The Fifth Estate And Money In Canada

Richard Priestman

Below is a message Richard had with someone at "The Fifth Estate" who responded to his email.

Richard Priestman's email to "The Fifth Estate".

While much continues to be said about the $100 million Sponsorship scandal, little is said about the misuse of the Bank of Canada which is costing Canadians over $65 billion a year in unnecessary interest. That is 650 times bigger than the sponsorship scandal, which is only a one time event, while we pay interest year after year after year. From 1995, the year when Paul Martin as Finance Minister declared war on the deficit, to 2002 Canadians paid $594 billion in unnecessary interest. That is the real reason we don't have enough money for health, education, roads or anything else.

Why is it "unnecessary interest"? Because the debt on which it is based was unnecessary due to the misuse of the Bank of Canada. Had the government been using the Bank to finance its long term debt for the past 30 years as it did for the 35 years before 1974, we would not have built up the $590 billion federal debt plus about $400 billions of provincial and municipal debts.

Some claim that using the Bank of Canada to finance public debt will cause inflation. Let's look at the facts.

In 1952 the inflation rate was 2.4%, and while it rose and fell over the years when the government was using the Bank it was never very high, being only 3.2% in 1971 (just before the sudden increase in oil prices). On the other hand, if increasing the amount of Bank money in circulation is supposed to cause inflation, we would expect that decreasing it would reduce inflation. Instead, just the opposite happened; inflation increased from 6.4% in 1978 to 11.4% in 1980 along with a huge jump in public debt when the government was using the Bank less.

The spectre of "international experience" is sometimes raised to show that "there are disadvantages to low-interest lending from the central bank to governments" leading to "very high inflation and its costs". Canada is, of course, part of the "international experience", and Canada has shown that lending from the central bank to government can be done quite successfully and beneficially without high inflation, even if some countries have not done as well.

The financial system is sucking us dry. We need to return to using the Bank of Canada as it was meant to be used. Reporters are not writing about this and politicians are not talking about it. I would like to know why.

Richard Priestman
604 Aylmer Crescent
Kingston, Ontario
613-634-0237

Response from Eleanor Besly at "The Fifth Estate".

----- Original Message ----- From: "The Fifth Estate" fifth@toronto.cbc.ca

Dear Richard,

Thank you for your e-mail to the fifth estate. We work hard to bring you important stories, and we always welcome questions and story ideas from our viewers.

I am passing your information along to Hana Gartner and to our producers for their consideration. Please be assured that it will be carefully read by senior members of our staff. Should they decide to proceed, someone will be in touch with you.

Once again, thanks for taking the time to write. We hope you will continue to watch and enjoy the fifth estate.

Yours truly,
Eleanor Besly
the fifth estate

Note: The Fifth Estate fifth@toronto.cbc.ca