- a letter I sent to Greg Weston of the Ottawa Sun re a column I thought some might find interesting, if the thoughts or info therein open a door at least a crack ....
Greg [email protected] :
Re http://www.ottawasun.com/comment/columnists/greg_weston/2009/10/01/11221... Seeing red over debt:
You seem like a pretty level headed guy, Greg, I don't detect much bias in your writing for either political party, which is good. But why do so many people seem so unaware of what is going on with our money?
Imagine for a minute here. You suddenly need some large sum of money - say a hundred grand. You have two options - A, you can go to a bank and get it, and over the next ten years or so, pay it all back with interest - say two hundred thou. Or B, you can go and talk to your brother (or someone else you are close to, and trust), who just won a lottery or something and has millions to spare, and this bud will lend you the money, no problem, pay him back when you can, no interest. You do not intend to rip this person off - you will pay them back. So what is the obvious choice? Pay back two hundred thou over the next few years, or one hundred?
I don't know - maybe this hypothetical person isn't too bright, and their wife's brother is a banker, and she says you should give him the business or something, which might lead some of the 'not too bright' persuasion astray - but I expect most people would go the interest-free route, given they do need the money anyway, but are not rich, and would choose the least expensive option.
So you need to think - obviously comparing this loosely to our national finances - when our government has the Bank of Canada, which is, of course, the only body in our country which can issue legal tender, and is also, inter alia as it were, able to issue 'credit' in the same way a commercial bank can - you need to wonder why, when our government needs money, it goes to a commercial bank, gets that bank to create whatever money it needs, and then borrows that money at interest - rather than going to the Bank of Canada, instructing the Bof C to create exactly the same amount of money, and borrowing it there, where whatever interest it charges itself is just an accounting game and amounts to zero in the overall finances, more or less doing nothing more than going from pocket A to pocket B?
You got to wonder, I think. At least I do, and I know a few others, although our wonderings don't seem to get much media attention.
If you are thinking, 'Oh nono, when the government borrows money, there is no 'creation' involved, it is just borrowing other people's savings from the banks, which is the banks' business!' - you are wrong. As with every loan the banks issue, they just create that money out of thin air, which is where most of what we think of as 'money' comes from. Government-created money, the bills and coins we carry around, amounts to about 5% of the Cdn money supply - the rest is created through loans by banks. There's about 3 trillion of debt in Canada (gov, consumer, business), and about 50 billion of 'hard cash' money. Do the math.
And if you are thinking "Golly, everybody knows that governments creating money is just inflationary!' - wrong again. It could be, if they just cranked up the printing presses with no thought for financial stability - but insofar as most of our money is just created as debt - if you just set some limits on bank-created money to allow for the government-created money, the end result in terms of the overall money supply should be the same.
I won't get into a long essay about all this, it's a multi-faceted thing, a deeeeep rabbit hole altogether once you get into it - but I do have a longer article about similar things if your curiosity is sparked at all, or you could google around and check some things out yourself.
Global Financial Meltdown: Forces beyond our control, or the greatest scam ever?
Be happy to answer any questions you might have -
Hat Yai, Thailand
Green Island http://www.rudemacedon.ca/greenisland.html