RM-DEBT - Essay 1 - The Red Debt Pill

WARNING: If you’re a blue-pill sort of person (4.5 hours of tv per day, malls on the weekend, apathy is my middle name, Sgt Shultz I KNOW NOTHING!!) - DON’T READ THIS. If you feel a need to read something, an urge which probably comes over you now and then, try “Yes Virginia there IS a Santa Claus!” or something like that - at some point in your life you may be ready for more advanced things, but now may not be the time. If, however, you are ready for a Red Pill - carry on ....

I know the economics of a national government, and the national debt, seem like vastly complicated things that probably only trained economists and people like that really understand. And that is pretty much what they (warning: CT ALERT) want you to believe. Because if you understood how you’d been scammed for the last 20-odd years, you just might get a little upset.

Let’s have a quick look - maybe it’s not quite as complicated as they want you to believe.

Fact 1: Currently this Canadian National Debt is around 600 Billion dollars - lots of bucks. And we are (and have been) paying interest on that debt at varying rates over the last 20-odd years - all in all, around one Trillion (no misprint - that’s a T - Trillion) dollars in interest. Lots and lots and LOTS of bucks that was NOT (have this in your mind) spent on health care (national Pharmacare program anyone?) or education (noticed skyrocketing tuition fees at universities the last few years?) or daycare, or infrastructure (heard about the decaying school buildings and city transportation systems lately?) - etc and etc. A Trillion dollars would have gone a loooong way with all of those things, and much more. But instead our government, through deliberate policy decisions, chose to pay your tax dollars in interest to people wealthy enough to be loaning the government money. If the government actually needed to be loaned any. Read on.

Fact 2: Of this 1.6 Trillion dollars, only (a maximum of) 100 Billion was ever spent on actual programs of the Canadian government - all of the rest - around 1.5 Trillion - was/is interest and compounded interest on both the original borrowings and further money borrowed to pay interest etc. Think about that for a minute now - of the 600 billion currently still owing, and the one Trillion or so already paid in interest, from your tax dollars, only around 100 billion was ever used for programs.

Fact 3: The Canadian government chose to borrow that original 100 billion, over a period of several years back in the 1970s and early 1980s when it faced some relatively small budgetary deficits, from commercial sources - that is, direct borrowing from banks, or through issuing longer term debt instruments, usually government bonds or treasury notes.

Fact 4: Instead of borrowing that original 100 billion during those years, the government could have instructed the Bank of Canada to either print new “cash” money to be used by the government, or simply credit the government accounts on which it writes cheques to all kinds of people - the Bank of Canada could have done this at either no interest or nominal interest, if the money was to be considered a loan, or simply issue it free-gratis - as in, We are the government, we have ultimate control over the money supply in Canada, the money supply increases naturally through various means every year, and we choose to increase it by crediting the government accounts with that much money, which we will then inject into the economy through our payments to suppliers of government services, or the salaries we pay to our employees, or the monies we issue the provinces for health and education transfers, etc.

Fact 5: If the government had chosen to issue the money as described in Fact 4 rather than borrowing it - we would NOT have subsequently paid private “investors” over one Trillion dollars in interest on the resulting debt over the last 25+ years. The huge outcry during the last 15+ years (beginning with Mulroney and Wilson’s “Ball and Chain around our poor wee babies unto the Xth generation!” story, then carrying on with a vengeance through Chretien and Martin’s budgets of their first few years in which they out-Mulroneyed Mulroney, much to his surprise) about the huge debt requiring us to cut back (“slash!”) our social spending, etc, would never have been necessary - and we would not still have that 600 billion dollar debt on the government accounts, for which we still pay something like 30-40 billion dollars yearly in “service charges” (anyone from a farm background will understand the exquisite irony of that term, in light of this exposition of the debt myth), off the top, of your tax dollars.

Fact 6: The standard bank-government “economist” story about the above facts is that for governments or their central banks to “print money” causes great inflation and instability in the national finances (remember Germany or some place in the 1920s carrying around wheelbarrows full of money to buy a loaf of bread?!? horrors!! That’s what happens to governments “printing scads of money”!! - a completely different situation, in every way, than the Canadian situation of the 1970s, but they don’t get into that part of it, just the scary part...), and thus is very irresponsible of any government and must not even be considered - end of discussion. They do not, for some reason, carry on to explain how following a policy that resulted in our current situation - the 600 Billion dollar debt, still drawing 30-40 billion per year in interest, after paying out already over one Trillion in interest - was responsible behaviour, compared to the alternative of a government issuing, through the Bank of Canada, say 100 billion over several years, resulting in NO debt currently on the books, NO 30-40 billion per year in current interest, and NO trillion dollars in interest having being already paid. (Nor, one might note, do they get into the explanation of how the so very "responsible" banks to whom we have de-facto given the rather important responsibility of issuing the nation's money supply so badly mismanaged their own investments during the early 1990s that they required a massive bailout from the Canadian government to survive - for which their "punishment" by the Canadian government was to further remove any requirements they had previously had concerning the maintenance of reserves, and to increase the government boorowing to help them out - bet you haven't read much about that in the Pispot either, as they demand more bank mergers and deregulation, etc and etc - but all stories for another day - and covered in much more detail in Monetary Reform Magazine).

It is with good reason, actually, I think, they do not try to say this - even they could not do so with a straight face - even your average Canadian, who is, apparently, rather deliberately NOT educated in high finance or government finances or even basic (“real”) economics during 12 years or so of compulsory schooling, would see the absurdity of this fairly readily.

When put in straightforward terms like this, it is pretty difficult to arrive at any other conclusion than that we have been scammed, big time, by the very people we have trusted to oversee our national economy, for quite some time now. The only other even remotely possible conclusion is that some people in high places made some rather poor decisions, and now we must all pay the price - but to believe that is to believe that the best and brightest minds in the highest circles of the government and banks, over many years, were actually not very bright, and could not see the consequences of some rather irresponsible actions. Like putting a gun to someone’s head, pulling the trigger - and then pretending to be shocked when the person falls over dead. Possible - but not very likely. In any (responsible) court of law, the stories of the defendants are listened to - but not automatically believed. They must be judged against a preponderence of belief and evidence, among other things (consider the gun story) - and that the highest economists and government officials would be unaware of the consequences of repeated borrowing over a period of time, as compared to the consequences of simply crediting a government bank account with a relatively small, controlled amount of money, is simply not believable. The story of “runaway inflation through unrestricted printing of money” is equally unbelievable when considered in a wider context - what they do not choose (or outright refuse) to acknowledge is that, concerning such things as government finances in a modern democracy such as Canada, responsible decisions are made by intelligent, trained and responsible people, who are well aware that the money supply must increase each year, and that a limited, controlled addition to this money supply, through government creation of money, simply helps meet this demand and, thus, is in no way inflationary. Equally, to embark on a course of borrowing, year after year, has definite and known repercussions - increased debt, obviously, and increased percentages of income going to interest payments - that such trained economists had to have been equally well aware of.

When anyone you talk to feeds you the “printing money causes inflation” story - they ought to be asked to explain why the alternative, as described above, with the resulting 1.6 Trillion debt, was felt to be preferable. If they plead ignorance - that it was unforeseen or something - perhaps then would be a good time to try to unload that bridge in the Everglades you’ve been trying to get rid of, and see if they really are that simple-minded. (I have written letters to my MP, the Bank of Canada, and the Finance Department of the government requesting even a simple explanation of this - nobody answered. Go figure.)

As a final point, one might note that such a course of action as described above - borrowing, debt, interest payments, reduced national (government) disposable income - rather handily (coincidentally?) fell into the “neocon philosophy” emanating from the US (and followed by the governments of Canada and Britain, among others) as part of the Washington Consensus beginning in the 1970s and 80s of reducing government expenditures, deregulation, privatisation, slashing taxes, etc, that we have witnessed for the last 15 years - but as that does get dreadfully close to a “conspiracy theory” of some sort, I shall just leave the statement open, without further comment, as a story, perhaps, for another day - another day during which we might also talk about the corporate tax revolt of the early 1970s which was instrumental in reducing government income, which led to the need for borrowing in the first place - and also gave certain well-heeled “investors” more after-tax income they needed to do something with - and loaned back to the government!! Or perhaps you might do some sums yourself, and see what sorts of “Hmmm - isn’t that interesting!...” sorts of doors start to open for you. As Morpheus said - choose the red pill or the blue pill, Neo - but if you open your mind, you can never close it again. (something like that - you think I have time to check every quote?!? geez)

- another point probably worth thinking about concerning this “debt” is the application of the internationally recognised concept of “Odious Debt” to it all - given that the Canadian people received benefits of something less than 100 Billion dollars, or something around 6%, of the 1.6 Trillion, with the rest going (and going and going and going and going) to wealthy investors of various sorts in “service charges”, quite a good argument could be made that the entire debt should be just plain cancelled, written off as such an Odious Debt. Consider a situation closer to home - if a man, shall we say, agreed with a banker that he would borrow a lot of money, and then his children would pay it back with copious amounts of interest over their entire lives - why, no court in the country would dare try to enforce that repayment on the children - so why should it change with the government? A very strong case can be made that certain “lenders”, in collusion with certain government officials, took a calculated risk in imposing this odious debt regime on Canadian taxpayers - now that the scam has been exposed, they must pay the price (and, quite frankly, go quietly and thankfully they aren’t hauled before a criminal court for massive fraud, and required to pay back that 1.5 trillion they stole). Or maybe something happened during one of the years I was sleeping - did we have a vote on whether or not we approved of the government policy of wildly and irresponsibly accruing this huge debt rather than getting the Bank of Canada to provide the money, a much more responsible action?

(By the way - Don’t look for confirmation of any of this story in the National Post or Sun papers, or most of the rest - the people who own these papers also hold a considerable amount of the (financial) paper under discussion - it is rather not in their interest to promote any discussion of this issue - and as we well know, they pretty much confine things in their papers to things they want to talk about, or want YOU to talk about (read any stories about how we need more tax cuts lately, or privatisation, or American-style "health care"?). This is not one of them......)

Well (I hear you say...) this “odious debt” stuff is a pretty serious charge, and not provable - we do sort of trust our politicians, you know - well, maybe not 100% - but this is really beyond the pale!! - 20-plus years of politicians scamming us like this!! - too much!! - but - well, consider, first - probably most of them didn’t/don't really understand this any more than average citizens did - few politicians have economics training, and weren’t/aren't aware of the scam; not to mention most politicians are much more concerned with how they can use (and abuse) the system for their own gain rather than actually making it work for everyone, so exploring things like the debt would not be of much use to them - especially if it results in a few phone calls from certain funders to back the f___ off. But consider also - what have the politicians been doing with our tax money, and the money from the debt they accrued - what have they given to Canadian citizens? decreased funding for every social program. For themselves? Very high salaries with regular raises, gold-plated pension plans, junkets for every one of them all over the world - while they gut the UI program, welfare programs, and such like (WE cut back!! - THEY get regular raises and great pensions! - as a reward for their mismanagement, I guess). Of course, the “investors” holding the ‘debt” rake in 30-40 billion per year right off the top. The politicians and banks MIGHT have a small argument about this not being an odious debt - if they weren’t so obviously benefiting so greatly from what they have wrought, while watching the rest of us face depletions in everything those tax dollars are SUPPOSED to be paying for..

- believe me, I have always felt our government was pretty good, at least until Mulroney took over and tried to make us an American puppet - haven’t been very impressed with Chretien either, mostly following along in Mulroney’s footsteps - but this debt thing bothers me. I wrote letters to my MP, the Bank of Canada, and the Finance Department, asking if they could briefly point out what I was missing or overlooking that made the debt some kind of really necessary thing or something, why my take on it was somehow wrong from the get go - and nobody answered. If this was a question like “My friends have told me Elvis is alive, and living on the moon, which is actually made of green cheese so he has lots to eat - can you explain to me whether or not this is true, because my friends never lied before...” sort of question, I could understand not taking the time to answer - my parents or someone who is looking after me should be expected to deal with this stuff before letting me out on my own. But like it or not, the debt question is a pretty serious accusation, not an “Elvis is alive” question - and the failure to answer only lends more credibility to the truth of the accusation. More like the Santa Claus story than Elvis - but at least when the 10-year old finds out Mom and Dad were fibbing about Santa, the reasons behind the fantasy seem pretty benign - but the reasons behind the debt scam are somewhat less so.

For more articles (guess what - I'm not alone in this!!!) - check out the RM Debt Scam Index. Then start asking questions. And get some red pills for your friends - the sooner we do something about this, the sooner we get decent government back in this country.

Gee it's good, to be Back Home again....