In 1934, at the behest of Prime Minister R.B. Bennett and with the approval of Parliament, Canada’s central bank, the Bank of Canada (BOC), was founded. It began operations in 1935. Its job is “to promote the economic and financial welfare of Canada.” It is now 2023, and more than half of Canadians are living hand to mouth, a trend that has been well established for many years. How much longer do we have to wait for the BOC to do its job?
The BOC continues to operate because its real purpose is not to promote the economic and financial welfare of Canada, but rather to promote the economic and financial welfare of Canada’s political class, including bankers, at the expense of regular citizens. The BOC is able to do this because equality under the law does not exist in a democracy, where legal privileges are granted to some people, but not all people. For example, the government says that it is legal for the BOC and the commercial banks—but no one else—to create money that did not previously exist. They even explain the process:
The majority of money in the economy is created by commercial banks when they extend new loans, such as mortgages. . . .
. . . Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.
You may have to wait a few days to find out if you qualify for a bank loan, but after you qualify, the banker only needs a few seconds at his keyboard to create the money for you. As your loan is repaid, the banker destroys the principal and keeps the interest. This is how Canadian banks rake in billions of dollars in profits every year. The exclusive right to create and destroy money is the ultimate power, the source of banks’ ill-gotten gains. As Ludwig von Mises wrote:
A government’s plans concerning the determination of the quantity of money can never be impartial and fair to all members of society. . . . It always furthers the interests of some groups of people at the expense of other groups. It never serves what is called the commonweal or the public welfare.
When the BOC and the banks create money that did not previously exist, they are congratulated for facilitating economic growth. Anyone else who does this is punished for counterfeiting. In other words, in a democracy, the legality of a specific action is determined not by the nature of the action itself, but by whether the person initiating the action is a member of the political class. Thus, counterfeiting is legal for banks and the BOC, but not for anyone else. Counterfeiting is bad, but this double standard is worse.
When newly created money (monetary inflation) outpaces the production of new goods, the result is price inflation, which can be more severe in specific asset classes, such as houses, where bankers have seduced borrowers with mortgages at ultralow interest rates. Bankers never acknowledge that their counterfeiting activity results in price inflation which steals purchasing power from the pockets of hardworking Canadians. According to the BOC’s own inflation calculator, the Canadian dollar has lost 25 percent of its value since 2010; 50 percent of its value since 1990; and 95 percent of its value since 1935, when the BOC began operations. The government borrows a lot of newly created money as an alternative to imposing higher visible taxes on the public. Therefore, a loss of purchasing power is best described as an inflation tax, but the political class believe that Canadians are too stupid to make this connection.
They also believe that Canadians are too stupid to discover the truth about bank bailouts. The recent failure of Silicon Valley Bank in California elicited these comments from University of Toronto finance professor Laurence Booth, a member of the political class: “The big test for the Canadian banks was the financial crisis in the United States in 2008 and 2009. . . . But there was never any question about the safety of the Canadian banking system.”
Booth is dutifully repeating the lies of former prime minister Stephen Harper. To this day, there remains a widespread misperception that the Canadian banking system was rock solid, head and shoulders above the rest of the world, never in need of financial assistance. This is pure myth. Canadian officials are simply less transparent than their foreign counterparts. Five banks dominate the Canadian market, and at the height of the financial crisis, they were all in deep trouble. Each of them received massive bailouts from the Canadian government, the Bank of Canada, and the Federal Reserve. Thus, the banks got their profits, their CEOs got raises, and taxpayers got shafted, which forced hardworking Canadians to work even harder to support themselves, their families, and these bloodsucking political parasites.
The political class offer many sophisticated arguments to justify their exclusive right to create money out of thin air, but their arguments should be dismissed because the BOC has failed to achieve its official objective. However, the absence of equality under the law is a far more important reason to dismiss their arguments. Politicians constantly make laws that do not apply equally to all people, and they get away with these immoral laws because most citizens attended government schools where they were taught to equate “law” with “justice.” Frédéric Bastiat warned us about confusing morality with legality:
It would be impossible . . . to introduce into society a greater change and a greater evil than this—the conversion of the law into an instrument of plunder. . . .
. . . When law and morality are in contradiction to each other, the citizen finds himself in the cruel alternative of either losing his moral sense, or of losing his respect for the law—two evils of equal magnitude, between which it would be difficult to choose.
Money is not the root of all evil, but a legally sanctioned monopolistic power to create money is nothing more than a legalized counterfeiting ring, which is the root of a lot of evil.
Loans can be economically beneficial, but only when the money being loaned comes from our savings which we voluntarily relinquish for the term of the loan. When a bank deviates from this process and misrepresents the nature of the money being loaned, the bank is guilty of fraud. Democracy legalizes this fraud.
The BOC must be abolished. Money and banking must be returned to the competitive marketplace. This will force the government to either cut spending or convince the public of the need to drastically increase visible taxes.
Technically speaking, it is legal to use other forms of money in Canada, but the government actively discourages this with tax laws and legal tender laws. When the law does not hinder anyone’s freedom to use whatever form of money they choose, people tend to use money whose quantity changes very little over time because this inspires confidence in the future value of money. History shows that money freedom tends not only to preserve the value of money, but to increase its value. Money freedom puts the responsibility for the “economic and financial welfare” of the people back where it belongs—in the hands of the people.
