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The Bank of Canada does not fulfill its function

Written by Alain Pilote on Sunday, 01 March 2015. Posted in Social Credit

It is sued in Federal Court by a group of citizens

In the previous article, Mr. Even writes: “Because money gives a claim to everyone’s products, it cannot justifiably be created by an individual or by private corporations. It would amount to attributing to oneself the right to dispose of products made by other people. Yet, new money must begin somewhere... New money, the increase in monetary volume, may not come from any other source that society itself, through the agency of an organism that is established to fulfill this function on behalf of society.“

Bank for International Settlements, SwitzerlandBank for International Settlements, Switzerland

This organism could just as well be the Bank of Canada, the country’s central bank; all it needs is to be given the proper mandate. The Bank of Canada was created in 1934 by a law of the Canadian Government. Since 1938, the Canadian Government holds 100% of the capital stock of the Bank of Canada. Of all G-8 countries, it is the only central bank that is not privately owned.

The Bank of Canada Act is reviewed every ten years, the last revision was done on December 16, 2014. A summary of its functions can be found in the preamble:

“It is desirable to establish a central bank in Canada to regulate credit and currency in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of Canada. “

Article 18(j) of the same law states:

“The Bank may make loans to the Government of Canada or the government of any province, but such loans outstanding at any one time shall not, in the case of the Government of Canada, exceed one-third of the estimated revenue of the Government of Canada for its fiscal year, and shall not, in the case of a provincial government, exceed one-fourth of that government’s estimated revenue for its fiscal year, and such loans shall be repaid before the end of the first quarter after the end of the fiscal year of the government that has contracted the loan.”

The Bank of Canada has therefore the power to finance, without interest, the country’s many developments. (Even if it were to charge a very small interest, this would be returned to the Canadian Government since it is the Bank’s only shareholder, making it the same as an interest-free loan.) The Bank of Canada has the power to do this but does not do so. Or to be more precise, it does not do so anymore.

In fact, it has been established that between 1939 and 1974, The Bank of Canada financed, without interest, as much as half of the country’s financial needs. (See the following article on page 12.) The Government thus succeeded in financing several extensive public projects, including the building of fighter planes during and after WW II, education support for the soldiers upon their return, family allowances, old age pensions, the Trans Canada Highway, the St Lawrence Seaway and medicare for all Canadians.

A change in policy was imposed in 1974 on the countries’ central banks by the Bank for International Settlements (the bank of central banks), based in Basel, Switzerland (see photo at right). Under the pretext that direct financing, free of interest, of a country by its own central bank might create inflation, it was recommended that countries be financed by private creditors, i.e. commercial banks. It is precisely from this time on that the debts of all Western countries began to grow exponentially.

Why pay interests to private banks for something the government can do itself, interest free, by using its own central bank? This is a financial coup, a swindle of the worst kind.

Passed into law

Some countries went so far as to pass into their laws this prohibition of using their own central bank, under the guise of “maintaining the stability of the currency”. This is what happened in France in January of 1973: the then Minister of Finance, Valery Giscard D’Estaing (under the presidency of Pompidou who was previously Director of the Rothschild Bank), modified the statutes of the Bank of France through Law 73-7, forbidding the Bank of France to advance or lend money to the State. (This Law is sometimes refered to as the Pompidou-Giscard Law or the Rothschild Law.)

Seat of ECB, Frankfurt, GermanyThe seat of the ECB
in Frankfurt, Germany

From 1945 to 1973, a period referred to as the “glorious thirty”, the financing of the French State, as well as other institutions, was done directly through the Bank of France, without any interest to pay because the Bank of France belonged to the State. In voting in the Law of January 2, 1973, France inhibited itself from having the power to finance itself directly from the Bank of France and is now compelled to finance itself through private banks at market rates.

The principles of this 1973 Law would later be extended to all Europe, with the introduction of the European Union in 1992, and the advent of a single currency, the euro. The same Valery Giscard D’Estaing, who took part in the writing the “Rothschild law” in 1973, would also contribute to the writing of the Maastricht Treaty, dated February 7, 1992, repeated word for word in Article 123 of the Lisbon Treaty, dated December 13, 2007, that deals with the European Constitution. Article 123 states:

“Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.”

In other words, all the nations that signed the Lisbon Treaty have agreed not to finance themselves directly, at zero interest rate, through their central bank or the ECB, through Europe’s Central Bank. They must call upon private banks that decide the rate of interest charged, all the while financing themselves, at almost zero interest, through the European Central Bank.

In an article written in 1960 entitled “Our bad servant, the Bank of Canada,” Louis Even wrote: “One may wonder whether the network of central banks, which has slowly invested all countries in the last decades, more recently headed by the World Bank and the International Monetary Fund, was not designed mostly to facilitate the control of the economic life of all nations through a universal monopoly of credit.” Mr. Even was already aware of what was to come.

And Mr. Even would also denounce the fact that when questioned on the policy of the Bank of Canada, the Minister of Finance would always hide behind this answer: “The Bank of Canada is independent and the Government can in no way influence it.”

In fact, it is the duty of the sovereign government of a nation to dictate the monetary policy of the country. It does not mean governments issuing money at their whim, or of replacing a banking monopoly with a state monopoly. In a Social Credit system, money would be created by an independent monetary organism a National Credit Office. (In Canada, the Bank of Canada could fulfill this purpose if ordered to do so.) This National Credit Office would have the mandate to establish an accurate accounting system, where money would be the true reflection, the exact financial expression of economic realities, reflecting the statistics production and consumption, through a purchasing power guaranteed to all by a periodic dividend, and a discount applied to all sales so that prices may be adjusted to the total purchasing power available to consumers.

Graham TowersIn the spring of 1939, Graham Towers, then governor of the Bank of Canada (photo at right), testified before the Canadian Committee on Banking and Commerce. He was asked the following question:

“Will you tell me why a government with the power to create money should give that power away to a private monopoly and then borrow that which Parliament can create itself, back at interest, to the point of national bankruptcy?”

Towers answered: “Now, if parliament wants to change the form of operating the banking system, then certainly that is within the power of parliament.”

The Bank of Canada taken to Court

Why do Canadians allow private banks to profit from the public debt while the Bank of Canada has, by law, the duty to guarantee interest-free loans as it did during the Great Depression, the Second World War and the Glorious Thirty? This situation is absurd and some citizens have decided to challenge it. In 2011, a group that includes COMER, the Committee on Monetary and Economic Reform (, and two of its members, Ann Emmett and William Krehm, decided to institute a class action against Queen Elizabeth II, the Minister of Finance, the Minister of National Revenue, the Bank of Canada, the Attorney General of Canada, accusing them of having cooperated with the International Monetary Fund and the Bank for International Settlements, to prevent the Bank of Canada from returning to its duty of issuing interest-free loans to municipal, provincial and federal governments. They are represented by the country’s top constitutional lawyer, Rocco Galati.

On January 26, 2015, three judges of the Federal Court of Appeal gave them permission to go ahead with their class action, and dismissed the claim of the Canadian government that the Federal Court had no jurisdiction to make a decision in this case. None of the large Canadian and international media have reported on this judgement. According to Galati, it is obvious that the Government has asked the media to remain silent.


About the Author

Alain Pilote

Alain Pilote

Alain Pilote has been the editor of the English edition of MICHAEL for several years. Twice a year we organize a week of study of the social doctrine of the Church and its application and Mr. Pilote is the instructor during these sessions.


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