The Problem:
In a nutshell: deficit spending is theft — successive Liberal and Conservatives governments have been stealing money from our children and grandchildren to buy votes. That’s wrong.
Furthermore, while it may seem to postpone our fiscal problems, compounding interest means those problems will be far worse when we—or rather, our children and grandchildren—finally have to “bite the bullet.”
Canada’s most famous author, Pierre Berton, published a book in 2000 under the title The Last Good Year. The year he referred to was 1967.
What happened in 1968 that changed it all? Trudeaumania swung the governing Liberal Party deep into socialism. The Progressive-Conservatives and Liberals in subsequent years competed to buy voters’ support with our own money, and the debt ballooned through habitual deficit spending and compounding interest.
A new Progressive-Conservative tax—the GST—was supposed to be applied to the debt; but in fact it was merely another source of “slush funds” to buy votes. The Liberals promised to abolish it, but did not. The Harper Conservatives merely reduced it, while increasing spending to record levels to bribe voters—thereby increasing the debt.
The problem is exacerbated by the fact that every government since the Trudeau Liberals has given away the right to coin money—which the Constitution says belongs only to the federal government—in effect “renting” Canada’s money from the chartered banks, which create our money as interest-bearing debt. Compounding interest deepens the debt which our children will inherit: now approximately $17,000 per man, woman and child… and rising.
Current Government Strategy: (and how it falls short)
The so-called “Conservative” government has saddled Canada with the most lavish-spending budgets in history. It has no plan to eliminate the debt. And it hasn’t even discussed reforming the way our money is created.
Opposition Strategy: (and how it falls short)
Although they criticize the Tories for spending more lavishly than the Liberals, the Liberal/NDP opposition clamours for even more lavish spending. None of the parties in the House of Commons is willing to cut spending.
The CHP’s Better Solution:
The core of the National Debt and Deficit problem is the failure of all parties— except the CHP—to recognize that deficit spending, which increases government debt, is a moral problem: stealing money from our children and grandchildren, to buy votes today.
The National Debt must be treated like a national “mortgage”, to be paid off at about $4 billion a month. That would make Canada debt-free in about 20-25 years (depending on interest rates). Since we already spend about $3 billion a month on interest, we only need to find another $12 billion a year to implement this CHP plan to make Canada debt-free; we’ve seen how easily the former Liberal government (and now the Conservatives) found much more than that to fund their campaign promises… continuing to bribe us with our own money (and that of our children).
In 2006-7, the CHP warned Canadians that if we do not reduce the debt when the economy is somewhat stronger, it will cause social and economic havoc when the economy takes an inevitable downturn in a year or two. That forecast was accurate. Reducing the debt would enable us to lower taxes without cutting important services. The interest we pay on past government borrowing is like “buying oats for a dead horse.” These expenditures add no services for the taxpaying public; they only serve to enrich the financial institutions from which the government borrowed unwisely. Canada must be debt-free!
The folly of the Tories’ so-called “stimulus spending” is that Ottawa borrows the money it gives to banks and industries to “prime the pump”; but every cent of that borrowing is more interest-bearing debt our children will have to repay.
The CHP would have the Bank of Canada make interest-free loans to provinces, municipalities and other local authorities for locally-chosen infrastructure projects.
This is exactly how the Bank of Canada, which is a government agency, and therefore belongs to Canadians, formerly functioned in Canada. The CHP would reinstate the Bank of Canada to its former role.
When those interest-free loans are repaid, the stimulus money can be retired from circulation to prevent inflation—and the new bridges, highways, roads, port facilities, light rapid rail transit, “green” power generation, water and sewer and other infrastructure will remain.
The CHP monetary reform would be good for the economy and reduce government debt, without monetising the debt and causing inflation.
To make the reforms we suggest, we would stop funding government by the issuance of T-Bills (which are really government bonds)… but we would do it gradually. We start with the Infrastructure Program, funded entirely by new money created by the BoC; that money goes into circulation, and as it moves through the economy, and enlarges the economy (by providing the liquidity the banks are still reluctant to create) the prosperity gradually returns. Then, by gradually expanding the range of the program, we simply displace more and more of the T-bill financing—which was Bank Created Money (BCM) with billions in compound interest attached to it.
Secondly, we simultaneously return to using one of the tools which previous governments used to control inflation, the statutory reserves. Statutory reserves required the commercial banks to put a percentage of their deposits in reserve. The Bank of Canada controlled the amount of money in mainly by lending to the government significant amounts of new money as needed while at the same time controlling the amount of money created by the commercial banks through the statutory reserve system. The federal government has the authority to adjust those deposit reserves. These reserves were abolished by Prime Minister Brian Mulroney in 1991 and should be reinstated to control the amount of money created.
The proportion of the money supply that comes from the sale of T-bills to the banks (BCM, which is actually borrowing from the banks with the interest paid up front in the form of a discount rate on the T-bills) is now 98%; we want to work it down to 50% gradually… then move to 100% Government Created Money using the Bank of Canada to serve the interests of Canada and Canadians.
That’s a far better solution!