To the Right Honourable Mr. William Morneau,
Minister of Finance for Canada
Dear Mr. Morneau,
I thank you for the electronic letter 2016FIN428702 sent to me by Veena Bhullar (Senior Special Assistant –Operations) , in response to the section on The Bank of Canada from my letter to the Prime Minster of 25thNovember 2015.
First let me say that I do appreciate a response from your office but I have some serious problems with the content of the response. I quote paragraphs two and three in particular to start with:
“It is sometimes suggested that the Government of Canada should fund part or all of its debt by borrowing from then Bank of Canada, rather than by borrowing in private sector markets. The Government does not support this approach, as it would require the Bank to create new domestic currency, which does not create any additional wealth.
In fact, the experience of many nations has demonstrated that relying on domestic currency creation to finance government expenditures results in excessive inflation.While some inflation is desirable to ensure price stability, too much inflation can adversely affect economic growth. Furthermore, excessive spending and domestic currency creation often lead to a misallocation of scarce resources.”
Are you seriously suggesting that the experience of “growth” in Canada between 1935 and 1974, including financing our part in WW2, the St. Lawrence Seaway, the Trans Canada Highway, CPP, Our National Heath system along with a myriad of social services among so many other things, did not lead to growth and wealth of the country and the Canadian people? It is completely obvious the private banks and investors of the world were angry that we were doing so well and that they were not making a huge profit from it, thus the creation of the Bank of International Settlements and its accompanying Basel agreements; through the signing of these agreements we gave them the right to gouge us with compounding interest rates as we started to borrow on credit from them. Your suggestion that the creation of national debt in 1974 of $22 billion owed basically to ourselves through our own Bank of Canada creating money to be spent into the economy is not preferable to the over $1 trillion currently owed to international banks and investors at that aforementioned compounding interest rate, based I might say on a series of computer strokes credit. But you are right, the creation of new domestic money printed by the Bank of Canada to be spent by the government for the benefit of the people of Canada does not make money for the banks and international investors, even though it will benefit all Canadians, and indeed all our businesses too. Sad that you cannot accept the Bank of Canada as a good thing for Canada, and essentially for our sovereignty as well.
Please provide me with the names of those countries which own their own bank and have fallen into the path of excessive inflation through government expenditures. I could give you many examples of countries which do not own their central bank which have fallen into that trap, (the UK and USA to mention just two), and offer instead the example of North Dakota a state of the USA which owns its own bank and thrives with no compounding interest debt to outsiders and no deficit in their budgets. It should also be mentioned that Libya owned its own bank and was threatening to help create a Bank of Africa to be jointly owned by the African Nations and as a result of this threat to the IMF we helped to destroy that country completely and allowed the IMF to establish a private central bank in place of the Libyan people owned bank. Libya is now in financial ruins and complete chaos politically and socially. That is what happens when private central banks get mad at potential lost profits..
As I mentioned above the concept that creation of money by the Bank of Canada to be spent into the economy (particularly for the people’s benefit) did not create excessive inflation between 1935 and 1974 and, is not creating inflation even now in North Dakota so that argument is spurious and very weak.
How will using the bank of Canada to finance our needs lead to misallocation of scarce resources?
I would refer you to Paras #4 and 5:
“Since 1991, the Government and the Bank have jointly agreed that the central objective of monetary policy should be for the Bank to target an inflation rate of 2%. This is the best contribution monetary policy can make to solid performance.
Canada’s policy of low, stable and predictable inflation has served Canadians extremely well. This policy has contributed to creating a more stable economic environment relative to that of previous decades and has allowed households and businesses to make better long-term financial plans.”
Surely this government cannot believe that increasing the national debt from 22 billion owed to ourselves at a low flat rate interest, to close to or over $1 trillion today at a compounding interest rate owed to outside and private interests is an improvement. Do you really think that households can make long-term plans when they are not sure if the breadwinners will even have a good job job next week? Or that business can make those same long term plans when they have no idea how long they will be in business, or when they will be bought out by foreigners and closed down. When, during the last decade, our manufacturing was sacrificed for bitumen production from Alberta, and the price for that bitumen feel through the floor our economy became as unstable as is our looney leading me to question the concept of “a more stable economic environment.”
No Mr. Morneau, I cannot believe or accept that the best use of the Bank of Canada is to simply be an inflation watchdog.
To move to another topic, I understand that this government intends to create an Infrastructure Bank. I have some questions about this.
What will it be called?
Who will own the bank?
Who will finance it?
Will there be an Act of Parliament to create it? (If the answer is yes, why would it have any teeth as the Bank of Canada Act has been ignored since 1974 and your government shows no signs of obeying the mandate created in 1935, as clearly stated in Para#1)
Will this new bank be subject to the Basel agreements?
Will this bank’s activities cause us to be challenged by the investments agreements already in place through a myriad of so called free trade deals and the CETA and TPP? (Yes I know these are under a different ministry but they refuse to answer my questions) because those multi million/billion dollar awards will affect your budget.
Which Ministry will administer this new bank’s activities or will it be a joint venture?
Will there be consultations with Canadians to determine if this extra national debt is acceptable to us?
Finally what is the point of this new Bank when we already have the Bank of Canada mandated to do this work? And how will the activities of this new bank not adversely affect inflation as you claim would the use of the Bank of Canada? Surely if this bank is to operate on credit only supplied by international banks and investors at compounding interest rates that will drive our national debt through to the $2 trillion mark very quickly.
I cannot condone what your government is planning as I do not believe it is in the best interest of Canadians or Canada.
Interim Leader of the Canadian Action Party