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Bankers Gone Much Too Wild

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The fact is that money lent by the Bank of Canada to the Canadian government would only be temporarily inflationary. The inflation would go away once the debt was repaid and the cash was removed from the money supply, same as when private bank loans are repaid. This means we could borrow to pay our bills without interest.

This would of course be difficult since it would mean challenging the private-banking structure. However, the advantages would be enormous. In fact, between Confederation and when we switched to borrowing from private banks instead of our central bank (1867-1974), our public debt level only reached $21 billion.

After 1974, our debt level increased 20% annually, reaching $563 billion in 1997. There was a Auditor General report which noted that of the accumulated net debt of $423 billion in 1993, only $37 billion was principal. The rest was compound interest payments, payments there was no reason to make. It is estimated that between 1974 and today, we have needlessly paid over one trillion dollars in interest.

Of course, people are right that there are pretty terrible examples of governments going insane with the printing press. Germany during the 20's, Zimbabwe recently, Chili during the early 70's, etc. Each experienced brutal inflation due to having too much cash around. However, each of those countries had reasons for their hyperinflation that Canada would not face. Germany was making massive reparation payments to Britain and France for its role in WWI, Zimbabwe is a basket-case with insane leadership, and Chile was going through a socialist revolution under Salvador Allende where he fixed prices of goods too low and raised wages by decree. This resulted in too much money chasing too little goods. Canada is safe from all those problems.

This makes the idea of having to pay massive interest payments when we don't have to because we don't think we can handle the responsibility of printing our own money kind of a lame cop-out. If we passed legislation saying that we could only have the Bank of Canada buy a limited amount of Canadian government bonds yearly and that they had to be repaid the next year from tax revenue, we could avoid the massive interest payments to private banks with no risk of hyperinflation.

The United States has an even weirder system. They needed a central bank to prevent various banking crises and got one in 1913 when the Federal Reserve Act was passed. It was pushed through under President Woodrow Wilson two days before Christmas when most of Congress was not there. The main problem with it is that the Federal Reserve Bank is actually a privately owned corporation with stocks owned by member banks that cannot be traded or sold.

However, knowing which banks own it is difficult since it won't tell and has stated that it doesn't need to respond to Freedom of Information Act requests since it is "not an agency" of the federal government. However, it is known that some of its member banks are at least partially foreign owned. This means that the US Federal Reserve is partially owned by foreign citizens and governments.

Either way, the Federal Reserve buys US government bonds and T-bills and provides the US treasury with money. The profits made by the Federal Reserve doing this are given back to the US treasury except for an annual 6% dividend on their paid-in capital stock. I honestly have no idea what this 6% dividend works out to and am having trouble finding out. Please mention in the comments if you can.

Now, the Fed's policy of Quantitative Easing has consisted of the Federal Reserve printing money to buy treasury bonds/bills and toxic bank assets in the hopes of pushing down interest rates and making banks solvent enough to lend. As explained by Andrew Huszar, we already know that the QE policy has only benefited the biggest banks who are not lending any more but are instead buying up smaller banks and speculating. Also worth noting is that it is these biggest banks who are also the member banks that make up the Federal Reserve. Which means the Federal Reserve which is made up of the biggest banks has chosen to implement policies that only benefit the biggest banks. That's not suspicious.

What is clear is that the Federal Reserve is not controlled by the people whose money is made in its name. Between December 2007 and July 2010, the Fed gave out secret loans at almost no interest to various corporations to a sum of $16.1 trillion dollars. The link to the Government Accounting Office's audit showing who got it is here.  

Now, just a few useful quotes on private banking and paying interest when creating your countries own money:

Thomas Edison on the Federal Reserve system:

"That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt.

Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 -- that is what it amounts to, with interest. People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work. That is the terrible thing about interest. In all our great bond issues the interest is always greater than the principal. All of the great public works cost more than twice the actual cost, on that account. Under the present system of doing business we 

simply add 120 to 150 per cent, to the stated cost.

But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good."

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25 year-old Canadian student, currently attaining my masters in political science. Work with mentally disabled individuals for employment. Try to be politically involved. A card-carrying member of the provincial and federal green parties of Canada. (more...)

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The Canadian government has chosen to give away it... by Adam Smith on Friday, Dec 6, 2013 at 12:20:05 PM