Canadians paid $170-million per day in 2008/09 in unnecessary interest on federal, provincial and municipal debt.  The cost for 2009/10 and subsequent years will likely be higher.  These costs are reflected in taxes, fees, cut-backs in public services such as education and medicare and deterioration of infrastructure such as roads, sewers, water lines and affordable housing.

If our government had been using its own Bank, the Bank of Canada, as it should have for the past 35 years we would not be in this situation.  From 1867 to 1974 the accumulated federal debt amounted to $18-billion, and during that time we paid for two world wars and other smaller ones, built the trans-Canada highway, contributed to construction of the St. Lawrence Seaway, built housing, provided funds for our veterans to go to school, brought in the Canada Pension Plan and made Medicare a national service.

In 1974 the government, which had been borrowing from its own bank since 1938 at near zero interest, decided to borrow less from there and more from the private sector at market rates of interest.  The result was a huge increase in federal debt from $18-billion to  $588-billion in 1997, with a total debt for all levels of government of over $900-billion.

 In 2009 federal debt stood at $464-billion, but by 2015 it will be up to $622-billion.     Federal debt charges, currently at $31-billion, will grow accordingly and based on previous figures the total debt charges for all levels of government will be about double the federal charges.

Economists tell us there are only three ways to reduce the deficit: grow the economy, raise taxes or cut expenses.  We could cut back on public services such as health care, education, housing and infrastructure.  That would save a bundle, but it would also make life for most Canadians much more difficult.  BUT WAIT!  Instead of cutting services we could cut interest paid on the public debt.  The federal government can do this by borrowing from its own Bank at near zero interest, and to prevent the creation of too much money it can bring back the statutory reserves.  This would lead to a reduction in the profits of the commercial banks and less income for holders of government bonds, but most Canadians would be unaffected. 

Government's indebtedness to private financiers gives that sector undue influence on government policy, leading to decisions which benefit the interests of the private sector foremost rather than that of the community as a whole.

To reduce the influence of the private sector and to save taxpayers billions of dollars every year we should only elect politicians who support using the Bank of Canada for financing public debt and restoring the statutory reserves. 

Richard Priestman                                                                                                Committee on Monetary and Economic Reform,                                              Kingston Chapter   March 7, 2010