THE RECORD
November 01, 2000

Fiat Lux

by Ed Deak

One of the silliest ideas that keeps coming up all the time, whenever business people, economists and politicians gather is : "Canada is rich in resources, but poor in capital. We must become more competitive to attract foreign investment.!"

Total rubbish. Business people should be the first to know this, as they literally run their businesses and survive on a constant flow of loans. The bigger they are, the more they borrow, so they won't have to use their own capital reserves. Besides, the costs of borrowing are legitimate business expenses that can be written off against taxes. By borrowing, these companies can literally double their economic power so the larger ones can walk over anybody.

It is an old joke that you can borrow all the money you want provided you can prove you don't need it. The reason is that to borrow one has to show collateral in the form of real estate, or some other form of resource the bank can foreclose on and sell in case of default of payment. In theory, this means that a loan must be balanced by solid properties and that the banks have strict limits on what and how they can loan.

Nothing could be farther from the truth. It amazes me how many business and political people still have no idea how money is created by the banks. Many people still believe that money is issued against gold stocks locked up in vaults, or against the deposits by customers. Those days are long gone. The gold standard died many years ago. The loans against deposits had been in practice until our friend Mulroney deregulated the banks. Now they can create money by issuing loans almost without any limits. While the "loans against deposits" rule was in practice banks could loan out around $20. for every dollar on deposits. The last I've heard, in less than 10 years since deregulation, Canadian banks have loaned out almost $300. for every buck on their books. Sounds good, doesn't it. Sort of makes you feel warm all over.

By law, only a government can create and own money, people only borrow it for various uses. This is why it is illegal to destroy money, because it is public property. However, governments have given away this right and now the system is out of control to produce profits for the shareholders of the banks and major corporations, while we the ordinary unwashed public remain, through our governments, responsible for the convertibility of the created money into resources and goods.

The vast majority of this money is created out of nothing and very often for the purpose to put people out of work. The excuse is that the companies the money is created for will make profits, which in turn will also make everybody prosperous. The minute that money is created it is accounted by the banks as an asset on which more loans can be made. What used to be monetary deposits balancing loans is now loans balancing new loans. In real business practice this is called bankruptcy, but in economics it is called wealth.

Our monetary system is called "fiduciary, or "faith based", because the money in our pockets and accounts is worthless until somebody sells us something for it. On the larger scale what happens is that the banks create unlimited amounts of money and to maintain the convertibility of it without causing inflation governments are forced to open more and more resources for exploitation. In other words, our money is now a "licence to control energy" and nothing more.

Now comes globalization. The concept of free trade is not supposed to include the free movement of capital, as it totally destroys the opportunities for people to produce goods for their own purpose and for sale. With the free movement of capital multinationals move in with imaginary money, as in the case of the BC forest industry, and simply take over to convert the benefits into their own pockets.

The main purpose of these free trade deals, that have nothing to do with either freedom or trade, is the forced acceptance of the fiduciary, non existing capital of other countries for resource convertibility and the removal of the profits created by imaginary investment. In reality it is nothing less than a huge, legalized pyramid scam where certain countries are permitted to create capital out of nothing to colonize others.

Neoclassical economics, known as capitalism, is built on a collection of contradictions and fraudulent accounting, sold as wealth creation. We have banks thousands of miles away creating imaginary capital against resource collateral owned by the citizens of other countries. The citizens are not permitted to create their own capital for the same purpose. Their own governments deny them this right under trade agreements, giving away their birthrights and literally the food from their mouths.
So, let's hear from the business experts why Canada can not create it's own capital for our own development, but we must permit exploitation by foreign investment created against the same resources.

Copyright (c) 2000, West's International