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Hello
Keith,
(You wrote:-)
I met around a boardroom lunchtable recently with some local
politicians and their small business colleagues and noted with interest their
willingness to listen to accounts of how Bank of Canada used to control credit
(monetary) issue and keep production going without inflation--during
wartime. Then after war, it is payback time. An interesting
connection, war and debt finance.
It is indeed. I
am not an expert in any way in these matters, but in regards to keeping
"production going without inflation during wartime" wasn't there more
involved than just using the BoC to finance government? I don't think we
can overlook the fact there was an extensive system of government
regulated 'wage and price controls' in place then, too. (unlike,
apparently, in the First World War.) As well as strict 'rationing' of many
formerly plentiful consumer commodities and essentials. Other desired
consumer commodities simply weren't available, (new automobiles, for instance),
so there would've been no way their 'price' could've been 'inflated' in any
case. Even the willingness to pay 'more' for an existing, used
car would likely have been tempered by the rationed amount of gasoline
available to any would be car owner to drive it. As well as
similar restrictions on the availability of tyres
and spare parts. Many workers were exempt military service, and encouraged
to stay working in those fields where their skills were essential to maintaining
needed production by the prospect of 'consciption' if they quit. People
'saved' their wages like never before, since there was often nothing available
they wanted that they could spend them on.
(Keith continues:-) Why does the Government
now do its bank borrowing from private banks rather than the
BoC? (Obviously to help CIBC pay back the hit on its latest mega-folly,
Enron.) It collects taxes to pay interest to banks instead of paying it to
the BoC--of which it is sole shareholder.
(Joe replies:-) Good question. But why should
the 'government' BE the sole shareholder in the BofC? If it truly belongs
'to the people', why not 'give' each individual Canadian his or her share of
it? And instead of worrying ourselves about how it can lend to the
government 'interest-free', let any net profit it receives from the
'government' on its borrowings or otherwise, be paid out to each of
us. By so doing would we not be 'financially' crediting the public with
'capital appreciation' the use of its credit
created?
Joe |
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