WEARECHANGE-HALIFAX SPEAKS TRUTH TO POWER!!!
Email conversation with the Finance Minister of Nova Scotia!
by Wearechange Halifax on Tuesday, October 27, 2009 at 9:06pm
I had some questions about why the Canadian government, or more specifically the Provincial government of Nova Scotia chooses to enslave itself to private entities through borrowing from private sources (banks) with high interest rates instead of just borrowing at little to no interest from the Bank of Canada (a Crown corporation, owned by taxpayers.) which exists primarily to fulfill that role for the government and in fact was created for that exact purpose. Since my MLA is Graham Steele and he happens to be the Finance Minister of Nova Scotia, I figured he would be a good person to ask! I sent Mr. Steele a letter via email with my inquiries and while he was fairly quick to respond to me, his answers left me puzzled to say the least. Here is the text of our dialogue via email, I’ve edited spelling mistakes but no content has been changed in any way.
Hello, my name is Ryan White and I am a member of the community that you represent (I voted for you in the election).I was wondering what views you have on an increased role for the Bank of Canada in lending money to the government? My understanding is that the Bank of Canada is legally able to create money and lend it to the government at little to no interest and that any interest charged would then come back to taxpayers because the B.O.C. is a crown corporation. This seems far more responsible than borrowing money from private banks with interest. Common sense seems to say that if private entities create 98 percent of the money that we have in circulation by lending it to us there is no way for us to pay that money back plus interest because we owe more than the total amount of money that was created to begin with. As far as i can tell, since 1974 Canada has borrowed mainly from private banks, and a debt of just $18 billion in 1974 (accumulated, since confederation) has ballooned to a debt of over $500 billion; 95% of which is compound interest!! Considering the fact that in fiscal year 2007-2008, the largest single federal spending item was payment of interest on our public debt (a total of 33.9 billion or about 14.5 percent of all tax dollars spent, plus the 16 percent “surplus” which also went directly into paying down the debt, making it in reality almost one third of all tax dollars collected!),it seems basically insane to continue doing this when we have the ability to legally have the B.O.C. create the money and put it in circulation by lending to the government at a near zero rate of interest. Even if they lent it at the same rate of interest as the private banks do it would still be more beneficial to Canadians because the money would go back into public hands. One third of all tax money being siphoned off into the pockets of a bunch of bankers is unacceptable. I see this as the most important issue that is facing us today as Canadians. All other programs are being negatively impacted by this ridiculous monetary policy that is virtually enslaving the Canadian government to private interests through debt. I can’t imagine any reason why someone who cared about this country would have put the policy in place to begin with, that is without beginning to think very cynically about the politician who was responsible. I hope you are someone who can see the malfunction of this policy and will work diligently as well as vocally on the provincial level to push for its reversal. Our future depends on it.
Looking forward to your response,
The Response from Mr. Steele was as follows:
“Thanks for your note, Ryan. I’ve forwarded your suggestion to the Department of Finance for their evaluation.
I, then realized that I’d made a couple of small errors in the email I’d originally sent to the Finance Minister so I sent him 2 more quick emails to correct those errors. Here is the content of the two emails just mentioned:
“Thanks for the quick response Mr. Steele!
Just a quick edit though I realized after sending the email that I did quote an incorrect stat in my previous email. I said “fiscal year 2007-2008, the largest single federal spending item was payment of interest on our public debt (a total of 33.9 billion or about 14.5 percent of all tax dollars spent, plus the 16 percent “surplus” which also went directly into paying down the debt, making it in reality almost one third of all tax dollars collected!)”, when what i should have said was “in fiscal year 2006-2007, the largest single federal spending item was payment of interest on our public debt (a total of 33.9 billion or about 14.5 percent of all tax dollars spent, plus the 6 percent “surplus” which also went directly into paying down the debt, making it in reality about one third of all tax dollars collected!)”. My apologies on this error, all of my previous statements, to the best if my knowledge, are accurate and the sentiment remains the same. I appreciate you looking into this issue on behalf of your constituents, here is a link to the website that I quoted the 06-07 debt payments info from, it is the Dept of Finance Canada’s website. http://www.fin.gc.ca/taxdollar07/mm/taxdollars0607_-eng.asp
“Er… Debt repayment would account for 1/5 not 1/3 of tax dollars collected in 06/07. Geez lol, this is why I elect politicians to take care of this stuff for me.
Anyway I think you get the idea 1/5 is still pretty bad.
Thanks so much for your time today sir.”
The Response from Mr. Steele was as follows:
“Dear Mr. White: Thank you for your email of September 21st regarding the Bank of Canada. Let me first say that we agree that it is vitally important that we strive to limit the amount of debt we have as a Province and this Government is committed to that goal. This is integral to the “Living within our means” Priority that this Government has set for itself.
The province of Nova Scotia borrows money via the Capital Markets and not directly from the banking system. Various financial institutions do help us distribute this debt to end buyers (such as individuals, pension funds and asset managers for example.)But they will typically not hold onto that debt .As such, the actual beneficiaries of any interest payments are the buyers of our bonds. These are, in the end, individuals like you and me who own the bonds indirectly via pension funds or investing in mutual funds for example.
We also have access to short term borrowing in the so called Money Markets (a Capital market for borrowings of less than one year in maturity.)at a rate equivalent to where the Bank of Canada would likely charge us for the same terms.
Borrowing directly from the Bank of Canada could lead to problems. I will mention two. Firstly if a province were to use this method of financing itself, it would likely lose it’s ability to borrow moneys in the Capital Markets (as investors would take this to signal significant mismanagement of the given Provinces financial affairs)- thus remaining dependant on the Bank of Canada to manage it’s affairs going forward. And, if the Bank of Canada were to begin printing money to lend to the Provinces, this could eventually lead to rising inflation.
There are many reasons why it is important for Provinces to borrow directly in the Capital Markets, not least of which is that it instills discipline in our fiscal and financial management. All other things being equal, the better we manage our finances as a Province, the lower the rate that we can borrow at.
Please rest assured, Mr. White, that this Government is committed to minimizing and reducing waste and unnecessary expenses in the long run and this includes, as you rightly point out, looking for the best ways to both reduce our debt burden over time and prudently managing the debt we are currently saddled with.
I was totally unsatisfied with The Finance Minister’s response to my inquiries and he seemed to be playing dumb, so I decided to break his statement down paragraph by paragraph and send it back to him with a brief comment after each one, detailing how pretty much everything he said was wrong and why.
Here is my response to Mr. Steele’s response to my initial inquiry:
First, let me say thank you for your quick response to my inquiries, it is appreciated. Now I feel I should reciprocate and let you know in a similarly timely manner that I felt your response was inadequate for several reasons. Instead of writing a lengthy analysis of your comments I’m simply going to go through the contents paragraph by paragraph and give you a quick response to each comment that you made.
Your letter began with:
“Dear Mr. White: Thank you for your email of September 21st regarding the Bank of Canada. Let me first say that we agree that it is vitally important that we strive to limit the amount of debt we have as a Province and this Government is committed to that goal. This is integral to the “Living within our means” Priority that this Government has set for itself”
Every year we are paying down only interest on our provincial debt. In years when a deficit is required, do to unforeseen circumstances like last falls financial collapse, we add to the provincial debt which in turn increases the amount we have to pay in interest the following fiscal year. This causes us to debate where to raise taxes or where to cut social programs, instead of just asking why we are making billions in interest payments to begin with when we have a legal alternative (which was in place, by the way from 1935-1974, during which time we got out of the Great Depression, funded Canadian involvement in World war 2, set up universal healthcare and built the CN railway.). That’s not living within our means, that’s barely getting by and occasionally going further into debt while at the same time raising taxes and cutting social programs.
“The province of Nova Scotia borrows money via the Capital Markets and not directly from the banking system. Various financial institutions do help us distribute this debt to end buyers (such as individuals, pension funds and asset managers for example.)But they will typically not hold onto that debt. As such, the actual beneficiaries of any interest payments are the buyers of our bonds. These are, in the end, individuals like you and me who own the bonds indirectly via pension funds or investing in mutual funds for example.”
The capital markets ARE the banks. I Googled the term “Nova Scotia Capital Markets” and the first link that pops up is for ScotiaCapital http://www.scotiacapital.com/Products&Services/PR_Primary.htm
which then leads me back to the Scotiabank webpage for services that are provided to Governments and Crown Corporations http://www.scotiabank.com/cda/content/0,1608,CID6808_LIDen,00.html
.Then you say “Various financial institutions do help us distribute this debt to end buyers (such as individuals, pension funds and asset managers for example.)But they will typically not hold onto that debt.” I take this to mean that you sell debt to the banks, then they resell it to taxpayers? So basically the banks profit off of selling Government debt to the portion of society that buys bonds, overwhelmingly the rich, then those people profit directly from tax money payed by all Canadians. That’s not really any better from the point of view of someone who doesn’t own Government bonds(the vast majority of Nova Scotians) because it is still taking tax dollars and redistributing it upwards, in other words increasing the concentration of wealth in fewer people hands. Also when you say “But they will TYPICALLY not hold onto that debt.” I can only assume you mean that sometimes they do hang onto the debt which contradicts your assertion that the beneficiaries “are, in the end, individuals like you and me who own the bonds indirectly via pension funds or investing in mutual funds for example.”
“We also have access to short term borrowing in the so called Money Markets (a Capital market for borrowings of less than one year in maturity.)at a rate equivalent to where the Bank of Canada would likely charge us for the same terms.”
If we have access to short term borrowing through the Bank of Canada at the same interest rates as we get from the private Money Markets, with the only difference being that the profits of the Bank of Canada as a Crown Corporation would return to the Government of Canada then it is clearly illogical to borrow it from a private source. Here’s the link to ScotiaCapital’s Money Markets page by the way.
“Borrowing directly from the Bank of Canada could lead to problems. I will mention two. Firstly if a province were to use this method of financing itself, it would likely lose it’s ability to borrow moneys in the Capital Markets (as investors would take this to signal significant mismanagement of the given Provinces financial affairs)- thus remaining dependant on the Bank of Canada to manage it’s affairs going forward. And, if the Bank of Canada were to begin printing money to lend to the Provinces, this could eventually lead to rising inflation.”
Part 1. : More or less your argument is that if we stop going further into debt through interest to private institutions and wealthy private citizens, then we might lose our ability to go further into debt to private institutions. Mr. Steele that is not a bad thing! That is a very, very, good thing. You say doing this would signal to investors that “significant mismanagement of the given Provinces financial affairs” had taken place. Well sir, here is an article published by the CBC on Sept. 25 2009, in which you yourself openly say that we are running a huge deficit in N.S. this year because of the significant fiscal mismanagement of the previous Government.
Signals to investors don’t get any clearer than that and you specifically are the man sending them.
Part 2.: There are only 2 options for the creation of money, we can have the Bank of Canada create it (by the way, the same principles that allow us to create bonds and sell them allow us to create the money ourselves.), or have it loaned into existence by private entities at a higher rate of interest where the profits go to private hands instead of public. Inflation can exist under both scenarios but under the Bank of Canada scenario we would in fact have ALOT MORE control over inflation. The fact that you are Finance Minister and you don’t understand that simple fact is kind of terrifying actually.
“There are many reasons why it is important for Provinces to borrow directly in the Capital Markets, not least of which is that it instills discipline in our fiscal and financial management. All other things being equal, the better we manage our finances as a Province, the lower the rate that we can borrow at.”
We are running a deficit of 592 million dollars this year sir! That’s the “fiscal discipline” that has been instilled by the current illogical policy of borrowing money needed in deficit years from private sources instead of the Bank of Canada. The only options you are looking at to balance the budget are to raise taxes or cut social programs, meanwhile ignoring the core issue, which is that as long as we are taking money away from social programs in favor of using it to pay interest on a debt that never gets smaller, only larger, our quality of life is being slowly but surely eroded away. If we used the Bank of Canada to provide us with the money to pay of our Provincial debt, then we would owe that debt to Bank of Canada interest free, thus we could use the money freed from interest payments(to private institutions and wealthy citizens) to get our economy going, create jobs and massively increase the amount we spend on healthcare, school and other important social issues as well as making yearly payments on the debt itself instead of pointlessly treading water by making interest payments. If we actually followed this plan we could be out of debt completely in 10 or 15 years have a stronger economy and return to the kind of society that people think of when they think of Canada, in other words an intelligent society that has social programs in place to increase quality of living year over year instead of decreasing it.
“Please rest assured, Mr. White, that this Government is committed to minimizing and reducing waste and unnecessary expenses in the long run and this includes, as you rightly point out, looking for the best ways to both reduce our debt burden over time and prudently managing the debt we are currently saddled with.
“We agree that debt needs to come down. Unfortunately you need to wake up to the fact that until we stop borrowing money in a deficit scenario from private sources with exorbitant interest rates and go back to having the Bank of Canada create the money as our grandparents intended when they fought for its creation, there is technically NOTHING that can or will reduce our debt besides raising taxes or cutting social programs. Since we increased the debt this year we already know that the interest payments are going to be more next year than they were this year sir, so it’s clear to anyone looking that you WIIL be raising taxes or cutting programs (most likely both) to increase the portion of tax money going to pay the interest on our debt next year. That is a fact. Further more if you really were sincere in all the arguments you raised to try and dissuade me from what I believe then you really need to read the history of the Bank of Canada, why it was created and how it came to be that in 1974 Jean Chretien(then Finance Minister) decided to stop using it(here’s a hint, banks orchestrated a collapse and he decided that the way to keep them from failing would be that instead of lending them money to keep them afloat, we would start borrowing money from them with interest thus starting the slow chipping away of all social programs in Canada and the snowball rolling downhill-like accumulation of national as well as provincial debt in correlation to the increase in interest payments.) This the most important issue Canadians face today, everything else is a distraction. Make no mistake. The only reason that the NDP are in power in Nova Scotia is because we wanted some serious change from the status quo. If we don’t see that and fast, the next time around the Green Party is gonna end up having they’re day in the sun.
After I sent the Minister’s comments back to him translated through a prism of truth, I received a generic email from his office confirming that he had gotten my last email. It’s been over a week now since that confirmation email and I’ve not gotten another personal response from the person I helped vote into office. Just goes to show the left right paradigm is all a distraction. Hand over your power to anyone and it WILL be abused. At least he can’t claim ignorance on these issues anymore as I now have documents confirming that he is aware of them. I encourage everyone who reads this to send similar letters and emails to Mr. Steele asking him to return to borrowing from the Bank of Canada!
Here are his email addresses: email@example.com
ALL POWER TO THE PEOPLE!
Oct. 21, 2009.
Wearechange Halifax share this with everyone please!!!!!!October 21, 2009 at 9:29am ·
Wearechange Pittsburgh Great job Ryan! 🙂 I will be sharing this.October 21, 2009 at 9:41am ·
Daniel Wiseman Nice job Rdub, good luck getting another response hahaha…October 21, 2009 at 10:25am ·
Wearechange Halifax lol bring it N.W.O.October 21, 2009 at 10:27am ·
Hahaha makes sooooo much sense, what a fucken knob, of course he is not going to write back Ryan he doesnt know what to say! You are right he is wrong, it is very simple. The gorvenment does not want to improve our socities way of living it… is there way of keeping the rich “rich” and the poor “poor”. Instead of opening new programs at schools they are shutting more and more down ie. Drama, art, music, sports and so many more, it makes it very easy for the families that have money to place there children into programs and sports that they can afford so that the young ones can stay out of getting into trouble and drugs, but where does that leave the families who have nothing? It leaves them robbing, stealing, bullying, getting into hard drugs at a young age, it leaves young children with little or no interest in anything! Rather then having a government that will provide children with these extra curicular activities to increase our quality of life they give them a smaller window year by year to look out of and one day the window will be completly closed, the children are our future and what are we leaving them with other then a large amount of debt that will only raise our taxes in the future and leave our society with a decrease for employment rather then the increase that we ALL need! We have the HIGHEST taxes in CANADA and the LOWEST minimum wage!! How is that not screaming WRONG to every citizen of Nova Scotia? Its fucken pathetic if you ask me. Our Government is pathetic, we spend more money on military for a war that we will never have to fight, instead of increasing the quality of our lives. But we are stuck in a loop that is controlled by the greedy hands of our government and as long as they keep getting richer they just dont give a fuck! All we are is number to them …not people just a number.The amount we pay in interest alone is enough to turn this province around clean up the streets, the pot holes, give the homeless more shelters, the children more programs and sports to occupy there time in a posotive way, raise minimum wage and increase our employment opportunities. But why would they do that??See MoreOctober 21, 2009 at 10:29am ·
Wearechange Halifax U said it all right there Gillian, people need to WAKE UP NOW!October 21, 2009 at 10:52am ·
Luke Rudkowski email me this on a website so I can link it on the wearechange.org page when I post itOctober 21, 2009 at 12:33pm ·
Wearechange Halifax done son, http://wearechange-halifax.blogspot.com/2009/10/wearechange-halifax-speaks-truth-to.htmlOctober 21, 2009 at 1:12pm ·
Just emailed this to the minister, hope it helps.
Dear Mr. Steele,
I am writing you today concerning a letter that was sent to you by Ryan White on September 21 of this year, asking you a question regarding the Bank of Canada. I have read a c…opy of his letter and it raises a legitimate matter that deserves an intelligent response. Your failure to do so only raises suspicion of either your ignorance on the topic, or blatant manipulation of facts. I recommend you respond to Ryan’s latest letter if you want to maintain legitimacy as finance minister of Nova Scotia. Myself, and Ryan I’m sure, are looking for something very simple, truth. Monetary policy in Canada is very quickly becoming one of the top issues for Canadians. We have incurred unprecedented amounts of dept since we stopped using the Bank of Canada and there is no governmental inquiry on the very fundamentals of money creation.
“Canada’s federal debt grew steadily between 5% and 10% per year until 1975 when it began to explode; growing for the next 12 years at more than 20% per year. It broke the $100-billion mark in 1981 and the $200-billion mark in 1985. While the growth slowed in 1988, our federal debt continued to climb, breaking $300-billion in 1988, $400-billion 1992, and $500-billion in 1994. It peaked in 1997 at $563-billion.” source: www.debtclock.ca
Today our national debt is over $495-billion, that’s a share of around $14 238 per Canadian citizen. We all agree this is a serious problem, and therefore it needs to be addressed responsively.
Many citizens of this country are educating themselves on this very subject Mr. Steele. They deserve to have their Finance Minister answer these crucial questions. You do not serve the “money markets” Mr. Steele, you serve the people of Nova Scotia. You are obligated to make policy in the best interests of Nova Scotians, please act in such a manner. This would be greatly appreciated by Nova Scotian’s, and would make re-election much easier for you and your party.
Sincerely and without malice, ill will or vexation. Respectfully I remain,
Evan of the Cox family.
Halifax, NS, CanadaSee MoreOctober 22, 2009 at 7:20pm ·
Wearechange Halifax Now that is exactly what i’m talking about Evan!! These politicians serve us not the other way around and it’s about time we all start holding them accountable!October 22, 2009 at 7:40pm ·
Wearechange Halifax Thanks for doing that Evan!October 22, 2009 at 7:40pm ·
Evan Cox Your Welcome! being in a democracy, I feel obligated encourage political discussionOctober 22, 2009 at 7:50pm ·
Evan Cox haven’t got a response yetOctober 28, 2009 at 5:30pm ·
Wearechange Halifax hmmm.he’s scared lol.October 28, 2009 at 6:36pm ·
Got a response.
“Dear Mr. Cox
Re Monetary Policy In Canada
I share your view that the debt burden we face as Canadians is a serious problem and needs to be addressed. This government intends on doing just that–we are committed to living within out means. However, the unfortunate and unprecedented economic and fiscal circumstances that we faced coming into this current Budget are such that tabling a deficit was our only choice.
With respect to the suggestions raised by Mr. White in his September 21st letter regarding managing the existing debt load of the Province (use of banking system vs Bank of Canada). I stand by my initial response. The advantages and disadvantages of various approaches to prudently and effectively managing our current debt load are carefully considered by professionals within the Department of Finance on an ongoing basis and I reflected their thinking, which I share in my response to Mr. White.
Graham SteeleSee More
October 29, 2009 at 12:48pm ·
Finally.I guess i can’t say hes scared to respond anymore! “The advantages and disadvantages of various approaches to prudently and effectively managing our current debt load are carefully considered by professionals within the Department o…f Finance on an ongoing basis and I reflected their thinking, which I share in my response to Mr. White.” … Read MoreSounds like he’s just the spokesman for the Department of Finance, and may possibly agree with what we are saying on a personal level.At least our message is being heard by the people ruling! I’m encouraged by the fact that he just side stepped the issue and tried to put responsibility for his response onto a faceless dept., as to me that indicates that he may realize there is a flaw in the policy and so, does not want to personally defend it.Anyway thanks for your concern about this topic, alot of people dont realize how important it really isSee More
October 29, 2009 at 1:22pm ·
Matt Matheson Bring on the green party, at least they won’t be scared to change. “insanity is defined as doing the same thing over and over and expecting different results” Exactly what these people need to understand, if you use the same system you get the same results. Keep on em Ryan!!!November 1, 2009 at 7:03pm ·
Wearechange Halifax thanks for the support Matt! as an ex-pat i know it kills you to see Nova Scotia being run like this!November 1, 2009 at 8:11pm ·
another email…. lets see how he answers these questions!
Hon. Graham Steele,
Although the intent of my previous letter was to support an antiquate response to Ryan White’s letter to you (which to my knowledge has not been done yet) I thank …you for your reply to mine.
Today I would like to ask you a few simple straight forward questions regarding money and dept in Canada. For the sake of efficency in our decussion, I would appreciate it if try to avoid rhetorical language in your response. For example words like ‘prudently’ and ‘effectively’ are essentially meaningless without relevant information. Although I respect your knowledge on the subject, I need quantitative answers for me to trust your information. Thank you for your attention on this matter.
Questions. (numbered for reference)
1. a. Is fiat money is essence debt?
b. If there was no debt in Canada, would there be any money?
2. a. Can Canada ever get out of debt?
b. If so, how is this accomplished?
3. a. Given banks are willing to lend, is there a limit on how much we can borrow?
b. If there is no ceiling on the amount of debt a government can incur, what sustains the value of our savings?
c. Does an increase of the money supply cause inflation?
4. At a fundamental level, what are the factors that affect interest rates?
5. a. What are the main reasons for the rapid increase in debt since around 1975?
b. Why is this increase debt correlated to the rise in money supply?
6. Is the shift towards privatized dept the result of a statutory obligation?
Thank you for your time Minister. I look forward to reading your response.See MoreNovember 2, 2009 at 12:43pm ·
Wearechange Halifax Good questions Evan!Ii’m looking forward to his response.November 2, 2009 at 1:24pm ·
Evan Cox got this back from him today.
With regard to your e-mail dated November 2nd, I have asked the Executive Director for Liability Management and Treasury Services, Mr. Peter Urbanc, to respond to your questions on my behalf.November 2, 2009 at 6:20pm ·
Wearechange Halifax Interesting, maybe you will get some real answers!November 2, 2009 at 10:03pm ·
Richard Scott Anderson
”The advantages and disadvantages of various approaches to prudently and effectively managing our current debt load are carefully considered by professionals within the Department of Finance on an ongoing basis and I reflected their thinki…ng, which I share in my response to Mr. White.”
So Graham Steele supports the professionals who, by being proponents of the status quo, are responsible for the financial vortex in which we find ourselves. Are these not the same “professionals” with whom he took umbrage when he was the Finance Critic while in opposition? Is there no one with balls enough to break the paradigm?November 4, 2009 at 7:32pm ·
Wearechange Halifax we need someone who is going to address this issue, not ignore it that’s for sure!November 4, 2009 at 7:42pm ·
Daniel J TowseyGreat qeustion..
Please read these
Daniel J Towsey I reposted this great article of truth at
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