'Usury, once in control, will wreck any nation'
Today is Elbe Day. Seventy years ago, Soviet and American forces met near Torgau on the River Elbe in Germany. The Third Reich collapsed less than two weeks later.
The soldiers came from nations that were very different politically, but surprisingly similar economically. In the Soviet Union the state exercised complete control over the economy. During the war, however, governments in the United States and the British Empire also established an unprecedented level of control over their economies. Workers and firms made their economic decisions with an eye to rations and quotas instead of prices and profits.
Wartime success led voters, who also remembered the hard times of the Great Depression of the 1930s, to desire even more government involvement in the economy going forward in order to, as it was said at the time, 'win the peace.' During the '30 glorious years' from the 1940s until the 1970s increased government spending and central bank money printing led to full employment, modern infrastructure and social services and an improved standard of living for millions of people in the world's industrialized nations.
So long as governments were able to deliver such results, people were happy to give them more resources. However, as in any system, success led to complacency. By the 1970s it was becoming more and more difficult to raise productivity and living standards as all of the obvious means of doing so had already been exploited. Workers and firms, meanwhile, insulated against harsh economic realities by government intervention, had become ever-less responsive to market and price signals.
Thus, when energy prices began rising rapidly after 1973 governments found they were powerless to reverse simultaneously rising rates of unemployment and inflation. This caused people to lose confidence in the government's ability to manage the economy. However, as power once centralized resists dispersion, the crises of the 1970s simply led to control over the economy passing from the hands of government into the hands of the banking system.
Evidence of this handover of power has come to light in a recent lawsuit filed by lawyer Rocco Galati on behalf of the Committee for Economic and Monetary Reform (COMER) against the Canadian government and the Bank of Canada. The suit seeks to -¦restore the use of the Bank of Canada to its original purpose, by exercising its public statutory duty and responsibility. That purpose includes making interest-free loans to the municipal, provincial and federal governments for human capital expenditures (education, health and other social services) and/or infrastructure expenditures."
The suit claims that when the government of Pierre Trudeau agreed to stop borrowing money virtually interest-free from the Bank of Canada and to borrow instead from private lenders at the behest of the Basel Committee of the Bank for International Settlements (BIS), the central bank of central banks, it was in violation of the Bank of Canada's original mandate (which, incidentally, has never been repealed).
In 1935 William Lyon Mackenzie King warned Canadians that "Once a nation parts with the control of its currency and credit, it matters not who makes the nation's laws. Usury, once in control, will wreck any nation." According to the lawsuit, the Trudeau government's 1974 decision has resulted in the payment of $1 trillion dollars in interest to private domestic and international financial institutions. These interest payments have given banks enormous risk-free profits for over 40 years. (For more information about this lawsuit, please read the article "Liberate the Bank of Canada, Intrepid Think Tank Urges" by Murray Dobbin, published by TheTyee.ca).
It is important to realize that fiat currencies such as the Canadian dollar are not backed by anything tangible like gold. Rather, they are created out of thin air whenever a loan is made. As admitted by the Bank of England in March of 2014, "Commercial banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created."
Give yourself a moment to let this sink in. Banks do not need to attract deposits first in order to make loans. When you are borrowing money from the bank, you are not borrowing money deposited by someone else. Instead, it is your own borrowing that is creating the money that is being lent and which you will be expected to pay back (with interest).
When the Bank of Canada was obliged to lend money to Canadian governments, money was similarly created but at least the loans were held as assets by the Bank of Canada. Under the current arrangement, however, every loan made to individuals, businesses and governments serves to increase the wealth and power of the commercial banking system. So long as the world uses fiat currencies, and so long as the power to create fiat currency is held by private banks, these banks have every incentive to, as William Lyon Mackenzie King put it, 'wreck any nation' in order to preserve their power.
A cursory look at the world's recent trouble spots supports King's assertion. Saddam Hussein was left in power until he had the nerve to announce that he was going to stop accepting U.S. dollars for Iraqi oil. Muammar Gaddafi was regarded as harmless until he started talking up a plan to issue a gold-backed dinar for use in intra-African trade. Looking at the evidence, it would appear that one of the duties of the U.S. military is to serve as the enforcement arm of the Bank for International Settlements.
Despite such efforts to enforce compliance, though, our current bank-run system of monetary central planning and control is beginning to fail. People are beginning to understand that the debts and interest payments that have been generated by the system, while undoubtedly enriching for the banks, are the root cause of the world's ongoing global financial crisis.
Iceland, which was the first economy to be sunk by its banks in 2008 and the only country not to subsequently bail out its banks with yet more borrowed money, has issued a report recommending that the power to create money should be taken away from commercial banks and handed to the central bank and, ultimately, Parliament. Meanwhile, the Greek government is looking into the possibility of classifying the bailout loans extended by the EU since 2010 as 'odious debts' that legally need not be repaid. However, Iceland and Greece are small and can, like the COMER lawsuit, safely be isolated and ignored.
Not so Russia. When the Soviet Union finally collapsed under the weight of its own inefficiencies beginning in 1989 the international banking system quickly assumed control of the Russian economy. First, the Central Bank of the Russian Federation, a member of the Bank for International Settlements, was established in 1990. At the same time, well-connected officials rigged state privatization auctions with the help of international banking connections to gain control of valuable assets for pennies on the dollar. Wealth amassed over decades by the Russian people passed smoothly into the hands of a new oligarch class, who eagerly joined the ranks of the global financial elite.
Vladimir Putin is known to regard the early 1990s as a catastrophic time for Russia. While he is hardly a sympathetic character, one has to appreciate that he is motivated in some measure by a desire to win greater independence for the Russian state and the Russian people. He understands that to do this he needs to take Russia out of the BIS-controlled fiat money system. Thus, Russia under his leadership has steadily increased its official gold holdings and has developed economic arrangements with China and other economies that do not employ the U.S. Dollar.
Of course, these efforts have not escaped the notice of the global banking establishment. There is strong evidence that disorder in the Ukraine was deliberately instigated by the US State Department in late 2013 in order to provoke Putin and weaken his hold on power. Eighteen months later, Ukraine is a mess. Putin, meanwhile, enjoys broad support in Russia even as he is increasingly vilified by the West.
Returning to the anniversary of Elbe Day, as the United States sends troops to Ukraine (with Canadian troops from Petawawa scheduled to join them this summer) let us hope that we never see Russian and American troops meeting as enemies on the River Dnieper. Russia, with its still formidable arsenal of nuclear weapons, is not Libya and even one drop of blood spilled on behalf of the BIS fiat money system is one drop too many.
Next week: Wendy Michael