...Let me ask you a question: if you could make your own money, would you then instead go & borrow it as debt & as interest from someone else? Does such a choice sound absurd?

It is well past time Canadians- including many activists- became aware of the ridiculous, preposterous, unbelievable situation concerning the money-creation function, a situation which I call the best kept secret of the 20th century. We are always hearing about 'the deficit' and 'the debt'- but most of us have a mistaken idea as to what it means!

This 'Public Debt Interest' is choking the very life out of our economic systems- worldwide-and yet its origins and significance are never discussed or evaluated by mainstream media or major political parties- even though it may arguably be at the core of our difficulties today.

...If such an investigation were undertaken, it would become clear almost immediately that there is a workable alternative to the way we fund our social projects, which is simply not being used!

Please! Do us all a favour! Please click & carefully read through the Bank of Canada tutorial provided.It will only take you a few minutes. Of particular interest may be 'Unbelievable' & 'Ex. 1'.

We must try to generate a dialogue about this critical, destructive situation, and the letter below provides a good example & opportunity to do so:

[ removed ALL of the unnecessary FORMATTING. Jan 17. JvH ]

January 15, 2005
Mayor David Miller and Council
City of Toronto
Re: Funding public transit and other public capital expenditures

Dear Mayor Miller:

Your recent appearance on CTV stating that it will be years before the Toronto subway system will be extended because of the lack of funds leads me to ask if anything has been done since my letter to you of December 22, 2003, in which I spoke of using the Bank of Canada to finance public capital expenditures.

I am aware of the arguments against this put forward by your Chief Financial Officer, Ms. Wanda Liczyk, and I am also aware that these arguments were thoroughly discounted by William Krehm, President of the Committee on Monetary and Economic Reform. I won't take space here to repeat Mr. Krehm's statements, but if you do not have his information on file I will be glad to send it to you.

Suffice it to say that the Bank of Canada could finance public capital expenditures if the government saw fit to instruct it to do so. It is a purely political decision. The Bank of Canada Act provides all the authority needed. A separate Act, the Bank Act, which was amended under Prime Minister Brian Maloney to eliminate the statutory reserves, would have to be amended again to reinstate the reserves in order to control the amount of money created and avoid inflation.

While funds for essential services are slashed and the infrastructure deficit climbs, the federal government continues to spend billions (currently about $35-billions) annually on unnecessary interest. On top of that provincial governments also spend billions on unnecessary interest (about $10-billions in Ontario), and the City of Toronto cannot carry out necessary capital projects.

As mentioned in my previous letter, for 35 years from 1939 to 1974 much of the government's capital expenditures were financed by the Bank of Canada. The advantages of using our publicly owned bank can be enourmous. Not only could debt be carried for the cost of administration (which for the Federal Government has been as low as 0.37%), but it could also be carried for the expected life of the asset so that the debt is always offset by the depreciating value of the asset.

For example, if a given capital acquisition has a life span of 50 years and costs $100-million, payments would be $2-million a year plus the cost of administering the loan - less than ½ of 1%. Contrast this with borrowing $100-million at, say, 6% for 20 years. Payments would amount to $8.5-million a year and the total cost would amount to $170-million.

The City of Toronto adopted a resolution pertaining to the Bank of Canada at its regular meeting held on April 23 to 27 and its special meeting held on April 30 to May 2, 2001.

It requested that "the Federal Minister of Finance, in conjunction with the Province of Ontario, provide low cost, below prime, long-term loans to municipalities, such as through the Bank of Canada". The resolution was sent to the then Minister of Finance, the Hon. Paul Martin as well as to the Federation of Canadian Municipalities and the Association of Municipalities of Ontario.

The City of Windsor is the latest municipality to adopt a resolution in support of using the Bank of Canada to provide financing for public capital expenditures, bringing the total number of municipalities to do so to 17. Will the City of Toronto provide leadership and press the government to act on this issue?

Richard Priestman
Committee on Monetary and Economic Reform
Kingston

CC: William Krehm
Committee on Monetary and Economic Reform
Toronto

Herb Wiseman
Committee on Monetary and Economic Reform
Peterborough