Money Matters —
By Judy Kennedy
The great challenge of our time is to wrest control of our lives from Big Money, beginning with the control of our nation-al finance. Our forefathers did just that 80 years ago during the Great Depression when, in 1935, they established the cen-tral bank, the Bank of Canada (the Bank), responsible to Parliament, and generally to promote the economic and financial welfare of Canada. In 1938, the Bank was national-ized by the Bank of Canada Amendment Act: private shareholders were required to sell their holdings to the government. One of the functions mandated to the Bank is the making of loans to the federal and provincial governments (and indirectly, to the municipal) at no or very low simple interest, interest which is returned to the people of Canada through the Treasury. Another function is to issue and regulate the
national currency on behalf of Government, fulfilling one of the latter’s constitutional responsibilities. The Bank carried out these tasks for 40 years, Canada’s “golden years.” However, in 1974 at the Bank for Inter-national Settlements (BIS), Canada joined the Group of Ten charged with “maintain-ing financial stability” on a global scale. Since then, the government has borrowed, instead, from private banks at compound
interest, with resulting deficits and debts. When people are held hostage financially they can be easily controlled. Public pro-grams can be eliminated, services cut, and the economy downgraded while billions are siphoned through the banks to the 1%. Be-cause our central bank is publicly owned we can, by law, hold Government responsible to fulfill its mandate and that of the institu-tion for which it is responsible – the Bank.
How do we do that?
Through Parliament. But when Parliament fails in this as it has for 40 years? We do it collectively through civil society with an organization that takes it on. For over three decades the Committee on Monetary and Economic Reform, an NGO known as COMER, has raised awareness of
these issues across the land. Now, they have taken the bold step to challenge Govern-ment and the Bank, through the courts to fulfill their mandates.
The Claims
The Plaintiffs in the case with COMER are its co-founder, William Krehm, and long-time member Ann Emmett as parties whose Charter and constitutional rights have been infringed by the Defendants’ failure to act. They seek a declaration that the Defendants – the Finance Minister, the Minister of National Revenue, the Attorney General of Canada and the Bank – have failed in their constitutional and statutory responsibilities in implementing the Bank of Canada Act (the Act) with resulting harm-ful impacts on the plaintiffs. The first harmful impact arises from the increase in public debts resulting from the refusal to request and make interest-free loans pursuant to the Act. All Canadians have felt the destructive effects of such debts for 40 years starting with the compound interest paid to bankers during that time, the disinte-gration of our economy, the cuts to social ser-vices and programs, and growing inequality. Another claim of harm derives from Government’s falsifying the estimated tax revenues it presents to Parliament by sub-tracting all tax credits from the total before-hand. Taxation without representation. Most significantly, COMER says that Government, by handing over its monetary, currency and financial policies to be deter
-mined by international private entities, has abdicated its constitutional duties to govern, and that it is unconstitutional and against the Act for the Governor of the Bank of Canada to keep secret from Parliament the minutes of his meetings with central bank governors of other states.
The Legal Bases for the Claims The Bank’s powers and responsibilities are set out in Section 18 of the Act which states: “The Bank may:” followed by the list of various functions including the mak-ing of loans to the federal and provincial governments. Section 18(m) of the Act was amended in 1974 to allow the Bank to be agent for the BIS, the International Monetary Fund and for any other international financial institu-
tion or organization. This cedes control of government’s financial policy and practice to supranational institutions, contrary to Section 24 of
the Act which states “The Bank shall act as fiscal agent of the Govern-ment of Canada.” Furthermore, Section 91 of the Consti-tution Act, 1867 states that “the exclusive Legislative Authority of the Government of Canada extends to all Matters,” matters listed thereafter, including public debt, the borrowing of money on the Public Credit, banking, currency and coinage. Ceding these powers to any other institution re-quires amending the Constitution which has not occurred.
The plaintiffs claim, too, that taxes im-posed to pay for the interest on debts to private bankers are illegal and abrogate sec-tions of the Constitution Act, 1867 relating to taxation without representation. The Legal Process Faced with such challenges, Government inevitably responds by contesting the justi-ciability of the claims, the standing of the plaintiffs to bring the action to court and the jurisdiction of the court to decide the case. So it did in this case. A first hearing was therefore held in December 2012 before a prothonotary of the Federal Court – a judge who hears a challenge of the legitimacy of the claim prior to a hearing on its substance or mer-its. His decision was to disallow the claim
on justiciability grounds. He did not deny COMER’s standing to proceed. Nor did he deny that the Federal Court has jurisdiction to hear this case. COMER appealed, leading to another hearing before the Federal Court in Decem-ber 2013. Something unique in Canadian history
occurred at that time. The lawyer in this case, Rocco Galati, had challenged, on his own, the legality of Harper’s appointment of a Quebec judge to the Supreme Court of Canada. Galati won, at the Supreme Court, and hit national headlines. Shortly after this momentous event, the result of the COMER appeal was announced. It, too, hit alternative media, locally and internation-ally, but not the mainstream media. COMER won the right to proceed to court on the merits of the main claims: to win a declaration of the failure of Govern-ment to fulfill its constitutional responsi -bilities, and the Bank, its statutory ones. A secondary claim relating to the harm done to the individual plaintiffs was disal-lowed although it was allowed to be redraft-ed and resubmitted. The plaintiffs decided to proceed on the principal claims only, at this time. Justice Russell’s reasoning on a number of points is instructive for those seeking to challenge government, even outside the courts. The case could turn
on the interpre-tation of the word “may” in s.18 of the Bank of Canada Act which, as stated, sets out the Bank’s powers. Justice Russell commented “even if s.18 of the Bank Act is permissive, this does not dispose of the allegations of improper handing-off to international
institutions. ‘May’ is usually permissive, but it is not invariably so, and full legal argument on a full evidentiary record is required before the
Court can decide what the Bank Act requires of the Government and those involved in applying and interpreting that statute.” The government appealed the judge’s decision.

In January 2015 Rocco Galati argued this cause before the Federal Court of Ap-peal. On the right to proceed for declaratory relief on the several claims, COMER won a unanimous decision. Government did not apply for permission to appeal this decision to the Supreme Court of Canada within the time allotted. So, in March COMER again filed an amended statement of claim at the first level of the Federal Court, this time to proceed on the merits of the case. Govern-ment will undoubtedly contest this action on the merits. Should we put faith in our judicial system

or, as John Ralston Saul asks, are we now fac-ing “the collapse of the last meaningful edges of democracy” as we await the outcome?
(Cited by Chris Hedges in Revolt: The Path to Ending US Inverted Totalitarianism.)
The case has garnered widespread atten-tion partly because of the growing interest in the reach of international institutions into national affairs. Furthermore the BIS meetings of its 60 member states are held in secret with no accounting to their gov-ernments, and no representation nor votes for their citizens. Given the fiscal, economic, social and democratic deterioration that Canadians –and others – have experienced beginning in the mid-70s we ask was it grounded in the exponential increase in government debt that resulted from “commitments” of thenBIS member states? What other orders have come from such international organiza-tions? Regardless, governments’ ceding of their critical powers and responsibilities to foreign entities, in fiscal, monetary or trade matters must be challenged. As COMER members pursue this action on our behalf, we wish them success. Dollars will help too. See
Update On May 13, COMER published an up-date to this case by Rocco Galati on its web-site. In brief, Government has indicated it will again move to strike the claim, challen-ing Justice Russell’s finding of justiciability, upheld by the Federal Court of Appeal, and on other grounds already removed from the original claim. Galati has requested that any such mo-tion be placed before Justice Russell and is seeking leave to the Supreme Court of Canada on behalf of his clients “from the Federal Court of Appeal, for not having Economic Reform.
The Balanced Budget Narrative
By Herb Wiseman
Libs and Cons lament and wring their hands about balanced budgets, debts and deficits. The heritage of the NDP should lead it to lament and wring its hands on the transfers of taxpayers’ dollars to the wealthy in the form of interest on the debt but it doesn’t. The media are complicit in manu-facturing narrative rather than exposing it. The first part of this series exposes and challenges the narrative and the second part looks at whom it serves – its purpose and how we got there. The NDP has not governed the country and have never intro-duced a budget so their true intentions are not known in this regard. Balancing budgets usually means robbing from items in the budget to reduce a deficit but the one thing
never touched is the interest payments on the debt. All the others are subject to reduc-tion but not the money paid to the wealthy in the form of interest on the debt!
Part 1: Eyes Wide Shut
In their budgets the Libs and Cons al-ways emphasize spending taxpayers’ dollars wisely whereas the NDP criticizes them for spending on the wrong priorities. But they all talk about balancing the budget by end-ing deficit spending and then using surplus-es gained by cutbacks to reduce the debt. That narrative is taken up by the media and dominates the discussion and we are left with our eyes wide shut. It is a red herring
meant to obscure what is really going on. Indeed, this frame is widely accepted with-out questions by even the left-wing pundits. Part of this narrative includes conversa-tions about how much should be spent on different areas but the one item never dis-cussed is the amount of interest paid on the debt and who gets that money. The interest on the debt is never adjusted. For example, Jim Stanford in an otherwise
excellent recent CCPA article, “The Five Most Outrageous Things About the Con-servative Budget,” ignored the transfer of tax dollars to the wealthy. He admitted “it’s hard to even know where to start” to comment on such a “galling, short-sighted and ultimately destructive…federal budget….” He focused on tax and spend differences between the CCPA Alternative Federal Bud-get and the government budget stating “The
question is not whether to ‘tax and spend’ but whom we will tax and what we should spend it on” highlighting the unfairness of the government budget’s allocations. The article was reproduced in the May-June is -sue of COMER (see and his third item was the “Phony Balance” in the budget. He correctly described some problems in his fifth item “More Stealth Austerity” but that again is part of the conventional balanced budget/deficit/debt narrative because the argument is that we need to cut back to eliminate the deficit or pay down the debt. His report for UNIFOR also ignores the amount of interest on the debt. It even adopts the government strategy to obscure this further by talking about the debt as a percentage of GDP. Somehow it is better when the debt is a smaller percentage of the GDP. That frame obscures the real
problem. The article by Warwick Smith in the same edition of COMER, talked about money cre-ation and spending without ad-dressing the interest issue.
Hidden from plain view is the transfer of tax dollars in the form of interest on the debt. Even when the budget is balanced, huge sums of taxpayers’ money are being trans-ferred to the wealthy money-lenders. In the current budget the amount of interest is $25.7 billion (in 2013/14 it was $28.2 billion) and, if a deficit is in the offing as reported by the budget officer, this amount is climbing. Furthermore, the current bud-get adds almost $20 billion to the country’s market debt of $620 billion. While there is some attention paid by the media to the $150 billion added to the debt during the 11-year rule by the Cons, nobody noted the increase to the market debt in this budget.
Nor has anyone added up the amount of interest paid during the recent 11 years nor since we secretly changed the role of the Bank of Canada in the mid 70s under Trudeau Senior! How much was taxed back if any? We do not know. Recent business news has speculated on when interest rates will begin to rise. When they increase, the amount of interest owed on the debt and transferred to the wealthy will increase. How much has gone so far to the 1% or even the top 10% in lock-step with the increase in national debts? How has this transfer contributed to the inequality that has been growing since the mid 70s? As part of his current election support for the Liberals, an early effort was made by Ralph Goodale to trumpet his past suc-cess in achieving balanced budgets. He stopped – perhaps because I replied to his post that his budgets transferred even more money than the Cons to the wealth classes. He transferred more than $34 billion in his “balanced” budgets on a lower debt of $500 billion – likely because interest rates were higher then. Now that we are likely in a recession, the deficit may return but if we should emerge from the recession, and prosperity should be on the horizon, inter-est rates will increase and the amount of money transferred to the wealthy as interest
on the debt will rise – perhaps dramatically to the levels Ralph Goodale experienced or the even higher levels of his predecessors. People will celebrate the return to balance and ignore the real ongoing problem of large amounts of our tax dollars being transferred to the wealthy as interest on the debt. That debt is the reason we are told we cannot afford the programmes and infrastructure Canadians need. It underpins inequality. At COMER we often join the narrative of the parties but point out that if the govern-ment borrowed from the Bank of Canada

(monetary policy), the spending of the bor-rowed money would be interest-free and that the stealth austerity that Jim Stanford deplored, would be avoided. At the end of the Stanford article, our comment correctly criticized the Alternative Federal Budget’s failure to include monetary policy and only focus on fiscal policy. But we also ignored thetransfer of tax dollars to the wealthy. Instead we try to sell an alternative narrative about money creation and the historical role of the Bank of Canada that would reduce or elimi-nate the transfer of tax dollars as interest on the debt but this subtle shift in the narrative is harder for people to understand. We are still part of the mainstream narrative about

tax, spend, balanced budgets, deficits and debt repayment in the same way that Smith does. In our comments, we seem to believe that it is out of a lack of knowledge and igno-rance that this is occurring. That will be ad-dressed in more detail in Part II of this series. When Paul Hellyer used to present on this topic, he would ask, as have I, “When you go to the bank and borrow money, where does the bank get it from?” We all know that people usually say from other depositors or the Bank of Canada and we then politely correct them telling them that it is created out of thin air and explain why that is a problem. But recently I have started to ask, “The current budget is allegedly bal-anced. Do you know how much interest is still being paid on the debt and to whom?” People don’t know and when asked to guess usually underestimate the amount. They are shocked when they hear the number and have asked more than once, “every year?” They know that it is unfair especially when they realize that the wealthy are avoid-ing taxes on this interest and sometimes park the money in off-shore accounts. The debt service charge number is so big that it boggles the mind. It is the third highest budget amount behind Seniors and Health and more than Defense. When they realize that there is an alternative, they usually ask, sometimes rhetorically, why are we not do-ing that instead? That explanation will be explored more fully in Part II. The assumption is often that the gov-ernment does not know what it is doing. Perhaps. But politicians and civil servants are subject to their own lack of confidence at the individual level when it comes to numbers and face pressure from the media to put forth only a certain face on the topic. They do not find it easy to think through the problem. So they engage economists to advise them and allow lobbyists to influence and shape their policies. Thus, COMER’s efforts to educate them do not accomplish much. People in general, and politicians
in particular are reluctant to engage in this intellectual struggle. Once they have a narra-tive they understand and that is also popular with the media and public, why challenge it? That mainstream narrative also includes:“therefore we must practice austerity, stealth or otherwise, and tighten our belts to pay down the debt.” This is code for cutting programmes and services in the budget and is a message for the people to reduce their expectations. Recently some writers have noted that tax evaders park their money off-shore and these writers want the govern-
ment to crack down on the evaders which is a laudable activity and part of the narrative. But if we were to apply the entire current amount of interest being paid on the debt to the balance owing, it would take 25 years to pay it down. Under the present budget, there is no provision for paying down any of the debt and indeed almost $20 billion has been added to it. If we were to generate $10 billion annual surpluses, it would take 62 years to pay down the current debt using just surpluses. If the goal is a balanced bud-get, there are no surpluses. Paying down the
debt then becomes a line item in the budget. But at COMER we know a better nar-rative. The Bank of Canada can hold all or part of the debt because the interest paid is returned to the government. The debt can sit there forever and we can pay interest on it forever but govern-ments can decide how much of our tax dollars as interest should be transferred back to the government versus being transferred elsewhere. For example, we may think it is a good idea for the CPP and other pension funds to receive some of that interest during a time of economic downturn to shore up the pensions of Canadians when pensionsare at risk from recessions and economic up-heaval. So we would allow them to acquire treasury bills or members of the public to hold Canada Savings Bonds in their RRSPs or TFSAs as at present. That could be re-stricted for economic reasons at other times. But we need to be able to talk about theseoptions that are currently not on the table. Last year a large credit card companyoffered me a year’s worth of interest-free purchases on my unpaid balance as long as I paid the minimum payment each month. I noticed on-line that there is an advert for another credit card company to do the same thing now. If you run a balance on your
purchases, there is no interest charged to you for one year. If you pay the balance off at the end of the year, the money for those purchases was loaned to you interest-free. If you don’t pay it off at the end of the year, the interest rate becomes 19.9% on the unpaid balance. In the past, I have had offers from credit card companies to transfer the balance from one credit card to another at a very low interest rate of 2.99%, 1.99%, 0.9% or even 0% for a limited time plus a flat fee of 1% or 2% on the amount transferred. Of course, the hope is that people will not pay the bal-
ance off at the end of the year but will have run up a large balance earning the creditcard company a hefty amount of money in compound interest.
But when those of us who pay the bal-ance off do so, the credit card company still wins because it has that money available to invest or use as leverage for more lending. It is likely that only those people with a proven track record for paying their minimum pay-ments on time receive these offers because some of my clients with poor credit histo-ries do not receive them. This may offer a clue to what is behind the narrative about balanced budgets and deficits and  will be explored further in Part II. Canada has a proven track record with a positive payment
history. Canada, unlike Greece, is consid-ered risk-free so is not required to put up collateral when borrowing unlike the recent agreement Greece made with the EU. If the Bank of Canada were to acquire the privately held public debt, what would be the impact on that money (QE or Quantitative Easing) being available in the private sector? The private sector has had huge tax breaks that have not been translated into new invest-ment and thus have not contributed to job growth as we were told by Harper it would. If the private money-lenders no longer had ac-cess to government bonds and treasury bills, where would they invest that money? Would it all go to dividends or to purchasing backtheir shares or to CEOs or to new equip-ment and software or corporate takeovers? This then has implications for fiscal policies, labour policies and union contracts. Hopefully Part I of this article stimulates discussion about another narrative than the balanced budget/deficit/debt one and will
prompt some further research into the ques-tions raised. In Part II we look at how and why busi-ness leaders used their media to manufacture
our consent for this misleading narrative.  (Herb Wiseman is COMER’s information of-ficer, and a long-time member of COMER)
The next hearing before the Federal Court will take place on Wednesday, October 14, 2015.
For details, visit
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