To members and supporters of COMER, please forward this letter to Prime Minister Trudeau (pm@pm.gc.ca) and urge him to borrow from the Bank of Canada. As well, send a copy to your contacts and ask them to do the same.
The letter below was published in the Kingston Whig-Standard on Wednesday, October 21, 2015 and sent to the Prime Minister on December 3.
Borrow from the Bank of Canada
Building or rebuilding public infrastructure would give employment to thousands, but financing costs can sink the best of plans. Interest rates today are low, but there is no guarantee they will stay that way. It is more likely that rates will go up as the economy rebounds and there is more demand for money.
However, it has been known for a long time that our federal government can borrow from our own public bank, the Bank of Canada, virtually interest free and has been doing so since 1938 (when the government bought 100% of the shares of the Bank of Canada). From 1938 to 1974 our government used the Bank to finance some of its debt, but since 1974 it has borrowed mostly from private banks at commercial rates of interest. By 2012, that change of policy had cost Canadian taxpayers C$1 trillion in interest – twice Canadas national debt (Adam Taylor, “Til’ Debt DoU.S. Part? – With a Plan Ottawa’s Debt Can be Eliminated,” Enter Stage Right, October 23, 2006, enterstageright.com, confirmed by Hon. Paul Hellyer from official sources, April 2012).
Public debt, which stood at $18 billion in 1974 after 35 years of extensive development and growth, now sits at $620 billion. Interest on this debt has consumed $25 billion to $34 billion a year, money which otherwise could be used for public services such as roads, bridges, utilities, schools, colleges, universities, hospitals, day-care and more.
Justin Trudeau is promoting extensive building or rebuilding of public infrastructure and would borrow over $100 billion to do this. If elected as prime minister, will he borrow this money from commercial banks at commercial rates of interest (which will saddle our offspring with debt for many, many years), or will he borrow it from our public bank, the Bank of Canada, virtually interest free?
Richard Priestman, COMER, Kingston, Ontario.
Prime Minister, if you would borrow from the Bank of Canada to finance public investment in public infrastructure, that would be real change! It was your father, influenced by economists of his day who wrongly believed that government borrowing from its central bank would invariably lead to hyperinflation, replaced the policy used so successfully for 35 years to one of borrowing mostly from commercial banks.
