Canadian Austerity Measures Benefit Banks

[Nation of Change] Last week in Ottawa, the Canadian House of Commons passed the federal government’s latest round of budget cuts and austerity measures. Highlights included chopping 19,200 public sector jobs, cutting federal programs by $5.2 billion per year, and raising the retirement age for millions of Canadians from 65 to 67. The justification for the cuts was a massive federal debt that is now over C$ 581 billion, or 84% of GDP.

[Nation of Change] The presumption was that borrowing from a central bank with the power to create money on its books would inflate the money supply and prices. Borrowing from private creditors, on the other hand, was considered not to be inflationary, since it involved the recycling of pre-existing money. What the bankers did not reveal, although they had long known it themselves, was that private banks create the money they lend just as public banks do. The difference is simply that a publicly-owned bank returns the interest to the government and the community, while a privately-owned bank siphons the interest into its capital account, to be re-invested at further interest, progressively drawing money out of the productive economy.

Ellen Brown concludes her superb article by explaining that the simplest way for the Canadian government to cut debt is to start borrowing money from it's own bank. If the government were to return profits to the central bank, it would no longer have to pay interest on their loans. Reducing debt by 40%.

Yet, just like in America, bought-and-paid-for politicians are protecting the banking system and instead have resorted to cutting services, selling off public assets, and raising taxes on voters to address mounting debt.  

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