Index

4 Pay The Piper! Call The Tune!

Elan

If we are to call forth the sweet strains of a better world, then we must be prepared to pay the piper; for, he who pays the piper does call the tune!

Fortunately, this is something that we are quite capable of doing. The money is there for whatever it is that we need money for. Alas, the choice of how to spend it, is not. That choice is in the hands of the money-lenders.

The struggle over who should control a nation's money system has been going on for centuries. Its history is a most instructive cautionary tale. Thomas Jefferson, for example, addressed this issue early in the history of the United States. Without so much as a crystal ball, he warned:

If the American people ever allow the banks to control the issuance of their currency, first by inflation and then by deflation, the banks and the corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied. The issuing power of money should be taken from the banks and restored to Congress and the people to whom it belongs. I sincerely believe the banking institutions having the issuing power of money are more dangerous to liberty than standing armies.1

And lo! It has come to pass. (For a compelling documentary on how this prophecy has been fulfilled see Michael Moore's, Capitalism: A Love Story.)

The good news, is that we have a bank of our own, you and I. It's our central bank. It's called the Bank of Canada. We bought it during the 1930s – a time when the Great Depression had educated the public to a level of consciousness and concern about banks and banking that would serve us well today.

As early as 1925, J.S. Woodsworth, then the Independent Labour Party Member of Parliament for Winnipeg North, and one of only two MPs who held the balance of power crucial to the Liberal minority government of Prime Minister, William Lyon Mackenzie King, called for a nationalized system of banking, and government control of the issuance of currency and credit, with the removal of this power from private corporations. He contended that money supply should be managed for national interests rather than private profit, saying that, "in this we face the larger question as to whether or not Parliament is to be sovereign, as to whether or not the people are to be sovereign, or whether we have not had our liberties filched from us without most of us having been aware of what has taken place."2

Whoever Said that Canadian History Was Dull?

In 1933, the Bennett government appointed a royal commission on banking – the Macmillan commission. One of those who appeared before the Macmillan commission was Gerald Grattan McGeer, representing the Vancouver, New Westminster and District Trades and Labour Council. McGeer was a highly accomplished lawyer, counsel to the BC government during the freight-rate cases of the 1920s. His brilliant success had resulted in "significant reductions in rates and corresponding increases in commercial activity." Those cases had convinced him that money and its mismanagement were at the root of the problem, and had drawn his attention to economics, especially in money, banking and interest. That concern was further stimulated by the Great Depression, whose cause he traced to faulty monetary policies.3

McGeer's report on the Macmillan Commission included a devastating criticism of the commission itself, and of the "indecent haste" with which it was proceeding. He suggested that the Commission could be likened to a "thieves' kitchen court, in which the wrong – doers were both upon the Bench and in the jury box." He pointed out, for example, that under the ministry of one member of the Commission. Sir Thomas White, PC, KC, MG, Vice-President of the Canadian Bank of Commerce, and Canadian war-time Minister of Finance, war-time rates of interest charged to government for credit loans were increased by 50%.

Also included in his report were excerpts from the British Macmillan Committee on banking credit and finance (same Macmillan!), excerpts which McGeer believed reflected the minority views of such other notable members of that committee as John Maynard Keynes, and which supported his own.

Finally, he enclosed the outline of a plan for Canada, entitled, "The Conquest of Poverty." In it, he explained how "public credit [was] used to support the most powerful predatory monopoly in finance that has ever been organized," and argued that "legal tender money and the purchasing power medium of exchange, whether it be money or credit, transferred by cheque, is…a creature of law and its creation and circulation constitute the exercise of a supreme prerogative power of governmental authority." In the course of time, "he predicted, 'the system of more equitably distributing national income will be perfected. But, in the meantime,' he stressed, 'we must get started.' His performance at the committee won much public acclaim and wide publicity."4

Three of the five members of the Commission supported the creation of the Bank of Canada. While there was little opposition in the Commons to creating the Bank of Canada, important issues remained to be settled.5 Two of these were key. Should the bank be privately or publicly owned? Who should have supreme authority on monetary policy, the government or the bank? The ensuing struggle for ownership of the Bank of Canada is a buried tale that bears out Santayana's observation that, "those who do not remember their history are doomed to repeat it."

The Bank of Canada opened in 1935. In August of that year, in a radio address to the nation, Prime Minister, Mackenzie King, said:

Once a nation parts with control of its currency and credit, it matters not who makes that nation's laws. Usury, once in control will wreck any nation. Until the control of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of the sovereignty of Parliament and of democracy is idle and futile.

To this Abraham Lincoln would have added that "the privilege of creating and issuing money is not only the supreme prerogative of government, but it is its greatest creative opportunity." In an address to Congress, a few weeks before his assassination, Lincoln outlined principles not unlike those expressed in the Bank of Canada Act and predicted that by the adoption of these principles…"money [would] cease to be the master and become the servant of humanity," and that, "democracy would rise superior to the money power."6

Colourful, controversial, relentless, indefatigable, and a powerful orator, McGeer championed the cause of monetary reform through a publicly owned bank, operated by the Canadian government. He stirred national debate on the subject. "From him, more than any other man of his time, [the public] learned about the awful power of money."7

Finally, in 1938, thanks in no small part to Gerry McGeer, Prime Minister Mackenzie King, in accordance with his political insights, and his well honed skills in the "art of the possible," led his government to "nationalize" the Bank of Canada.

In Canada, it seemed for a time that the question of who should create the money – the state on behalf of all the people, or the private banks in their own interests and that of their preferred clientele – had been decided. Money-creation was shared by the government, through the Bank of Canada, and the private banks. The system served us well. It helped finance World War II and favoured us with a "Golden Age." It helped us to afford post-war infrastructure projects like the Trans-Canada highway and the St. Lawrence Seaway, and social programs like the Canada Pension Plan and Medicare. It nurtured a growing Middle class and an increasingly egalitarian society.

To be continued.

Elan

1. Charles Beard, The Rise of American Civilization, London: Cape. Quoted in Michael Rowbotham's, The Grip of Death, pages 34, 35.

2. Vincent Lam, Tommy Douglas, Penguin, Canada

3. David Ricardo Williams, Mayor Gerry, Douglas and McIntyre

4. Ibid.

5. Babad/Mulroney, Where the Buck Stops. Stoddart.

6. Abraham Lincoln, Senate document 23, page 91, 1865. Quoted in The Grip of Death, Michael Rowbotham, page 221.

7. David Ricardo Williams, Mayor Gerry, Douglas and McIntyre.

-- from COMER, July 2011

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