Feds have the money
Re: Mayor Kennedy Stewart looking for breakthrough year in 2020, Mike Howell, JANUARY 22, 2020
There is only one taxpayer, so the saying goes, but more pertinently there is only one central bank, and our national government owns all its shares. Google "Prudential Liquidity Management" and discover that when the federal government wanted an extra $20 billion in its account, the Bank of Canada complied by purchasing additional govenment bonds to increase the government's deposit.
We need not ask if we can "afford" a new transit line or housing the homeless, but whether we have the materials and human resources to build them. Lack of money should never deter because with political will, money can always be created at the federal level by BoC computer keystrokes.
In testimony before the Standing Committee on Banking and Commerce, the first Governor of the Bank of Canada Graham Towers was asked whether "...anything physically possible and desirable can be made financially possible". He replied: "Certainly."
1. Where will the money come from?
“Whatever is technically feasible is financially possible. To the perpetual question ‘Where is the money coming from?’ the answer is now clear. It comes from the only two institutions we permit to create money funds: the treasury of the sovereign government and commercial banks. And the rate at which we permit either to create funds is pretty much a matter of public policy.”
........ there is no theoretical limit to the ability to create funding, so “the only question is should they be made available.” Finance is not a scarce resource. The state cannot run out of its own money (currency).
2. Standing Committee on Banking and Commerce, Minutes of Proceedings and Evidence Respecting the Bank of Canada, 1939
Some of the most frank evidence on banking practices was given by Graham F. Towers, Governor of the Central Bank of Canada (from 1934 to 1955), before the Canadian Government's Committee on Banking and Commerce, in 1939. Its proceedings cover 850 pages. (Standing Committee on Banking and Commerce, Minutes of Proceedings and Evidence Respecting the Bank of Canada, Ottawa, J.O. Patenaude, I.S.O., Printer to the King's Most Excellent Majesty, 1939.) Most of the evidence quoted was the result of interrogation by Mr. “Gerry” McGeer, K.C., a former mayor of Vancouver, who clearly understood the essentials of central banking. Here are a few excerpts:
Q. So far as war is concerned, to defend the integrity of the nation, there will be no difficulty in raising the means of financing, whatever those requirements may be?
Mr. Towers: The limit of the possibilities depends on men and materials.
Q. And where you have an abundance of men and materials, you have no difficulty, under our present banking system, in putting forth the medium of exchange that is necessary to put the men and materials to work in defence of the realm?
Mr. Towers: That is right. (p. 649)
Q. Would you admit that anything physically possible and desirable, can be made financially possible?
Mr. Towers: Certainly. (p. 771)
3. Alan Greenspan, former U.S. Federal Reserve Chairman
"...... monetary authorities—the central bank and the finance ministry—can issue unlimited claims denominated in their own currencies .......a government cannot become insolvent with respect to obligations in its own currency. A fiat money system, like the ones we have today, can produce such claims without limit."
4. Bank of Canada, Third Quarter 2011
"Shortly after the quarter ended, the Bank and the Department of Finance signed a
Memorandum of Understanding in relation to a deposit to be established at the Bank
by the Government of Canada in connection with its prudential liquidity management. The
maximum deposit amount will be $20 billion. The Bank, in consultation with the
Department of Finance, will determine the pace of the initial build up of balances.
On 19 October, the Bank announced an increase in its minimum purchase of nominal bonds at auction to 20 per cent, effective immediately, in order to accommodate the projected increase in the Bank’s liabilities."
Modern Monetary Theory in Canada