14:Third in a Series
When the man in the grey suit went on to the second part of his lecture, "What Government Should Do," Finnolly Servus listened with a new interest. With his monogrammed notebook spread over his knees, he took notes. Previously, his thoughts on public policy had derived from superficial self-interest and took form in letters to politicians or newspapers. With his new-found understanding that the national money supply consisted almost entirely of debt, his interest in "what should be done" seemed to be more in the domain of "the public good."
To merge the banks into one humongous monopoly he used to think it would be a good thing for investors in bank stocks (such as himself), but since he had been badly stung in the stock market meltdown, he was more ready to become sceptical of the big financial conglomerates. So when the speaker said that bank reserves should be re-instated and more of the money supply created by government and less by the private banks, he listened with what might be called a new openness of mind. Having Fay and May beside him, exchanging approving remarks about the lecture, also made him more receptive. The ladies sounded like veteran thinkers in territory he had always considered his own.
His notes in the monogrammed notebook contained entries like this:
Personal: use cash, not credit.
Government: repatriate govt debt held by foreigners. Encourage Canadians by issuing government savings bonds for RRSPs with interest not subject to income tax when withdrawn.
Provincial govts: stop borrowing abroad especially in US dollars. Instead, they should have Bank of Canada create loans available to them.
On that point the speaker cited the relevant passage of the Bank of Canada Act. Finnolly resolved to visit a library and get a look at the Act – probably an incomprehensible blur of legalese, but he would at least have a look at it. (When he did – the very next day – he was surprised to find that it was only about six pages long – in English and in French – and that its language was quite within his own financial industry vocabulary.) As the lecturer had said, the Act did not provide for the independence of the Bank, but on the contrary for its subservience to the Minister of Finance, who had the power to issue a policy instruction to the Bank’s governor, and to fire the Governor if it was not followed! So why had the government not used the Bank (of which it is the sole shareholder), to finance its revenue shortfalls?
Finnolly asked that question after the lecture in a little group consisting of Bill Sparks, the speaker, Fay and May, the Chair of the meeting and a couple of Professor Spark’s students. The speaker looked thoughtfully at Finnolly before replying, as though assembling the likely effect of what he was about to say.
"Well," he said finally, "I’ve thought about that, and I can think of only three possible reasons: the politicians have been bought, bamboozled or intimidated! Probably some of each."
The students were pop-eyed. They turned to their professor for his reaction. "Well," said Sparks," this is in the public domain, so I guess I can say it. When the first Governor of the Bank of Canada, Graham Towers, was asked by a member of a Parliamentary Finance Committee if he really meant that the chartered banks create money, he said that as surely as a steel company creates steel, the banks create money. It was a direct, and, I would say, a manly reply. An interesting contrast is the transcript of a similar meeting of a later Governor and the Finance Committee, where the Governor sounds as if he is treating the parliamentarians like sub-normal children, and in my opinion, does nothing to enlighten them. It certainly sounds like bamboozling.
"And those six-figure donations to election campaigns," put in May, with a rather pugnacious thrust of her chin, "do you think they come from a pure and disinterested public spiritedness?"
"As for intimidation," put in the accountant," you have to recognize that the banks wield enormous power over the economy. There are documented cases in American history of the banks conspiring to cut back on loans before an election, so as to reduce the money supply and slow the economy to prevent the re-election of a non-cooperative government. Even the threat of that could be intimidating.
"And some American historians suspect that Abraham Lincoln was not assassinated because he was watching the wrong play, but because he planned to continue to issue government greenbacks," said Fay.
Finnolly Servus’s mind was reeling. He had asked what he thought was a simple question, and he expected an answer in economic terms. Instead, he got a barrage of evidence that sounded like a capitalist conspiracy! He retreated into simply-minded name-calling. "Why, you’re all socialists," he said under his breath.
To be continued.