issued the notes at November 12, 2016, you said to do that virtually zero cost to itself, whilst the profits paid to it by the 34. http://ipolitics.ca/2017/05/31/documents-raise-new- “would require the Bank of Canada to either government for holding government debt were all paid back to questions-about-taxpayer-risk-in-liberal-infrastructure-bank. borrow the funds it loaned to the Govern- government which owned all of its stock.” www.levyinstitute. 35. www.bankofcanada.ca/2017/02/bank-canada-announces- org/pubs/wp_848.pdf. reduction-minimum-amount-government. ment, or create new Canadian currency.” 17. www.bis.org/bcbs/history.htm. 36. “Minister’s directive (2) If, notwithstanding the consulta- The first alternative is a non-starter and 18. www.thestar.com/opinion/commentary/2015/01/17/ tions provided for in subsection (1), there should emerge a can be dismissed out of hand. The second monetarism-is-dead-finally.html. difference of opinion between the Minister and the Bank con- suggestion of creating new Canadian cur- cerning the monetary policy to be followed, the Minister may, 19. www.fraserinstitute.org/sites/default/files/authors/ after consultation with the Governor and with the approval rency makes perfect sense, but you dis- brief%20history%2012.png. of the Governor in Council, give to the Governor a written missed it unconditionally on the basis that 20. Chart 4: Asset Shares By Order of Government, Gen- directive concerning monetary policy, in specific terms and it would result in “excessive inflation,” and eral Government, 1955–2011. www.policyalternatives.ca/sites/ applicable for a specified period, and the Bank shall comply default/files/uploads/publications/National%20 with that directive” (http://laws-lois.justice.gc.ca/eng/acts/B-2/ without any evidence to support your state- Office/2013/01/Canada’s%20Infrastructure%20Gap_0.pdf. FullText.html). ment. That, minister, is not correct, and I 21. www.theglobeandmail.com//report-on-business/economy/ 37. “This will mean discarding the polite fiction that the Bank have been looking for an easy way to avoid ottawa-eyes-more-private-cash-in-infrastructure-push/arti- has any real say over, and therefore responsibility for, monetary saying that it is a lie, but my conscience fi- cle34392164. policy formulation – however convenient that story may be for 22. “If a loan funds the building of a house, or a railway or a the government and however flattering the Bank of Canada nally dictated that there was no escape. You

16 | Economic Reform May–June 2017 www.comer.org lied to the House of Commons, and you tion between government and the commer- inflation in the sense of too much money must know that under British parliamentary cial banks. That enabled Canada not only to chasing too few goods. Store shelves were precedents you are expected to resign your play a larger-than-life role in the war effort, loaded with produce, and there was only portfolio forthwith. but also to extend the miracle into the post- one commodity in short supply. The infla- Also, I must admit that I was not thrilled war years. tion was primarily due to the wage-price by your inference that Canadian politicians As a member of parliament and cabinet, spiral when nominal wages rose by a mul- might be irresponsible. Why did you not I was aware that government-created money tiple of productivity for 25 consecutive years say that when Canadian politicians relied played a key role in many of our infrastruc- – a critically important fact which hasn’t heavily on Bank of Canada funding, the ture projects like the Great St. Lawrence yet made its way into the economic text- inflation rate was comparable to countries Seaway development, the Trans-Canada books. Regrettably neither politicians nor that relied exclusively on private banks for Highway, new airport terminals and port economists had made any effort to educate their funding? These are the facts. facilities. It also enabled the federal govern- the public concerning the simple fact that In 1938 there were no jobs available in ment to assist the provinces and municipali- you can’t consume more than you produce, Canada. None. Then, in 1939, World War ties with many of their major public works and that there is a close correlation between II began and it wasn’t long until everyone ranging from bridges to sewage-disposal sys- nominal wages, prices and productivity. was either in the armed forces, or working in tems, and including the building of schools, Wage increases, with a few exceptions factories to build the tanks, trucks, airplanes universities and colleges. such as corporate executives, are no longer a and ships required to support a really mag- Another marvellous benefit that govern- problem. But there are other problems such nificent war effort. Unemployment dropped ment-created money helped make possible as increasing taxes, and price increases due to an historic low of one percent. was the establishment of a social security to the cartelization encouraged by globaliza- You may wonder where the Canadian network to help citizens in times of distress. tion. They are of greater immediate concern government got the money to initiate this Some of us who had lived through the Great than monetary inflation. unprecedented economic miracle. The an- Depression of the 1930s were determined The system of money-creation shar- swer is that the Bank of Canada printed it. that never again would someone lose their ing between the government and private The Bank bought government of Canada home, farm or life savings due to a serious banks worked splendidly for 35 years until bonds and paid for them with newly minted illness of one of the members of the fam- 1974, when the Bank of Canada unilater- cash. The government paid the Bank of ily. Nor would someone be left destitute ally changed the rules. As far as I know Canada interest on the bonds which then, because he or she was unemployed. This led – and I and others have spent many hours because the government owned 100% of the to universal pensions, unemployment insur- in research without finding any evidence Bank shares, was returned as dividends, with ance, and Medicare, all launched with help to refute it – this was done without either only the cost of administration deducted. from the Bank of Canada. advising or obtaining the consent of the It was near zero cost money that produced So from 1939 to 1974 the Bank created Canadian government that owns 100% of such wondrous results. very large sums of what you call “new Cana- the Bank’s shares. The newly created money that the gov- dian currency” to facilitate a near miracle. The Governor of the Bank of Cana- ernment spent into circulation wound up in With the exception of the wartime years da, Gerald K. Bouey, simply announced the private banks where it became what the when shortages of consumer goods made a that the Bank was adopting “monetarism.” economists called “high-powered money.” certain amount of inflation inevitable, at no There was no mention that this was being High-powered money was really “legal ten- time during this 35-year period did the Bank done to conform to a policy of the Bank for der” money, or “real money,” that the banks of Canada create “excessive” inflation. The International Settlements (BIS), in Basel, could use as “cash reserves” which the law experience was comparable to the average Switzerland. Of much greater significance allowed them to leverage into bank loans of 15 OECD (Organization for Economic was the failure to disclose that the Bank was equal to 12½ times their reserves. So if $10 Co- operation and Development) countries. adopting the BIS’s prohibition of providing million of what was literally government- In the 9 years from 1958-1966 Canadian low cost money to governments. In future, created money was ultimately deposited in prices rose 1.8% compared to the average we would have to borrow in the market, and one of the commercial banks, the banking of 3.1% for the 15 countries. Then from pay market rates. system was able to create an additional $125 1964-1991 prices rose 5.6% compared to The social and financial consequences million in book-entry or “virtual” money. the 5.85% average. So Canadian experience proved to be disastrous. It has been down- The commercial banks were able to lend was neither better nor worse than the com- hill ever since. In 1974 there were no foods this money to help businesses build factories, petition, and certainly not “excessive” by the banks in Canada. Not one. The latest count develop essential products, help Canadians norms for that period. Our big advantage is 2,108. This can be attributed to the buy “War Bonds,” etc. These large infusions was that our amazing performance was fi- change in policy which has cost Canadian of first government-created cash, followed nanced without accumulating a lot of debt. taxpayers a fortune. From fiscal 1974/75 by bank-created credit, made it possible for As I pointed out in an open letter to the to fiscal 2013/14 we paid $1.17 trillion on Canada to be transformed in a few short prime minister on June 1, 2016, from 1867 federal debt alone – the equivalent to more years from a largely agricultural and re- to 1974 Canadians had financed two world than $13,000 for every family of four – al- source- based economy into a significant wars and a very long list of major infrastruc- most all of it totally unnecessary. Just imag- mixed economy that included a strong man- ture projects while only accumulating an ine what more than a trillion dollars could ufacturing, industrial and scientific base. inconsequential $21.6 billion in debt. have accomplished if it had been spent on What made this all financially possible The increase in inflation in the late ’60s health care, education, keeping promises to was a sharing of the money-creation func- and early ’70s was not classical monetary our aboriginal brothers and sisters, the arts, www.comer.org May–June 2017 Economic Reform | 17 research for clean energy and infrastructure. This was the end of the so-called “partial ment years. Most discouraging of all is to To be overly kind to Gerald Bouey, he reserve” system of banking. It was replaced see a whole generation of young people who may have been influenced by the fact that by a new “norm” called “capital adequacy.” believe they can’t have a life as good as their the wage-price spiral peaked in 1974 and Banks were required to maintain about 5 parents. It should be the other way around. policy makers were looking for solutions. cents in invested capital for every dollar The banking and financial system is Bouey induced a minor recession in 1974- of new loans they create. The new system broke! Private banks have persuaded politi- 75 but a vastly more important one in 1981- should have been called “capital inadequa- cians to give them a monopoly on money 82 in concert with Paul Volcker, Chairman cy” because after the meltdown of 2007/08 creation even though it is the people who of the Federal Reserve System, a devoted all the banks, including Canadian banks, own the patent, and the banks are only apostle of Milton Friedman and his class- had to be bailed out by taxpayers and/or licensees. But bank-created money is all room abstractions. Volcker came within their central bank, or both. created as debt – debt that has to be repaid hours of crashing the whole world financial Even more disconcerting was Governor with interest. Unfortunately, however, no system by pushing US interest rates as high Crow’s attempt to have the Bank of Canada one creates any money with which to repay as 22 percent. Act amended to limit its role to preserving either principal or interest. So we find our- The results were disastrous both socially the purchasing power of the currency at selves in the unhappy position of having to and economically. Tens of thousands of the expense of encouraging job creation raise taxes, which are already too high for people lost their jobs, their homes and their and economic growth for the people. For- many people to pay, or borrow more, and go businesses. Government revenues fell, while tunately members of parliament refused to further and further in debt. The system is at rising deficits were rolled over into debt be bulldozed. The compromise was that the a dead end, and anyone who can’t see that acquired at astronomical cost. It was the BoC should adopt policies designed to limit must be numerically challenged. beginning of a debt cycle from which we inflation to 2 percent. That was a de facto So what has been your proposed solu- have never recovered. Central banks, which change in the preamble of the BoC Act, to tion, minister? It is to borrow more and put have never been known for their finesse, eliminate the final section which reads, “to us further in debt? Even your own depart- used interest rates as the bluntest of instru- promote the economic and financial welfare ment is concerned. The numbers released ments – comparable to using a bulldozer to of Canada.” quietly at the end of 2016 paint a bleak weed a vegetable garden. The tragedy is that You say concerning the 2% inflation picture of Canada’s future – one filled with a 12-month wage-price freeze on everything rule, “This is the best contribution mon- decades of deficits. except commodities, would have reduced etary policy can make to solid economic An article posted by Andy Blatchford of inflation to near zero without the loss of a performance.” I doubt that you are kidding The Canadian Press, on January 5, 2017, single job. anyone but yourself. It is 180% opposite reads in part: “The report, published on Canada was just beginning to recover to the de facto preamble established by the the Finance Department website two days from the horrendous consequences of the first, and arguably most progressive and before Christmas, predicts that, barring any 1981-82 fiasco when along came an even enlightened, of BoC governors. In response policy changes, the federal debt could climb more evangelical believer in the infallibility to questions from the Commons Finance past $1.55 trillion by (2050-51) – more of Central Banks, John Crow, who did it to Committee he assured members that the than double its current level.” us again in 1990-91. BoC would finance the war effort up to the “The projection comes as the federal As you suggest, 1991 was a critical year physical limits of the economy. He kept his Liberals proceed with plans to run annual in Canada’s monetary history. The Cana- promise, both during and after the war. It deficits over at least the next six years as dian chartered banks lobbied the govern- was the policy that gave us the best 35 of a way to help Ottawa fund an economy- ment to remove the 8% cash reserve against the last 100 years. Since 1991 it has been boosting effort that includes infrastructure deposits requirement, which had been in “austerity economics” designed to shrink investments.” effect since the BoC was established. Gov- the real economy to fit the blueprint of the Wow! By 2050 my great-grandchildren ernor Crow assured the then minister of financial economy. will be adults, and you plan to leave them finance that there were other ways of con- In 1995 the government of the day in- with an anemic economy and a debt of trolling the growth in the money supply. So troduced a draconian budget that ended $1.5 trillion or more. What if the banking the Bank Act was amended and cash reserves the Canada we knew. Some federal respon- cartel, which controls central banks, decides eliminated over 4 years. Today you are lucky sibilities were downloaded to the provinces, to raise interest rates to 10 percent? They if your bank has more than a cent or a cent- which in turn downloaded on the munici- would crash the system and buy up our and-a-half in cash (legal tender) for every palities which had to cut corners and raise children’s assets for pennies on the dollar. dollar you think you have in the bank. taxes. Cash strapped provinces began to Which brings me, finally, to your pro- What a lovely Christmas present for the build casinos and promote gambling, which posed Infrastructure Bank – a Trojan Horse banks, billions of dollars a year additional is just another tax on the poor. Commercial if ever there was one. profit because they no longer had to keep advertising was encouraged everywhere, Do you know who you are getting into cash on hand that wasn’t earning interest. including some of Toronto’s beautiful new bed with? The head of your advisory panel And what a slap in the face to taxpayers streetcars being plastered with paint. New provides a direct link to the folk who have who, after being robbed of the benefit of charges were applied to formerly free public been ripping off the people of the world low cost BoC-created money in 1974, lost spaces. Thousands of public service jobs for three centuries. They put up 1,200,000 the benefits of seigniorage (the profit from were contracted out in order to save a few pounds of gold and silver when the Bank printing the cash that the banks had to keep dollars in the short run, while establishing of England was chartered in 1694 and lent as reserves.) a liability for increased costs in their retire- it all to King William at 8% per annum,

18 | Economic Reform May–June 2017 www.comer.org a very high interest rate for a government due to a brainwashed academy and a disin- to the various provinces and territories in guaranteed loan. The King, either to show terested press. But the situation is getting amounts proportional to their population, his appreciation, or to fulfil a promise – we more desperate now. World debt is at an all with the understanding that they would help may never know which, allowed them to time high, as is the number of unemployed the municipalities, as appropriate, so there print 1,200,000 pounds in bank notes and worldwide. The situation will deteriorate would be no need to cut back on essential lend them to their rich friends. In effect, further because robots are beginning to services, or sell valuable assets. they were allowed to lend the same money eliminate many jobs, especially in the “tax 4. Amend the Bank Act to reverse the twice, once to the King and once to their producing” sector of the economy. A major 1991 amendments that eliminated the friends, and collect interest from each. A source of new jobs will have to come from requirement for the Canadian chartered leverage of two to one. the public sector, the “tax consuming” sec- banks to maintain cash reserves against Over the years due to their avarice, and tor. So a new revenue stream is essential to their deposits, and provide the Minister of the cooperation of the politicians, they provide the financial flexibility to meet the Finance, or someone acting on his or her have managed to get the leverage up to 20 needs of an aging population. behalf, the power to set the level of cash to 1 which is nothing less than a global There is a fast rising concern about the reserves for banks and other deposit-taking fraud of gargantuan proportions. The flip future, and a number of possible solutions institutions up to a maximum of 34%, side, of course, is that they can buy up the are being put forward such as “positive mon- provided the increase is not less than 5% world’s assets for 5 cents on the dollar, and ey” in the United Kingdom, and helicopter per annum until the new 34% has been they have been. Three years ago 88 families drops in several countries. But the best one established in 7 years. This will ensure that owned half of all the wealth in the world. A I have seen so far is one my colleagues and there will be no inflation resulting from the year later the number was 80 families, and I developed in 2013 that meets the essential government-created money. in 2016 it was 62 families, so the concentra- criteria. 5. The government should repeat the tion of power and influence continues. It provides a major infusion of govern- action prescribed in Sections 1 and 3 every That is a fact I find difficult in getting ment-created debt-free money to dilute the year for 7 years or until bank cash reserves my mind around. I make a list of all the big ocean of debt in which we are drowning. It reach 34% of their total assets. cities I can think of, and then try to com- would end 43 years of underfunding essen- 6. Once the transition has been made prehend that 62 families own the equivalent tial services. It provides for a smooth transi- the Governor of the central bank shall, each of every second one, lock, stock and barrel. tion from the present volatile and unpredict- year, estimate the amount of increase in the They achieved this by persuading naïve able system to one that is stable and meets money stock required to keep the economy politicians to give them a monopoly to cre- the essential needs of all parties concerned. growing at its optimum with the number ate money. It changes the balance of power between the of job openings being roughly equal to the The same group was responsible for the richest fraction of the wealthy one percent number of job seekers. He/she shall then ac- Great Depression, with all its incalculable in favour of the 99%, which is long overdue! quire, on a predetermined schedule, shares misery. (See the US Senate Finance Com- It is called “A Social Contract Between the from the federal government in exchange mittee Pecora Report.) Government and People of Canada.” for cash up to 34% of that amount. Of course there was method in their So, speaking on behalf of the millions of 7. In the event of a disagreement be- madness. Most of the small banks went underdogs, we demand that the federal par- tween the Governor and the Minister of bankrupt and property values plummeted so liament use its constitutional power over all Finance in respect of the amount by which the big boys could buy up assets real cheap. matters pertaining to money and banking the money supply should be increased, or Every recession offered opportunities by forthwith taking the following action to the rate of interest to be charged by the to buy assets at low prices and the Great benefit all Canadians. The figures suggested, bank on overnight lending, the view of the Recession of 2007-08 (another inside job) which are based on 5% of bank deposits, are Minister shall prevail. In any such case, produced another year-round clearance sale a bit out of date, but they are close enough however, a direction from the Minister shall which has been going on for almost as long for all practical purposes. be in writing and made public forthwith, as the Great Depression, and there is no end 1. The government of Canada should in accordance with Section 14 (2 & 3) of in sight. There is street talk to the effect that print fifteen non-transferable, non-convert- the Bank of Canada Act. This procedure is there might be another meltdown in the off- ible, non-redeemable $10 billion nominal consistent with the principles of democracy, ing, but whether it happens or not, the mere value Canada share certificates. and should eliminate future cases of mon- knowledge that the cartel could do it, if and 2. Simultaneously the Justice Depart- etary and fiscal policies being at odds rather when they decide to, is quite upsetting. ment should be asked for a legal opinion than working in harmony. Worse than that, the same folk may be as to whether the share certificates qualify These measures will at least double the planning a total crash of the whole world as collateral under the Bank of Canada Act. rate of economic growth and reduce the financial system so they can introduce a If not, legislation should be introduced to level of unemployment by half in less than single virtual currency that would give them amend the Act to specify their eligibility. 2 years. The amount of debt-free money the same complete control over each one of 3. The government should then present is sufficient to restore all segments of the us as individuals that they now exercise over the share certificates to the Bank of Canada economy. our countries. They have to be cut off at the that would forthwith book the certificates as Almost every day I read in one of the pass, now, or it is going to be game over! assets against the liability of the cash created, papers, or hear on radio or TV, of projects There have been many monetary re- and deposit $150 billion in the government’s desperately in need of funding. I will only formers over the last century or so, but no bank accounts. The federal government mention two. An article in the Toronto Star one has succeeded in informing the public should immediately transfer $75 billion on January 17, 2017 by Jennifer Pagliaro www.comer.org May–June 2017 Economic Reform | 19 and Emily Mathieu read as follows. N.B. See Appendix A for a breakdown of “Toronto Community Housing is on Appendix A: Rounded Distribution of payments to the provinces and territories. track to board up one unit per day in 2018 Transfers to Provinces and Territories if more funding for repairs can’t be secured, Government of Canada $75 billion Our Comment the head of the social housing corporation Provinces and Territories $75 billion Feedback from COMER members told the Star. Newfoundland & Labrador $1.10 billion would suggest that Paul Hellyer’s letter to An estimated 425 units are already slated Prince Edward Island $314 million the Minister of Finance, Bill Morneau, to close in 2017, pushing the total number Nova Scotia $2.04 billion would be a welcome and a helpful back- of boarded-up subsidized housing units to New Brunswick $1.625 billion ground in our ongoing struggle against the nearly 1,000 with more than 177,000 peo- Quebec $17.319 billion CIB debt trap. ple on the wait-list in Toronto – enough for Ontario $29.040 billion Paul has long been an invaluable COM- three sold-out crowds at the Rogers Centre.” Manitoba $2.724 billion ER ally. How fortunate we are to have some- Shame on us! Saskatchewan $2.322 billion one Who Was There – especially someone Another article in the Toronto Star of Alberta $8.329 billion so wonderfully able and dedicated as Paul March 4, 2017 entitled “Indigenous justice British Columbia $9.939 billion – to testify to the history and the validity of program faces cuts.” Despite 43% drop in Yukon $77 million the Bank of Canada as a public and social recidivism, federal initiative will get less Northwest Territories $93 million institution organized and empowered to funding this year. Nunavut $72 million operate “in the best interests of the eco- “Ottawa – A federal justice initiative to $74,994,000,000 nomic life of the nation”! (Bank of Canada help indigenous offenders and victims of (Based on Statistics Canada 2012 numbers) Act, 1934). crime doesn’t have enough money to meet His contribution continues unabated. demand, can only hire “minimal staff,” and when the US sees how well the system works To date there has been no response from isn’t available in most communities, a new they may want to use it to solve their own the Honourable Bill Morneau. government review has found.” financial problems rather than beggar their Élan These are just two examples of hundreds neighbours. of needs waiting to be properly funded. We It is sad, minister, that you have to pass General Comment might even have to pick up the US portion the torch because you are considered a re- “This week has been designated “Na- of the Great Lakes clean-up which seems to ally nice man. But in the league in which tional Infrastructure Week” by the US be in jeopardy. The program must go on! you have been playing, nice guys finish last. Chambers of Commerce, the American It just so happens that Canada is the only The budget will have to be postponed long Society of Civil Engineers (ASCE), and country in the G20 group of countries that enough to go from negative to positive, and over 150 affiliates. Their message: “It’s time is in a position to act quickly. Parliament cut out the middle men who want to buy or to rebuild.” Ever since ASCE began issuing could enact the few necessary changes in mortgage more of our country. its “National Infrastructure Report Card” the statutes in a few weeks – certainly less Most important of all, notice has to be in 1998, the nation has gotten a dismal than a month. So we have not only the good given to all Canadians that the financial grade of D or D+. In the meantime, the fortune, but also a profound responsibility famine has ended, and hope has been re- estimated cost of fixing its infrastructure has to the rest of the world, to show what can born. gone up from $1.3 trillion to $4.6 trillion” be done. So by all that is holy we must not Yours sincerely, (“If China Can Fund Infrastructure with Its fail! You never know, it is just possible that Paul T. Hellyer Own Credit, So Can We” by Ellen Brown, Common Dreams, May 17, 2017). “Time to rebuild.” Got that right! But, rebuild what? Why? What’s behind this idea? If the prevailing answers to such ques- tions come from those who have organized and promoted the Canada Infrastructure Bank scheme, the rest of us need to stop this train and get off. Canada’s engineers have hustled Ca- nadians on board through the infamous omnibus bill. While the NDP shone some light on the matter by causing a debate in both houses on a resolution to extract Bill C-44 and debate it in the House, they were, in the end foiled by a narrow margin in the chamber of “sober second thought” (like that expressed by Senator Sarabjit Marwah). It’s our political economy that we need to rebuild. The phony Infrastructure Bank is a ploy to protract the already overdue, natural demise of a failed system. Élan

20 | Economic Reform May–June 2017 www.comer.org