lightsabre
Member
Joined: 07 Jun 2007
Posts: 140
Location: Toronto area
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 Posted: Wed Sep 24, 2008 1:07 pm Post subject: Banking Crisis in Canada |
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for all the Canadians here, we should make our banking system the central issue of this election.
we still have The Bank of Canada, a public institution that has the authority to print our money at zero interest and stop the lunacy of the private bankers. DEMAND of your representatives that this be done.
to understand what's going on, read this op-ed piece:
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From: Jerry Ackerman
To: Chronicle Herald Letters
Sent: Thursday, September 18, 2008 8:39 PM
Subject: Op Ed Piece on Money Meltdown
The Money Meltdown
If Jack Layton is to deliver on his promise "to protect Canadians with new
banking regulations" (Sept. 17, Welland, ON), he’ll need to pay close attention
to what has happened and what is now happening at the Bank of Canada.
When I say the Bank of Canada, I mean OUR bank – the people’s bank, the only
publicly-owned central bank in North America. Nationalized in 1938 by the
government of the newly-elected prime minister, William Lyon MacKenzie King,
this bank has served Canada well. It funded a war effort, a seaway, a trans-
Canada highway, old age pensions, and universal health care. All of that
without serious inflation and all interest-free, because any profits were paid
into our national treasury.
Until the early 1970s, all private banks were regulated. Their restrictions
involved reserve requirements, limited loan periods, and maximum interest
rates. Since then, each of these restrictions has been removed. Since 1972,
private banks have created money by extending credit to governments at every
level and always collecting for themselves the going rate of interest. The
total annual interest charges for these municipal, provincial, and federal
debts are now over $60 billion annually.
With relaxed regulatory controls, the privately-owned banks have taken full
advantage of the opportunity to inflate the money supply by creating credit
instruments for investors backed by assets of questionable value. Such "assets"
include sub-prime mortgages, auto loans, and credit card debt. Canadians have
been encouraged to imitate their American neighbours in this folly, borrowing
well beyond their ability to repay. Canadian businesses and investors have
suffered as a result. Some $33 billion of Asset-Backed Commercial Paper (ABCP)
has been frozen since August, 2007. The supposedly risk-free ready cash is
still not accessible.
Oh, wait! Maybe it will be. The solution proposed by the Purdy Cameron
Commission (composed mostly of bankers) is for the Bank of Canada to loan these
private for-profit banks money to pay off their debts, using only their ABCP
assets as collateral. This proposal has already been approved by a Toronto
court (though is subject to appeal). In the past, it would have been illegal,
but the Bank of Canada Act has recently been modified so the transfer can
happen. Under the new law, the Bank of Canada now can provide 365-day loans
based on questionable, high-risk collateral, whereas previously only first-
class collateral (e.g, Government of Canada Treasury notes) has been
acceptable, and only for overnight loans to private banks. Is this collateral
really worth a dollar? In August, the National Australian Bank, which also
owned this type of questionable high-risk collateral, wrote down their holdings
to 10 cents on the dollar.
In other words, in order to rescue the private banks from their self-created
crisis, the Bank of Canada – OUR public bank – is now primed to offer "good
money for bad." This essentially mimics what has been occurring in the U.S.,
where the "Fed" (in that case, a privately-owned central bank) has accepted
collateral of similarly questionable value to extend 100's of billions of
credit to protect the banking system.
What are the implications of such a move? Initially, the effect will be to
reduce public panic, promise some return of capital to investors, and keep the
private bankers in business. But ultimately, the financial consequences will be
enormous and at the expense of everyone in the country.
When you pump money into the economic system without equivalent resources
backing it, the result is serious inflation. As the value of our money
deteriorates, we can buy less because we must pay more for everything we buy.
The latest statistics from recent issues of The Economist, more reliable than
those from Stats Canada and the Bureau of Labor Statistics, document the double-
digit price increases we are even now experiencing.
But most importantly to the economy as a whole, this crisis will generate
serious consequences for the banking industry. It is imperative that government
use this opportunity to modify the practices of the private banks, and act
immediately to reinstate a forceful role for the Bank of Canada. We should note
that in a similar situation in Norway, the government chose to nationalize the
failing banks rather than bail them out. If we are to protect the long-term
interests of businesses and consumers, we must act decisively to limit the
power of private banks and control the creation of money.
The need is clear: We must challenge Jack Layton and ask him if his MPs will
have the wisdom and courage necessary to make the necessary changes in our
monetary system. We must ask if the Liberal and Conservative parties’ MPs are
willing to risk cutting off their private-banker support and finally act in the
public interest. We must ensure that this subject becomes a primary topic in
the leader debates and insist that the new government take immediate action.
Jerry Ackerman, Ph.D.
Financial Analyst & Investment Counsellor
Finance Chair, Canadian Action Party
Annapolis Royal, Nova Scotia B0S 1A0
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A candle loses nothing by lighting another candle |
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