Re: Colin Bartlett’s Nov. 7 letter in response to another letter about the national debt by Russ Vinden.
Bartlett’s comment that Vinden’s letter must be the tenth on the subject is a bit low. Vinden has been writing similar letters since the 1980s and for good reason.
Bartlett suggests that, according to its balance sheet, the Bank of Canada has no money to lend. Actually, they create the money out of thin air, exactly as the private banks do. Banks do not loan the money they have on deposit. Most of the money in circulation has been created by private banks out of thin air as interest-bearing loans: money created as debt.
Until 1974, the government did borrow from the Bank of Canada to cover its shortfalls and over 107 years — Confederation to 1974 — had accumulated a $22 billion debt. Since 1974, the federal debt has grown to $641B because of a change in policy to borrow from private institutions. Why such an exponential increase in debt over the past 39 years?
When the Government of Canada borrows from the Bank of Canada, interest is virtually nil. The Bank of Canada is owned by the people of Canada so the interest the government pays the bank is returned to the government as profits. When the government borrows from private financial institutions, interest at current rates must be paid to those institutions. In 2011, the cost of servicing the debt was $37B (over $103 million every day).
Bartlett then says that bank profits are in the public interest as their shares are held by many, including pension and mutual funds. But why should the Canadian taxpayer subsidize the profits of any private business? Shouldn’t the rules of capitalism and market forces determine which private companies make profits, without needing the windfall of taxpayer dollars? Wouldn’t these taxpayer dollars be more equitably in the public interest if they were used to fund better public health care, education, and infrastructure maintenance?
Had we cared enough to heed Vinden’s advice from his first letter and demanded our government return to borrowing from the Bank of Canada, we’d be far better off today. You can learn more at qualicuminstitute.ca.