Drinking the financial hemlock: Balancing public budgets to enrich the financial sector

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It's budget season everywhere, and it's all about debt and deficits and the elusive quest to balance the beast, which can only be done, it is said, by cutting services or raising taxes.

The burden of interest charges -- on the same scale as health or education in most provincial budgets -- doesn't get questioned because interest is fixed by the gods according to divine law, retribution from which we can only escape through harsher and harsher penance.

Or is it? Let's chew on a couple of startling points.

Before 1974, debt and deficits weren't a big problem in Canada because, get this, the Bank of Canada made loans to provinces and municipalities, as well as to the Government of Canada, interest-free. That's right. We were borrowing our own money, from ourselves, from our own public central bank, apart from international finance.

Apparently it worked. Along with all our public works, public services and so on, we financed our participation in the Second World War that way. If you're old enough, you may remember that the last time the finances of Nova Scotia, among others, were truly intact was in the 1970s. After 1980, debt and deficits went south at light speed as we were required to borrow from international financiers -- who also juiced up interest rates to as much as 23 per cent at the time.

So why did we drink the financial hemlock after 1974? First, another story.

Most American states and municipalities are groaning under a withering financial burden, some in or near bankruptcy. Only one state regularly balances its books: North Dakota. The state, it turns out, has its own public bank. It was started by mostly Norwegian immigrants in 1919 to prevent rapacious Wall Street financiers from foreclosing on their farms.

The line on it: pays no bonuses, offers cheap credit to state and local government agencies, underwrites municipal bonds, funds disaster relief, supports student loans, partners with (small) commercial banks to increase lending across the state, and pays competitive interest rates to the state.

You can do that!? That question is being asked in 20 other states where there are movements to attempt the same thing. Even in the heart of capitalist America, the connection is made: While public services are crushed, the financial sector keeps up the profits and the bonuses. Conclusion: they're sucking it from the real economy (in some cases stealing it, as with the rigging of inter-bank rates known as the LIBOR scandal, possibly the largest scam in history, the sub-prime meltdown and others.)

Here's what I'm getting to. There's a case in Federal Court in Toronto in which civil society groups under the name COMER (Committee on Monetary and Economic Reform) are suing to force the Bank of Canada to "exercise its public statutory duty," which they say is still on the books, to provide interest-free loans to provinces, municipalities and the federal government. Since 1974, they say, there has been a constant slide in which Canada's monetary and financial policy are dictated by foreign financial interests "contrary to the Bank of Canada Act."

It was in 1974 that the world's financial forces consolidated under the Bank of International Settlements (BIS), located in Basel, Switzerland. It's basically the world's central bank and runs the world banking system.

That's right, you've never heard of it although it's one of the world's most powerful institutions. It works in absolute and unaccountable secrecy. Its aim is to stabilize the world financial system, but its other aim is to make sure national governments have no say in that, overriding national constitutions and governments.

The plaintiffs argue that the BIS, with the International Monetary Fund and others under its wing, were set up originally to keep poorer nations in their place by putting them in hock to the company store, so to speak, but that now the plague has reached developed nations as well.

They call it a conspiracy. I paused at that word. But the right-wing coups of the 1970s driven by the theories of economic guru Milton Friedman, the deregulations leading to the 2008 meltdown, and the policies designed to enrich the financial sector at the expense of the rest of us jogged my memory, as did frank admissions like this one by banker David Rockefeller around 1990: "We who run the transnational corporations are now in the driver's seat of the global economic engine and are setting government policies," and "all we need is the right major crisis and the nations will accept the New World Order."

As for COMER, their chances of winning are probably zero, but if they manage to get this talked about, it will be a victory of sorts. It's time, as the major crises in question result from the predations of the Rockefellers and their friends themselves.

(By the way, I'm away this week and wrote this before knowing how the numbers have been tortured in the Nova Scotia budget. I'll join the fun when I get back.)

Ralph Surette is a veteran freelance journalist living in Yarmouth County. This article was first published in the Chronicle Herald.

Photo: d.neuman/Flickr

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