I refer to Bill Wilson’s letter to the editor of June 16 (‘Debt privatization’).
He maintains that privatization of the debt in 1970 did not solve the inflation problem since it remained high for several years after. However, he chose not to mention that his information source also showed it to decline to a low average of 2.5 per cent over the following 32 years,1.5 per cent over the last 5 years.
Wilson clings to the Utopian idea that the government could have continued to lend from the Bank of Canada following 1974 at no cost. There is a cost and that cost is inflation. Since the Bank of Canada is a Crown corporation owned by the government, it follows that when it creates money to cover government debts, it’s tantamount to the government lending money to itself. The bank simply could no longer create the huge amounts required without compromising its own chief mandate of regularizing the currency and controlling inflation. Wilson seems not to have recognized this, but fortunately the government of the day did, as did successive governments.
I ask people to refer to Dr. Ronald Kneebone, professor at the University of Calgary and his analysis of the situation titled “Why doesn’t the government print money to pay off the debt.”
Wilson’s diatribe on greedy banks enslaving citizens wrongfully gives the impression Canadian banks may have responsibility for the public debt. A study of the debt (see financial journalist davemanual.com) shows chief holders are Canadian pension funds, insurance companies, mutual funds, investment dealers and a wide spectrum of owners Canadian banks and near banks hold a mere 12 per cent.