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June 4, 2012
Reform of the US Monetary System: Message of 12 Year Old Victoria Grant
Out of the Mouths of Babes: Twelve-Year-Old Money Reformer Tops a Million Views
by Ellen Brown

Monetary reform—the contention that governments, not banks, should create and lend a nation’s money—has rarely even made the news, so this is a first.  Either the times they are a-changin’, or Victoria managed to frame the message in a way that was so simple and clear that even a child could understand it.

Basically, her message was that banks create money “out of thin air” and lend it to people and governments at interest.  If governments borrowed from their own banks, they could keep the interest and save a lot of money for the taxpayers.

She said her own country of Canada actually did this, from 1939 to 1974.  During that time, the government’s debt was low and sustainable, and it funded all sorts of remarkable things.  Only when the government switched to borrowing privately did it acquire a crippling national debt.

Borrowing privately means selling bonds at market rates of interest (which in Canada quickly shot up to 22%), and the money for these bonds is ultimately created by private banks.  For the latter point, Victoria quoted Graham Towers, head of the Bank of Canada for the first twenty years of its history.  He said:

Each and every time a bank makes a loan, new bank credit is created — new deposits — brand new money.  Broadly speaking, all new money comes out of a Bank in the form of loans.  As loans are debts, then under the present system all money is debt.

Towers was asked, “Will you tell me why a government with power to create money, should give that power away to a private monopoly, and then borrow that which parliament can create itself, back at interest, to the point of national bankruptcy?”  He replied, “If Parliament wants to change the form of operating the banking system, then certainly that is within the power of Parliament.”

In other words, said Victoria, “If the Canadian government needs money, they can borrow it directly from the Bank of Canada. The people would then pay fair taxes to repay the Bank of Canada. This tax money would in turn get injected back into the economic infrastructure and the debt would be wiped out.  Canadians would again prosper with real money as the foundation of our economic structure and not debt money. Regarding the debt money owed to the private banks such as the Royal Bank, we would simply have the Bank of Canada print the money owing, hand it over to the private banks, and then clear the debt to the Bank of Canada.”

Problem solved; case closed.

But critics said, “Not so fast.”  Victoria might be charming, but she was naïve.

One critic was William Watson, writing in the Canadian newspaper The National Post in an article titled “No, Victoria, There Is No Money Monster.”  Interestingly, he did not deny Victoria’s contention that “When you take out a mortgage, the bank creates the money by clicking on a key and generating ‘fake money out of thin air.’”  Watson acknowledged:

Well, yes, that’s true of any “fractional-reserve” banking system. Even before they were regulated, even before there was a Bank of Canada, banks understood they didn’t have to keep reserves equal to the total amount of money they’d lent out: They could count on most depositors most of the time not showing up to take out their money all at once. Which means, as any introduction to monetary economics will tell you, banks can indeed “create” money.

What he disputed was that the Canadian government’s monster debt was the result of paying high interest rates to banks.  Rather, he said:

We have a big public debt because, starting in the early 1970s and continuing for three full decades, our governments spent more on all sorts of things, including interest, than they collected in taxes. . . . The problem was the idea, still widely popular, from the Greek parliament to the streets of Montreal, that governments needn’t pay their bills.

That contention is countered, however, by the Canadian government’s own Auditor General (the nation’s top accountant, who reviews the government’s books).  In 1993, the Auditor General noted in his annual report:

[The] cost of borrowing and its compounding effect have a significant impact on Canada’s annual deficits. From Confederation up to 1991-92, the federal government accumulated a net debt of $423 billion. Of this, $37 billion represents the accumulated shortfall in meeting the cost of government programs since Confederation. The remainder, $386 billion, represents the amount the government has borrowed to service the debt created by previous annual shortfalls.

In other words, 91% of the debt consists of compounded interest charges.  Subtract those and the government would have a debt of only C$37 billion, very low and sustainable, just as it was before 1974.

Mr. Watson’s final argument was that borrowing from the government’s own bank would be inflationary.  He wrote:

Victoria’s solution is that instead of paying market rates the government should borrow directly from the Bank of Canada and pay only token rates of interest. Because the government owns the bank, the tax revenues it raises in order to pay that interest would then somehow be injected directly back into the economy. In other words, money literally printed to cover the government’s deficit would be put into circulation. But how is that not inflationary?

Let’s see.  The government can borrow money that ultimately comes from private banks, which admittedly create it out of thin air, and soak the taxpayers for a whopping interest bill; or it can borrow from its own bank, which also creates the money out of thin air, and avoid the interest.

Even a 12 year old can see how this argument is going to come out.

 

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Jun-10 9:54pm

santa

Apr-9 6:10am

nice blog.<br /> <a href="http://at-byte.com">byte</a>

mr craig

Jun-25 2:06pm

It is obvious that the private banking system in canada and every where else on the planet is not beneficial to people as a whole. It is laughable how mr. watson mentions inflation in relation to the government borrowing from it's self (the bank of canada) would cause increased inflation. well how about calculating todays minimum wage and the rate of inflation.? you would find that it equals minim wages of 1968! we have created a culture in decline as the result of people who think they know whats good for the economy! Banks and financial sectors have created bubbles in the housing markets and derivatives markets. Also falsified increases in stock markets as the result of increased liquidity by government bailouts. This liquidity is free money for the one percent! when this liquidity stops and interest rates rise it will blow up in all are faces. Governments, corrupt banksters and financial sectors will be held responsible. The 99% are rising around the world. The only question is when will Canada.? It's Naive to think that politically you have a choice when those in power are held hostage to organizations like the IMF and to worthless fiat currencies like the U.S dollar. when the world says they are tired of holding onto U.S debt, What do you think is going to happen?<br /> True freedom is with a resource economy. Capitalism kills millions each year through starvation alone. We have entered into a power shift, westerners are carrying the bags and parking cars for the new rich! The chinese and east indians. We have allowed corporations to equip foreigners with our technology and jobs,with cheap child labour.<br /> CRITICS TO A 12 YEAR OLD GIRL ARE THE ONES NAIVE!!


April 30, 2012
Our future with private banking --"bankstering".
Our future with private banking --"bankstering".
 When the G20 meet, Canada will 'come on side' with some billions
for the IMF to fund the bank rescues in Europe.
  Spain and Italy will go the way of Ireland, Portugal and Greece.

With Canada's REQUIRED contributions, we are assured of larger deficits,
more usurious debt , austerity except for the police, prisons and military
less and less attention to our interests and complete extinction of accountability.

This is the NWO   (New World Order)

Jerry Ackerman

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Don Watson

Sep-25 1:32pm

William Watson appears to support the "mafia" school of economics created by the Bilderberg Group. Borrowing money from one's own Bank at 0 percent interest, does not create inflation. The Bank of Canada belongs to Canadians citizens, not the international banking cartel, although it did fall into their grubby hands in 1974. Hopefully, Canadians will reclaim the Bank of Canada at some point in the not too distant future. If Canadians pay 20 percent interest to their own bank, it does not matter because---at the end of the day---the money is returned to all Canadian citizens, minus the ordinary costs of doing business such as salaries, building maintenance, etc. And, yes, Victoria the money monster of Grendel's ilk is real, it is represented by a group of individuals who ultimately manipulate economic realities by controlling the money supply. The economic meltdowns of the early 1980's, 1990's, and 2008 are the result of surrendering control of our monetary system to international banking interests. If the reported figures are accurate, Canadians pay 60 billion dollars a year in compound interest payments to private lenders. Of course, the stagnant economy creates an ever increasing debt burden. Essentially, we are getting more indebted as each year passes. Since we already pay over 43 percent of income on taxes, the current oppressive regime of banking is systematically bankrupting our country. The 60 billion dollars per year that is currently fed into the coffers of the mafia bankers---for compound interest payments---could be used to rebuild crumbling infrastructure, lessen the debt burden on all citizens, and help "jump start" the economy. More money in the hands of consumers equates to more legitimate buying power not linked to credit. Politicians, of all affiliations, talk a good game about job creation, but refuse to talk about the sell-out of the Bank of Canada in 1974. Canada needs to create more jobs simply to generate worker income to pay the interest on the national debt. Canadian workers are locked into a no win situation. Unfortunately, in the foreseeable future, there may only be two classes of people. The ultra-wealthy, 1 percent, will be viewed as the all-knowing oracles. The second group will consist of healthy, financially enslaved humans whose only reason for existence will be to service the whims of the 1 percent. The elderly, the ill, the disadvantaged, the impoverished, and non-conformists may be culled as per Agenda 21. The 99 percent need to actively, but peacefully, resist the oppressors and thwart their goal of an unaccountable world government.


April 30, 2012
The European Stabilization Mechanism, Or How Goldman Sachs Captured Europe
The European Stabilization Mechanism, Or How Goldman Sachs Captured Europe

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santa

Apr-9 6:12am

nice blog. <br /> <a href="http://at-byte.com">byte</a>


April 30, 2012
Oh Canada! Imposing Austerity on the World’s Most Resource-rich Country
Oh Canada! Imposing Austerity on the World’s Most Resource-rich Country

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January 22, 2012
Coming soon
Coming soon

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Darek

Aug-25 5:13pm

santa

Apr-9 6:13am

nice blog. <br /> <a href="http://at-byte.com">byte</a>

Alphanusmeric characters only

Apr-9 6:14am

nice blog. <br /> [url=http://www.occupyourbank.ca/]occupyourbank[/url]




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