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The Dragon with Five Heads
- and how to control it
by Derek Skinner, Victoria BC

Part 1.  The Dragon with Five Heads

All money supply is created by the obligations and debts of those who borrow.

We pay interest on debts so it follows that we incur interest on the total money supply as it is created. The money supply is a continuously revolving wheel of debts incurred, repaid and replaced by new debt on which we pay interest.

The Canadian money supply in circulation M(3) is about $1.5trillion. (see item 5 below). There are five (5) machines used to create and manipulate our money supply.

In Canada the authorities and machines that create and manipulate the money supply are:
1.- Bank of Canada (BoC). Is authorized to create money as needed by the governments of Canada. Specifically, the money base M(0) which is created by accepting and holding 10% of Government Bonds issued and then printing or minting the money in your pocket. M(0) is currently 3% of the total money in circulation. It is almost interest free because the BoC is a Crown Corporation and any profit from interest has to be returned to Treasury. At one time in the prosperous period from 1939 to 1974, M(0) was up to 25% of the money supply, even over 50% during WWII, but the Bank for International Settlements (BIS) and the consortium of National Banks thought this was unfair because they were losing a lot of potential interest so in 1974 BoC Governor Bouey agreed or was persuaded to change the rules. (see item 5 below).

2.- Chartered Banks and Financial Institutions are authorized to create digital money  as a multiple of the capital "reserve" that they possess. This is the well known "fractional reserve" principle. The reserve used to be held as bullion but is now determined by the value of the shares the Banks own on the Stock Exchange plus some other accounting variables. The multiple used to be 10 for good practice but sometimes grew to 20 or even 50 times reserve. The Basel Accords were trying to hold the level at 12½ times but did allow 20 times under special circumstances (Basel II). The BoC is slow to apply the Accords and without access to the reports issued by the Banks to the Office of the Superintendent of Financial Institutions (OSFI) there is little that can be checked by outsiders. It is reported by others that the Financial Institutions are now using a leverage ratio of 30 for Assets to Capital through the use of "off book" special instruments. Bank created digital money, M(3)-M(0), accounts for 97% of the total money in circulation.

3.- The Stock Exchange. -This is a casino for creation and maintenance of corporate capital in the form of shares. Shares are frequently created or bought with borrowed money which entails interest.

4.- The Bond Market. - Federal and Provincial governments issue Bonds and redeem them when due as a revolving debt load. The BoC is used as Agent to auction  Federal Government Bonds (the National Debt) to Financial institutions. All these Bonds pay annual interest (coupons).  Most of the redemption money is used to buy newly issued replacement Bonds. Corporations also issue Bonds to raise money in the Commercial Bond Market. Some Bonds pay interest in the double digit range. (Think Greece and Spain where IMF Structural Adjustments are applied, and commercial Junk Bonds.)

5.- the Vacuum Cleaners. -  Everywhere that interest is payable there is a vacuum cleaner contract document to hoover the interest money from the borrower, usually the 99% of us, up into the account of the 1% investor or lender who is holding the debt that entailed the interest.

Imagine if you can the amount of money that is moved by interest payments on the total of digital money in circulation. Digital money is made up of mortgages at rates that vary from 5% to 10% (in good times), charges of 2% or more on shop keepers total credit card accounts let alone the 22% paid on outstanding card holders' accounts, business lines of credit, and all the myriad accounts of those who borrow.

That digital money is actually created by monetizing the value of the credit rating or collateral deposited as security by the borrower.

(In Canada alone, assume an average interest rate of 5% on $1.5trillion. That represents $75 billion transferred every year from us to them. Much of it goes to the 1% of the 1%.)

Imagine the control that that sort of money can exert; and it is now inherited from generation to generation through Trusts and Corporations that may never die.

IN THE LAST 50 YEARS WE HAVE CREATED A CLASS OF MONIED "ELITES" WHO CAN BUY AND SELL POLITICAL PARTIES AND GOVERNMENTS AND MANIPULATE MONEY MARKETS TO SUIT THEIR OWN INTERESTS AND AGENDAS.This is anti-democratic and we are stupid to allow it. We are in the era of the oligarchs. On a world scale they meet in secret enclaves like the Bilderbergers and create organizations like the World Bank and the International Monetary Fund (IMF) that can intimidate governments and force feed them loans in order to control them with debt and interest payments.

If governments resist then "popular revolts" and coups are organized with military force. (Think Iraq, Libya, Syria, Sudan, Ukraine and soon to be Venezuela and Iran.)So - What to do?First of all we must understand the scale of the monetary problem and realize that the uncontrolled privately created money supply must be curbed and replaced, at least in part, by a government issued, interest free, money supply. Control of the money supply is the first duty of any government because the common good is dependent on it.

We cannot continue to let private entities create almost unlimited amounts of money at will and charge interest on what they create.

This is not to suggest that private satisfaction of commercial and industrial demands should be abolished. We are not likely to get rid of money-lending and capitalism but they can be made to work alongside government infrastructures rather than replacing or destroying them.Secondly, we must understand that the current concentration on uncontrolled growth in corporate "market share" and "profit" at any cost to the ecosphere has led to a crisis in the environment of monumental proportions. Unending pollution of the atmosphere has created climate change that will engulf large parts of the world and its populations.As Naomi Klein has so elegantly described in her article "The Change Within…" published in "Nation", we are out of sync with our capability to manage our affairs. At a time when it is so basically necessary to limit our polluting ways and destruction of the planet that supports us, we have been led to consume and waste as never before.

Part 2.  How to control a Dragon

So Again - What to do?

1. Get rid of any government that tolerates corporate pollution (Tar Sands, fracking etc.)
2. Eliminate the possibility of another majority Party government dictatorship by legislating Proportional Representation elections instead of the current First Past the Post.
3. Re-establish the BoC as a major partner in the creation of the money supply.There are many opinions and books on ways to operate a social gorilla war.

Regarding the 3 objectives listed above, consider these ideas and options from a modified version of the Saul Alinsky "Rules for Radicals."
A. Speak to peoples feelings rather than with facts - which they likely will not remember.
B.  Use "crowd sourcing" through social media to mobilize large numbers of participants.
C. Use ridicule against any protagonist or argument. It is a most powerful tool.
D. A good tactic is one that your people enjoy. They will keep on doing it for fun.
E. Change tactics to keep the opponent off balance. Stale tactics are boring.
F. Keep the pressure on. Never let up.
G. Pick the target. Personalize it. Isolate the target with direct personalized criticism.
H. Exercise your thoughtful choice of what you buy and who you buy from.
I.  Avoid going into debt. Exercise restraint and save before buying with cash.

Objective 1. (Rules C.D.F.G.) Harper is a strutting self-important clown. He has visions of himself as an admired Leader of a country that can sit with the big boys at the top table. He cannot see that the real financiers and players in the game for world domination regard him as a useful tool. He cannot escape his reputation as a liar, starting with the disgusting treachery in the formation of his Conservative Party, and ongoing barefaced lies about election financing, election fraud, deliberate corruption of Parliamentary protocols, contempt for judicial process, the degradation of Canadian control over our sovereign status through secret and bogus Free Trade Agreements, and total disregard for peoples' welfare and protection of the commons. His support for the New World Order agenda and out of date theories of unregulated capitalist growth in the face of finite and diminishing sustainability is proof enough that he is not the one we need to lead Canada. He and his entourage and their destructive policies must be permanently removed from office.

Objective 2. (Rules B.F.) Our current "first past the post" (fptp) electoral system is a relic from the British feudal middle ages that is maintained by those who benefit from it by using tradition as the excuse. Those who benefit are the parties and candidates with money because it costs between $80,000 and $100,000 to win a contested seat.

Furthermore, Parliamentary procedures, the Elections Act and the corporate controlled media work to ensure that minor Parties cannot be heard if they do not have an elected caucus of at least 20 Members. "Fptp" has been abandoned everywhere except in the English speaking world and it is time we adopted a democratic system that provides more citizen participation than an opportunity to vote every 4 years. Particularly if it leads to control by a single Party that gained about 40% of the votes cast or 26% of the total electorate leaving 74% of the population without effective representation. This is grossly undemocratic.

We must move to a form of Proportional Representation with a high probability of a coalition government that will debate issues and can be kept honest by open examination of performance.Objective 3. (Rules D.F.) In order to re-establish the BoC as the prime creator of interest free money required by the government for social and physical infrastructure work it is necessary to elect a government with the guts to stand up to the corporate and financial lobbies that will try to maintain the status quo.

The Bank of Canada Act contains the necessary wording to permit the Minister of Finance to instruct the Governor of the Bank of Canada to hold the necessary Bonds for it's own account in order to fund government necessities.

These could include adequate funding of Health Care to provide doctors, nurses and first class hospital facilities everywhere including First Nations territories and eliminate long waiting times; funding free education through university level for those with the desire and necessary capabilities; providing support for those in need; providing social services such as daycare and affordable housing; re-establishment of properly staffed bureaucracies to oversee and enforce regulations to control the excesses of market place capitalism. These issues are not inflationary if the results contribute to GDP growth.

The list of benefits is endless if we can just summon the effort to work together to elect a government that will make the necessary changes.When these three objectives are accomplished and a "peoples' government" is in place we can move on to the long list of corrections that are needed to reinstate our commons in the environment, judicial processes and social underpinnings. We will also then have the time and resources to work out how to tie the monetary dragon to a regime that will benefit everyone and not just a few.

Derek Skinner  , Victoria.  10 May 2014

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