This is Part 2 of an article published last week :here.

 

From 1938 to 1974 the publicly owned Bank of Canada created interest free money (Sovereign Money) in the public interest to end the Depression and to transform Canada’s Infrastructure. This state created money was loaned to the federal government and provincial governments at extremely low interest rates; this interest was then returned to the government account. The result was to produce one of the largest Allied navies during WW2, building the St Lawrence Seaway, the Transcontinental Highway, the Transcontinental Railroad, Schools and Colleges, provide Social Services, Medicare, Family Allowances and Old Age Pensions and University training or Land grants to WW2 ex-servicemen.

During this time inflation was low and the National Debt was substantially constant at only 18 billion dollars

However, in 1974 the government with world recession caused by the massive oil price rise due to the OPEC embargo bowed to pressure from the privately owned Bank of International Settlements (The central bank of central banks) and again the money supply was created by and rented from the banks with the State borrowing from the banks by issuing Government bonds. The result was that from 1974 to 1987 the National debt increased to 523 billion dollars, the Canadian Railroad was closed and businesses that were self- financing before 1974 were encouraged to take loans from the banks.

In 2011 the Canadian Committee for Monetary and Economic Reform (COMER) fought back by commencing a legal action of suing the Government for failing to create interest free money and lending at extremely low interest rates to the federal and provincial governments as was done from 1938 to 1974 with great economic success. The Canadian suit is still proceeding and has succeeded in being moved to the High Court of Canada despite government efforts to have it squashed. (Not reported in the Canadian mainstream Media).

References

(a) The Crime of the Canadian banking System – Bill Abram (An interesting video)

(b) COMER – Committee on Monetary and Economic Reform EST. 1986

Call for Renaissance of the Bank of Canada

(c) PRUDENT PRESS (CANADA)

The History of the Bank of Canada

(d)  The Case to “Reinstate” the Bank of Canada

The Committee for Monetary and Economic Reform:  filed a lawsuit on December 12th, 2011, in Federal Court to try to force a restoration of the Bank of Canada to its mandated purposes. In essence, they want the Bank of Canada to provide interest-free loans to the federal, provincial, and municipal governments, as provided for in the Bank of Canada Act.

 

Creditor and Depositer “bail-ins” could replace taxpayer “bail-outs” for distressed banks.

As a result of the EU Bank Bail-In Directive initiated by the Bank of International Settlements (Central Bank of Central Banks) called the Bank Recovery and Resolution Directive (BRRD) which came in to force on 1st January 2016 distressed banks in Eurozone countries will not be BAILED- OUT by taxpayers but will be BAILED- IN by creditors such as bondholders, investors and ordinary depositors. Perversely, hedge funds (Operating off banks’ balance sheets) will have first call on winding up a bankrupt bank because they are deemed secured creditors against possibly using dubious derivatives as collateral. Normal depositors will be the largest number of creditors and will be last in line as unsecured creditors. These depositors could be individuals, private businesses, pension funds and local governments.

At this stage there is some solace in that depositors would only suffer on savings above euro equivalent of £75.000 but savings above this could be someone’s life savings for retirement. This, I think, will be paid from a fund build from contributions from banks which, as yet, has not started and will be spread over 8 years (Will it be there when it is needed???). Also, there is every likelihood that the £75,000 compensation (In the UK) will be reduced without warning over time. I remind you that before the 2008/9 credit crunch the compensation limit was £25,000 and only rose to £85,000 to stop a run on the banks – it could similarly be reduced at any time as it was recently reduced, without fanfare, from £85,000 to £75000..

 

How is this possible?

Since our money supply is created by high street banks whenever they make a loan under the privilege given to the banks by our Parliament, the money in bank accounts does not belong to depositors but is an IOU that the bank will repay on demand. Of course, since the banks use this money often on risky investments they would be unable to repay IOUs to depositors if there were a run on a bank. This perversely means that banks take the profits during boom times but the taxpayer accepts the losses during a credit crunch as occurred in 2008/9; since banks are too big to fail, otherwise the money supply would dry up.

Since the inevitable next Credit Crunch could be greater than 2008/9, it has been decided that distressed banks will not be supported by the taxpayer but by bank creditors of which the greatest numbers are bank depositors – A grim scenario!

If under Brexit we eventually leave the EU it does not mean that the UK Government will not favour ‘’Bail-ins’ in preference to ‘Bail-outs’ by the taxpayer to support a distressed bank.

 

Part 3 will be published later this week.

Print Friendly, PDF & Email