Initially, the bank fullfilled its mandate. It was of great assistance in getting Canada out of the Great Depression, financing the war, and building infrastructure and social systems in Canada into the 1970s. But then things began to change.
Next: The BoC 2
In the 70s the monetary policy of Monetarism was adopted; further, central banks worldwide began attempting to control inflation by reigning in the money supply without regard for the inevitable effects on interest rates.(Monetarists hold that the money supply alone determines price- and just about everything else!)
In mid-1991 a bill was slipped through parliament without debate or press release phasing out the statutory reserves over a two-year period (subsection 457 of Chapter 46 of the Statutes of Canada.) That left higher interest rates the only means of “fighting inflation.”
Interest rates, however happen to be the revenue of money- lenders as the sole way of fighting price rise which conventional economists identify with “inflation”. ( see - the social lien section). At the same time a campaign was launched to enshrine (1) the independence of the central bank from the government, though the BoC Act sets forth that all shares are owned by the federal government; that in the event of a disagreement on broad policy between the governor of the BoC and the Minister of Finance, the latter shall have the right, after thirty days written notice to conform, to dismiss the Governor. If that does not add up to the good old capitalistic definition of ownership, i.e. non-independence, what does?; (2) “zero inflation” a perfectly flat price level was proclaimed essential. Most of Canada’s federal debt was run up in the attempt to enforce these provisions, which contradicted the BoC’s charter. Such contradictions, however, did not deter Mr. Crow, and subsequent BoC Governors, from pursuing like policies to this day!
Unbelievable Fact # 1: How Money is Created.
Money is created out of nothing.
Myth: it's based on Gold: Not so! The Gold Standard was abondoned years ago.
-Well....it's not quite created 'out of nothing': it's created out of a faith based on the credit of a nation: otherwise, it would be worthless. If I give you a $20 bill, you believe (have faith) that you can use it as a medium of exchange to buy other goods or services. Moreover, there are two ways to create money (out of essentially nothing).
GCM (Government Created Money), created by the federal government. People understand this method. Most people when asked would say, "well, the government creates money." That's true. But how MUCH of the money supply each year does the government create? About 5%. That's all. So who creates the rest?
BCM (Bank Created Money): the private banking system. How does the private banking system "create" money? Simple! But unbelievable! Bear in mind that MONEY IS CREATED OUT OF NOTHING. So, when you make that $30,000 loan at your bank for a new truck, that amount is typed into you bankbook. Seconds earlier it didn't exist! Now YOU owe that money TO the bank, + interest!
Myth: the money for your loan is somehow "backed" by deposits on-hand in the bank where the loan is made... Not so!
You, as a citizen or a business, don't have a choice. Much though you might like to, you can't create money. You have to borrow your money from the private banks.
Unbelievable Fact # 2: The Government's Choice
But governments have a choice! The federal government can EITHER create its own debt-free and interest-free money (GCM) OR borrow it AS debt, and AT interest from the private banks (BCM). The provincial and municiple governments can choose to borrow, at low interest rates, from EITHER the Bank of Canada OR borrow from the private banking system at substantial interest rates.
GUESS WHICH CHOICE OUR GOVERNMENTS MAKE??
YOU GUESSED IT! Some 95% of our money is created as BCM
You may say, " -So what? Some abstract argument about 'how money is created' doesn't effect me, anyway..."
-Oh yes it does! You'd better believe it!
Next: Believe it!