Pay The Piper! Call The Tune!
If we are to call forth the sweet strains of a better world, then we must be prepared to pay the piper; for, he who pays the piper DOES call the tune!
Fortunately, this is something that we are quite capable of doing. The Money is there for whatever it is that we need money for. Alas, the choice of how to spend it, is not. That choice is in the hands of the money-lenders.
The struggle over who should control a nation`s money system has been going on for centuries. Its history is a most instructive cautionary tale. Thomas Jefferson, for example, addressed this issue early in the history of the United States. Without so much as a crystal ball, he warned:
“If the American people ever allow the banks to control the issuance of their currency, first by inflation and then by deflation, the banks and the corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied. The issuing power of money should be taken from the banks and restored to Congress and the people to whom it belongs. I sincerely believe the banking institutions having the issuing power of money are more dangerous to liberty than standing armies.” 1
And lo! It has come to pass... (For a compelling documentary on how this prophecy has been fulfilled see Michael Moore`s, Capitalism: A Love Story.)
The good news, is that we have a bank of our own, you and I. It`s our central bank. It`s called The Bank of Canada. We bought it during the 1930s –– a time when the Great Depression had educated the public to a level of consciousness and concern about banks and banking that would serve us well today.
As early as 1925, J.S. Woodsworth, then the Independent Labour Party Member of Parliament for Winnipeg North, and one of only two M.P.s who held the balance of power crucial to the Liberal minority government of Prime Minister, William Lyon Mackenzie King, called for a nationalized system of banking, and government control of the issuance of currency and credit, with the removal of this power from private corporations. He contended that money supply should be managed for national interests rather than private profit, saying that, ‘‘in this we face the larger question as to whether or not Parliament is to be sovereign, as to whether or not the people are to be sovereign, or whether we have not had our liberties filched from us without most of us having been aware of what has taken place.’’ 2
Whoever Said that Canadian History Was Dull?
In 1933, the Bennett government appointed a royal commission on banking –– the Macmillan commission. One of those who appeared before the Macmillan commission was Gerald Grattan McGeer, representing the Vancouver, New Westminster and District Trades and Labour Council. McGeer was a highly accomplished lawyer, counsel to the B.C. government during the freight-rate cases of the 1920s. His brilliant success had resulted in ““significant reductions in rates and corresponding increases in commercial activity.”” Those cases had convinced him that money and its mismanagement were at the root of the problem, and had drawn his attention to economics, especially in money, banking and interest. That concern was further stimulated by the Great Depression, whose cause he traced to faulty monetary policies. 3
McGeer’’s report on the Macmillan Commission included a devastating criticism of the commission itself, and of the ““indecent haste”” with which it was proceeding. He suggested that the Commission could be likened to a ““thieves’’ kitchen court, in which the wrong –– doers were both upon the Bench and in the jury box””.
He pointed out, for example, that under the ministry of one member of the Commission. Sir Thomas White, P.C., K.C., M.G., Vice-President of the Canadian Bank of Commerce, and Canadian war-time Minister of Finance, war-time rates of interest charged to government for credit loans were increased by 50%.
Also included in his report were excerpts from the British Macmillan Committee on banking credit and finance, (same Macmillan!), excerpts which McGeer believed reflected the minority views of such other notable members of that committee as John Maynard Keynes, and which supported his own.
Finally, he enclosed the outline of a plan for Canada, entitled, The Conquest of Poverty. In it, he explained how ““public credit [was] used to support the most powerful predatory monopoly in finance that has ever been organized””, and argued that ““legal tender money and the purchasing power medium of exchange, whether it be money or credit, transferred by cheque, is ... a creature of law and its creation and circulation constitute the exercise of a supreme prerogative power of governmental authority””. In the course of time ““, he predicted, ““The system of more equitably distributing national income will be perfected””. ““But, in the meantime””, he stressed, ““We must get started””. ““His performance at the committee won much public acclaim and wide publicity””. 4
Three of the five members of the Commission supported the creation of the Bank of Canada. While there was little opposition in the Commons to creating the Bank of Canada, important issues remained to be settled. 5 Two of these were key. Should the bank be privately or publicly owned? Who should have supreme authority on monetary policy, the government or the bank? The ensuing struggle for ownership of the Bank of Canada is a buried tale that bears out Santayana’’s observation that, “those who do not remember their history are doomed to repeat it”.
The Bank of Canada opened in 1935. In August of that year, in a radio address to the nation, Prime Minister, Mackenzie King, said:
“Once a nation parts with control of its currency and credit, it matter not who makes that nation’’s laws. Usury, once in control will wreck any nation. Until the control of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of the sovereignty of Parliament and of democracy is idle and futile.”
To this Abraham Lincoln would have added that ““the privilege of creating and issuing money is not only the supreme prerogative of government, but it is its greatest CREATIVE OPPORTUNITY””. In an address to Congress, a few weeks before his assassination, Lincoln outlined principles not unlike those expressed in the Bank of Canada Act and predicted that by the adoption of these principles ... ““money [would] cease to be the master and become the servant of humanity””, and that, ““democracy would rise superior to the money power””. 6
Colourful, controversial, relentless, indefatigable, and a powerful orator, McGeer championed the cause of monetary reform through a publicly owned bank, operated by the Canadian government. He stirred national debate on the subject. ““From him, more than any other man of his time, [the public] learned about the awful power of money””.7
Finally, in 1938, thanks in no small part to Gerry McGeer, Prime Minister Mackenzie King, in accordance with his political insights, and his well honed skills in the “art of the possible”, led his government to “nationalize” the Bank of Canada.
In Canada, it seemed for a time that the question of who should create the money –– the state on behalf of all the people, or the private banks in their own interests and that of their preferred clientele - had been decided. Money - creation was shared by the government, through the Bank of Canada, and the private banks. The system served us well. It helped finance World War II and favoured us with a ““Golden Age””. It helped us to afford post-war infrastructure projects like the Trans-Canada highway and the St. Lawrence Seaway, and social programs like the Canada Pension Plan and Medicare. It nurtured a growing Middle class and an increasingly egalitarian society.
"The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in iniquity
and born in sin. Bankers own the earth; take it away from them, but leave them with the power to create credit, and with the stroke of a pen they will create enough money to buy it back again....If you want to be slaves of the bankers, and pay the costs of your own slavery, then let the banks create money." 8
In The Rise Of Canada’’s Richest 1%, Armine Yalnizian, economist with the Canadian Centre for Policy Alternatives, draws on data used in a study by two economists, Emmanuel Saez, and Michael Veall, which showed how, in both the U.S. and Canada, long-term trends towards greater income equality were reversed after 1980.
“From 1946 to the end of the 1970s”, she points out, “the majority of Canadians saw a rapid rise in income....and there was a clear and consistent trend towards greater equality. After 1980, however, despite a decade of unbroken economic growth, that trend took what has been called, the Great U-Turn of Our Time a flip from decades of steady DECLINES in income inequality to its opposite: a steady INCREASE in inequality, in good times and bad.
“Economic growth no longer paved the path to widespread prosperity. But, for a select few, good times never seemed so good. Incomes of the very rich have doubled and tripled, while they flat-lined for the majority, which has also been squeezed by rising costs and worsening household debt.”
One particular example she cites is that, “ From the beginning of the Second World War to 1977, the income share of the richest 1% was cut in half, from 14% to 7.7%; by 2007, we were right back where we started: the richest 1% held 13.8% of incomes in Canada, and the trend-lines show no signs of levelling off”.
Of course, this didn't just happen! No “invisible hand” filled the pockets of the rich. No mystical market reversed the “trickle-down”. It happened because real politicians, in a real House of Commons, using MONETARY POLICY,(the use by a government or central bank of interest rates or controls to influence the economy), and FISCAL POLICY,(the use of taxation and government spending to influence the economy), made the rich richer and made debt-slaves of the rest of us.
Politics and economics are two sides of the same coin. Indeed, what we today call ECONOMICS used to be called POLITICAL ECONOMY –– a term I believe we should resurrect, because it more honestly reflects the truth, and because it would remind a better informed public of that crucial connection.
As the financial elite escaped the arms of KEYNESIAN ECONOMICS and embraced the NEOLIBERAL ECONOMICS championed by politicians like Margaret Thatcher and Ronald Reagan, successive Canadian governments abdicated their responsibilities under the Bank of Canada Act, and surrendered our central bank to the moneylenders. Whereas, as recently as the early seventies, the Bank of Canada was still creating up to 25% of the money supply, today it creates less than 5%; 95% of our money is DEBT!
MONEY MATTERS! It is the lifeblood of the economy. If there is a shortage of money, the economy shrinks; if too much, money loses its value. At either extreme, society shudders as the economy, production, trade, and consumption of the goods and services on which it depends, slump or lurch into dysfunction.
HOW MONEY IS CREATED ALSO MATTERS! Money created by government is essentially debt-free and is spent into the real economy. This frees the government to act in the public interest. It empowers the government to exercise democratic control over priorities like job- creation and environmental protection, in a mixed economy, (one with a mixture of state and private enterprises).It promotes economic and political stability by enabling the government to maintain purchasing power for individuals and the nation.
Money created by private banks is created out of thin air, through loans, and is lent into a market economy. It favours financial capital over human capital. It perpetuates the “boom –– bust” cycle characteristic of the capitalist system. When the government is short of revenue it is forced to borrow money from private banks and must, like any other borrower, pay interest. This empowers banks and other corporations to influence government policy, and places governments under various constraints. Government debt, for example, swells taxes (for some!), and is used to justify cuts to social services.
The debt-money system generates serious problems. One of these is that private banks can create only the amount of the loan; they cannot create the money needed to pay the interest on that loan. There is never, therefore, enough money in the system. This makes growth imperative. The system must grow or die. Debt and the interest on debt grow faster than money and income because debt is the only way to create new money. If the money supply cannot keep up to the cost of debt and interest, the economy will stall. When the burden of debt exceeds the capacity of debtors to pay, or the willingness of lenders to lend, the system must fail.
The pressure of debt on business intensifies competition, generating waste and exploitation. Businesses strive to grow bigger through mergers and takeovers, to dominate and manipulate markets, to minimize costs, and to escape government interference, (but ensure government protection!).
Through so-called free trade, and debt, corporate globalization has created a “New World Order” owned by international capital, and has established a global infrastructure designed to put nations in their place and keep them there.
As Paul Hellyer has put it:
"In reality, the banks have turned the world into one humungous pawn shop. You hock your stocks, house, business, rich mother-in-law...Then, if the market value of your collateral goes down, the bank may phone and insist that you beef up your collateral or pay off the loan. That happened in the 2007 crisis. This would not be necessary if the banks themselves were not so highly leveraged. They have lent or invested twenty times as much as they actually have, on the basis of that collateral." 9
Our money supply has been privatized. The Bank of Canada, which could create money at little or no interest, borrows it instead from private banks at COMPOUND interest! The banks get the profit; we get the debt. That debt is then used to justify cuts to education, health care ...all of those social goods and services that most of us would deem it an economic system’s raison d’être to deliver.
Then, when the economy flags or fails –– as it sometimes must, given the “boom-bust” nature of the present system –– we pay those banks to stimulate the economy –– which they may or may not do –– or , we may even have to bail them out! In his 2009 budget, for example, Steven Harper agreed to purchase an additional $50 billion in government-insured mortgages from Canada’’s major banks, bringing the total since late the previous year, to C$125 billion. Mark Carney, governor of the Bank of Canada, has admitted that the banks know that the government will protect them, and has said, “We have to get rid of that”.
Whether our major concern is education, health care, social justice, the environment...we are all shackled to spokes of the same wheel. And that wheel is hurtling along the path of corporate globalization. At the hub of that wheel, causing it to spin faster and faster, is something called the money system. Unless we deal with that, NONE of these problems can be solved; for money is power –– the power that drives our economic system. Our present trajectory is over the cliff.
What to Do? Some Suggestions
1. Take back what is ours –– recover our central bank and use it to further the Common Good.
2. Re-regulate private banks.
3. Reduce our foreign debt.
4.Introduce a system of accounting that will distinguish between investment and debt.
5. Alter the way we assess the health of our economic system.
6. Develop a national incomes policy.
7. Make employment a genuine priority.
8. Restore a reasonable measure of equality through fair taxation.
9. Recognize the priority of human capital over financial capital.
10. Reconsider corporate charters.
How?
1. Educate ourselves and others about our options. If you don’t know what your options are, you don’t have any.
2. Work to make important issues regarding our political economy a matter of national debate.
3. Organize political action.
4. Make electoral reform an immediate goal.
5. Elect a government with the understanding, the integrity and the courage to legislate and enforce essential reforms.
6. Alert Canadians to the threats they face. For example, in June, 2010, during the G-20 meetings, former Prime Minister, Paul Martin, in a key-note speech at a Toronto seminar, asserted that we must “re-define sovereignty”. His theme was the need for, “global economic Governance”. "Every nation”, he stressed, “must submit to international laws that are mandatory and enforceable."
Canadians would do well to question this transfer of power BEFORE the monetary option is stolen from them. Serious national debate on this issue - a far more serious debate than that on N.A.F.T.A - could prevent the ultimate surrender of our national sovereignty to the tyranny of the global money power.
A Word to the Faint of Heart:
It was people with all the credentials that led us into this age of crises. There are good people with all the credentials who will help us where we need their expertise.
The eminent British economist, Joan Robinson, has observed that, “You don’’t study economics so that you can develop a new theory. You study economics so as not to be deceived by economists”.
“Amateurs built the Ark; experts built the Titanic.”
Footnotes
1 Charles Beard, The Rise of American Civilization, London, Cape, Quoted in Michael Rowboham’’s, The Grip of Death, Pages 34, 35.
2 Vincent Lam, Tommy Douglas, Penguin, Canada
3 David Ricardo Williams, Mayor Gerry, Douglas and McIntae
4 ibid.
5 Babad/Mulroney, Where the Buck Stops, Stoddart
6 Abraham Lincoln, Senate document 23, Page 91, 1865. Quoted in The Grip of Death, Michael Rowbotham, Page 221.
7 David Ricardo Williams, Mayor Gerry, Douglas and McIntyae.
8 Lord Josiah Stamp, Public Address in Central Hall, Westminster, 1937.
9 Paul Hellyer, Light at the End of the Tunnel, P. 217.