By Judy Kennedy,
We are at a point where a significant number of Canadians are now aware that our governments are beholden to the Kinder Morgans, the SNC-Lavalins, the Royal Banks, etc. Surprisingly, one group also under the global microscope is that of the central banks. At issue is their apparent autonomy from government oversight and accountability.
For many central banks, this may be their actual situation. Canada is unique among G7 countries in that the governor of the Bank of Canada (BoC) is answerable through the Minister of Finance to Parliament; that the Minister holds the BoC shares in the name of the Queen (i.e., us). This is now being widely noticed, as COMER’S lawyer, Rocco Galati reported at a press conference following the Supreme Court dismissal of their application for leave to appeal, ending this case’s 6-year journey through the courts. A number of COMER members attended as well as alternative media folks including journalists/authors Linda McQuaig and Joyce Nelson. Lawrence McCurdy filmed the session.
Constitutional (and tax) lawyer, Rocco Galati, repeated his message that, of his numerous challenges of government, many successful, this was by far his most important. He received hundreds of messages from across the globe as the case became known. Why? Because it challenges the legality of Government and of the BoC in failing in their constitutional and statutory responsibilities to implement the Bank of Canada Act – particularly in failing to make interest-free loans to the federal and provincial governments. The question of central bank authority is now being discussed globally: could that be in part because of COMER’s case? Yes!
COMER also claimed that Government has abdicated its responsibility in these matters by ceding it to private international organizations like the Bank of International Settlements (BIS), the 60-member club of central bankers who meet in secret and are accountable to no one. In 1974, the BIS required its members to curtail loans to their governments, forcing them to seek private funding from banks. No records of their meetings or directives were presented to the Finance Minister, nor to Parliament, in breach of the Constitution. Yet, the BoC complied, and since 1975, the federal debt has exploded, with interest payments flowing, in part, to the wealthy, whereas the BoC’s minimal charges would go back to the government.
Another breach of law claimed in this case arises from Government’s practice of removing all anticipated tax credits from the revenue total prior to reporting it to Parliament, usually resulting in a negative balance, incurring debt and more borrowing from private banks. This, says Galati is an example of classical taxation without representation. Unconstitutional!
The Bank of Canada vs. the Minister of Finance
The BoC’s history shows that in the case of two former governors who challenged his authority, it was determined that the Minister of Finance decides monetary policy. The Bank is charged with implementing these policies. Yet COMER’s co-founder, William Krehm, wrote in 1993, A Power Unto Itself – The Bank of Canada, showing how the executive of government is ceding its authority to the BoC governor and to international financial directors. This led to COMER’s legal challenge launched in 2011.
Summarizing the case’s history, Galati explained that on a motion to strike – government’s usual practice in these challenges – the facts are not in dispute: their legal import is. COMER lost at this lowest level on the question of justiciability, then won at the Federal Court – that the declaratory relief portion of their claim as to constitutionality and statutory compliance, could proceed, as justiciable. Government appealed this to the Federal Court of Appeal who approved it. So the case for declaratory relief proceeded on the merits at the Federal Court level where it was dismissed – by the same judge who had approved it the first time!
The Federal Court of Appeal dismissed COMER’s appeal of this last decision and the Supreme Court of Canada, which hears only about a tenth of its cases, chose not to hear it.
A prime function of the BoC has been to fund publicly-owned infrastructure projects (TransCanada Highway, bridges, the Seaway, wartime expenses). That this is no longer effectively its prime function is shocking. Galati notes that as the COMER case became known in political circles, the Trudeau government produced a privately owned and operated infrastructure bank (CIB) headed by the big names of the US financial system. Their projects will operate with fees, unlike the publicly owned facilities, with profits accruing yet again to the wealthy. Even PC MP Pierre Polièvre referred to it as “corporate welfare.”
COMER Co-Chair, Ann Emmett, commented that establishing a Canadian Infrastructure Bank was not discussed in Parliament but was hidden – in the Budget Implementation bill! Later, she added, when the NDP raised questions about the CIB in Parliament, government responded with arrogance and contempt. They have since ceded control of the CIB to its corporate masters.
As discussed in Krehm’s book, the issue of the central bank’s authority is critical to the concept of where our money comes from. As then Co-chair of COMER, Herb Wiseman, remarked, currently the three major Parliamentary parties believe that the BoC should be autonomous, even in setting monetary policy and goals. Fiscal policy is hugely dependent on monetary policy, he added. Yet for decades when asked why Government doesn’t borrow from the BoC at no interest for infrastructure or human capital expenses, the Ministers of Finance have answered with the same line: it’s inflationary. Galati pointed out that during the 2008-9 crisis, Harper and Obama bailed out the financial institutions with over a trillion dollars – with no noticeable inflation rate change.
The secrecy of the BIS operations extends to its membership fees. Apparently, Wiseman reported, Canada holds about $400 million in shares in the BIS which expense has never been discussed nor approved in Parliament, in breach of the Constitution. He showed a graph of federal debt which took off in 1975 and has remained at about 10% of the budget total, without Parliamentary discussion.
Krehm notes that in 1988 the BIS announced the complete dismantling of the reserve system, benefitting commercial banks. But Government does not have the right to ignore statutory law such as the Bank of Canada Act’s s.18 which outlines how loans are to be made to both the federal and the provincial governments.
So how should COMER respond to this democratic void? The answers from those attending this press conference were short and to the point: education, political action and community involvement. Politicians know of our growing awareness of their failure to address our real needs and their corporate controllers are worried. People need to know what is happening.
Starting with the education component, books were suggested: Carol Quigley, Tragedy and Hope; Mary Miller, Debt or Democracy arguing that money is public and social; Donut Economics by Kate Raworth; Joseph Stiglitz, The Price of Inequality; and Joyce Nelson, Beyond Banksters. And William Krehm’s, A Power Unto Itself.
Wiseman noted that COMER is part of a worldwide movement of central bank observer groups – the International Movement for Money Reform. One good news story noted that relating to the positive state of central banks, prior to 1974. Discussion continued around the illegality of the BoC’s membership in the BIS – without Parliament’s consent. An open association of public central banks would be different as it would involve a nation-to-nation treaty for the benefit of all as in human rights treaties, not as in nation-to private investor treaties like the trade treaties. Emmett added, “Corporate strategies for assuming total control are debt and ‘free trade’. Reading NAFTA, you realize that it was less than free and not about trade.”
Galati touched on the difference between Government and Parliament which are two separate things. Without respect for the constitutional framework we will slip into a quiet dictatorship. We ask that Government do what the legislation requires it to do.
Ann Emmett added that we need electoral reform to make fundamental change – to survive.
As I drafted this article, rereading A Power Unto Itself, an email announced that its author, co-founder of COMER, Bill Krehm had passed away. His huge contribution to the cause of Canadian democracy and its development will live on.
Judy Kennedy, retired lawyer and longtime member of COMER.