(March 4, 2015 – Saskatoon) The National Farmers Union (NFU) has joined with the Committee on Monetary and Economic Reform (COMER) and other Canadian civil society organizations, who work for public welfare, to call on our federal government to revive the powers of the Bank of Canada to provide funding to all levels of government in Canada, largely with interest-free loans, as was done between 1935 and 1975 with very low inflation, enabling our nation to break out of the Great Depression, to fulfill extraordinary responsibilities during World War II, and to prosper while building our infrastructure and highly valued social programs during some thirty post-war years. We Canadians now urgently need a renaissance of these powers of our Bank of Canada.
“NFU members have long supported using the Bank of Canada instead of private chartered banks to finance public debt interest-free and to control the money supply, having passed resolutions to that effect at National Conventions in the mid-1990s and early 2000s,” notes President Jan Slomp. “The wisdom of our older members is apparent in these positions, and it is important that we continue to bring forward these ideas so we can push for needed change. We appreciate COMER’s efforts to raise awareness of the positive role the Bank of Canada is empowered to play, if only the federal government would use it for the benefit of our whole population.”
Read the full statement here:
Call for Renaissance of the Bank of Canada
We civil society organizations who work for public welfare in Canada, depending heavily on dedicated volunteers, are constantly frustrated in our efforts to obtain government funding to meet urgent human and environmental needs. We are repeatedly informed that there is never enough money available, and that now we are entering a period of inescapable austerity required to overcome growing public debts. We are told that public funds – essential for infrastructure repair, for health and medical care, for education, for poverty reduction, for social justice, and for environmental protection – not only cannot be increased despite urgent unmet needs, but must be cut, and public assets for providing public services, must be privatized.
We are deeply concerned about government deficits and debt, and also about the heavy personal debts borne by Canadian citizens. Indeed we believe that governmental and personal debt should be taken far more seriously, and dealt with by far more radical means than the usual austerity programs involving cuts to social programs and privatization. Such measures have already been experienced as profoundly unjust. They shift debt burdens to individual Canadian citizens, especially to the most needy, bankrupting and impoverishing many.
Meanwhile, we see that wealthy individuals and corporations receive tax cuts they do not need, and that they often use tax havens to escape such taxes as they do owe. Lowering taxes for the rich is regularly justified by the argument that they invest their savings to create employment, but we see little evidence to support this claim. We see further that our federal government makes billions available for a controversial war, for expensive, inappropriate new weapon systems, and for unnecessary new prisons, while poverty and environmental damage continue to increase. A just tax system, wisely spent, could go a long way toward promoting the human and environmental welfare to which we are committed. But changes in our tax system are not enough to deal adequately with our debt problems.
Crucial to our governmental debt problems is the fact that our governments at all levels borrow from private banks and from other private money-lenders, and pay interest on these debts. Each year governments across Canada presently pay some $60 billion in interest on their debts, and as these debts increase, with interest rates probably rising, this enormous annual burden for taxpayers will increase. But this interest expense is not necessary.
Through our publicly owned Bank of Canada, which was established in 1935, the federal government has the power to borrow money in huge quantities essentially interest-free, and to make such funds available not only for its own use, but also for provincial and municipal expenditures. Such borrowing helped Canada to get out of the Great Depression, and to finance its participation in World War II. Continuance of this practice until about 1975 played a key role in creating Canada's post-war prosperity and in making possible its social programs.
As federal governments, which control the Bank of Canada, increasingly catered to the private commercial banks, this practice greatly declined. Governments at all levels throughout Canada increasingly had to resort to borrowing from the private banks and other private moneylenders, including foreign sources. Moreover, the Bank of Canada in the late 1970s began raising interest rates as its primary tool for fighting inflation, driving the economy into recession in the early 1980s and again in the early 1990s. These changes from the original mandate of the Bank of Canada, combined with tax reductions for the wealthy, rapidly increased the debts of governments at all levels, and served as an alibi for implementing major cuts to social programs. Following some recent federal government economic stimulus in the current recession, the stage is now set for even more devastating cuts to our valued public services.
In line with policies pursued through the Bank of Canada during its first four decades, our federal government could revive the powers of the Bank of Canada to replace gradually interestbearing debt carried by governments at all levels with interest-free debt, and could make available interest-free loans for new projects. This change in monetary policy, combined with changes in tax policy, would make available each year tens of billions of dollars urgently needed for actions, which can only be taken by governments, to protect our environment from such dire threats as global warming, to rebuild and to improve our public infrastructure, and to strengthen social programs meeting human needs – notably medical care. Through such interest-free loans for infrastructure, for example, our governments, instead of paying for interest that could double or triple their investment expenses, could be paying only for the principal, thus freeing tax income for other programs. Moreover, government-funded construction would create jobs, stimulate additional economic activity, and significantly increase tax receipts.
Those who oppose the revival of this monetary policy invariably charge that it would be inflationary, even though it was managed in the past without significant inflation. As the government through the Bank of Canada creates growing quantities of our money supply, the power of private banks to create money needs to be restrained, as was possible until 1991, when the reserve requirement for the private banks was surreptitiously removed from the Bank Act. This provision to the Bank Act needs to be restored to prevent inflation, as can readily be done.
Therefore, we Canadian civil society organizations, who work for public welfare, call on our federal government to revive the powers of the Bank of Canada to provide funding to all levels of government in Canada, largely with interest-free loans, as was done between 1935 and 1975 with very low inflation, enabling our nation to break out of the Great Depression, to fulfill extraordinary responsibilities during World War II, and to prosper while building our infrastructure and highly valued social programs during some thirty post-war years. We Canadians now urgently need a renaissance of these powers of our Bank of Canada.