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Bank of Canada Debt Proposal

Bank of Canada Debt Proposal

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A letter to the Minister of Finance proposing how to quickly alleviate the national debt using the Bank of Canada.
A letter to the Minister of Finance proposing how to quickly alleviate the national debt using the Bank of Canada.

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Published by: monetary-policy-redux on May 13, 2013
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MARCH 21, 2013
AN OPEN LETTER TO FINANCE MINISTER FLAHERTYWe, the undersigned, firmly believe that 2015 is far too late to balance the federal budget.Powerful stimulus is essential now, to revive the economy and get it running on allcylinders. All that is necessary is to use the power given to you by the CanadianConstitution. There is a precedent.From 1939 to 1974 the Bank of Canada provided the Canadian government with largesums of money at near zero cost. This got us out of the Great Depression, helped financeWorld War II, and many great post-war projects like the St. Lawrence Seaway and theTrans-Canada highway, as well as contributing to the establishment of our Medicare andsocial security systems which were the envy of the world.All was well until 1974 when, without government approval, the Bank of Canadaabandoned its shareholders, the Canadian people, and adopted the rules of the Bank for International Settlements. The Bank for International Settlements (BIS) is the de factoheadquarters of the international banking cartel, a club of immensely rich con artists whohave persuaded kings, queens, emperors and politicians to give them licenses to lend thesame money to 15 or 20 different individuals, companies, or governmentssimultaneously, and collect interest from each one of them – a global fraud without equal.This international Ponzi scheme has been so successful that big banks now control theultimate destiny of trillions of dollars in assets which they acquired with virtual (debt)money that isn’t worth more than about five cents on the dollar – not much more thanmonopoly money.Since the Bank of Canada joined the BIS club in 1974 it’s been all downhill for theCanadian economy. In 1974 there were no food banks in Canada. Today there are 1,921,and the need is still growing. Then, Medicare was well funded and tuition rates werelow. Now there are long waiting lists for elective surgery, and tuition fees are far toohigh.This decline in our welfare since 1974 is the direct result of the Bank of Canada adoptingtwo BIS edicts. First the adoption of the ideas of Milton Friedman, especiallymonetarism. Second, the Bank of Canada agreed to stop providing the federalgovernment with low-cost money as it had been doing for 35 years. Instead, thegovernment has had to borrow in the market and pay as much as 20% interest.The first of these decisions resulted in using high interest rates, which are the clumsiest of all possible tools to fight inflation. The terrible recessions of 1981-82 and 1990-91, thatcreated both social and economic chaos proved that the cure was far more dreadful thanthe disease.The Bank of Canada’s second decision to stop providing low-cost money has resulted inmonstrous increases in government debt at all levels. Between 1974/75 and 2010/11Canadian taxpayers paid 1 trillion, l00 billion dollars interest on the federal debt alone – more than $2,000 each year for every man and woman in the workforce – and all of itunnecessary. And the debt remains. There is no way to pay it off!
The system is broken! John Maynard Keynes and Milton Friedman both erred when theyassumed it was self-regulating. It has to be managed by governments on behalf of all the people. Our government has to use its sovereign power to liberate us from being slavesto debt.We therefore demand that you table your austerity budget – an idea that was tried in the1930s and failed miserably – and adopt a new deal for Canadians. So that you will knowexactly what we mean and want, we have spelled it out for you as follows.
In view of the fact that our present banking and financial system is unstable,unsustainable and basically immoral, we the undersigned, on behalf of all Canadians,demand that the federal government use its constitutional power over all matters pertaining to money and banking by forthwith taking the following action to benefit allCanadians.1. The government of Canada should print fifteen non-transferable, non-convertible,non-redeemable $10 billion nominal value Canada share certificates.2. Simultaneously the Justice Department should be asked for a legal opinion as towhether the share certificates qualify as collateral under the Bank of Canada Act. If not,legislation should be introduced to amend the Act to specify their eligibility.3. The government should then present the share certificates to the Bank of Canada thatwould forthwith book the certificates as assets against the liability of the cash created,and deposit $150 billion in the government’s bank accounts. The federal governmentshould immediately transfer $75 billion to the various provinces and territories inamounts proportional to their population, with the understanding that they would help themunicipalities, as appropriate, so there would be no need to cut back on essentialservices, or sell valuable assets.4. Amend the Bank Act to reverse the 1991 amendments that eliminated the requirementfor the Canadian chartered banks to maintain cash reserves against their deposits and provide the Minister of Finance, or someone acting on his or her behalf, the power to setthe level of cash reserves for banks and other deposit taking institutions up to a maximumof 34%, provided the increase, beginning in fiscal year 2013/14 is not less than 5% per annum until the new 34% base has been established in 7 years. This will ensure thatthere will be no inflation resulting from the government-created money.5. Repeat the action prescribed in Sections 1 and 3 above in accordance with thefollowing schedule. (a) 2014/15 $150 billion of government-created money (GCM);(b) 2015/16, $150 billion GCM; (c) 2016/17, $125 billion GCM; (d) 2017/18, $125 billion GCM; (e) 2018/19, 50% of the estimated increase in GCM to bring bank reservesup to 34% by the end of fiscal year 2019/20 (likely to be an amount greater than $100 billion); (f) 2019/20 the remaining amount of GCM to increase bank reserves to 34%(again likely to exceed $100 billion).

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