THE CLAIRE FOSS JOURNAL

Inflation Fighting

A MUGS GAME

Now that the Liberals have apparently got the deficit under control, great victory cries can be heard across the land, although most of these avid supporters fail to mention the trivial matter of a $600 billion dollar debt.

Meanwhile the government propaganda pundits would have you believe that nirvana is just around the corner. The scenario goes something like this, once we are in a surplus situation we can start paying down the debt, give abundant tax breaks and start refunding social programs. To all outward appearances it seems to paint a somewhat rosy picture.

The critical question that must be asked though is, how did we land in this mess in the first place. Furthermore, we must come to the realization that the same faulty rules and flawed banking strategy that put Canada at the mercy of the money lenders indeed still apply.

As long as our government is willing to allow the Bank of Canada free reign in using the raising of interest rates as its major tool in combating inflation, unemployment and thus poverty for a high percentage of Canadian workers are here to stay.

Annual payments of $45 billion of the nations tax dollars are being spent servicing this $600 billion dollar debt. Plus every time the Bank of Canada allows interest rates to raise just one percentage point it costs the taxpayers $1.5 billion the first year alone, with a cumulative impact on the debt of more than $10 billion over a four year period.

You might as well throw the budget out the window as soon as interest rates go up, because even a small increase in interest rates will result in a huge increase in the interest cost of the debt.
This truly is a mugs game.

The bankers and the government would have us all believe that there is only one way to fight inflation and that is by raising interest rates. The truth is that there are numerous ways of fighting inflation and without causing the severe damage that is done by using this archaic method of scuttling the whole economy by pushing rates up.

One sure fire method that has been used successfully in the past was to increase the downpayment required in purchasing major commodities such as houses and automobiles, this had the immediate effect of dampening demand, thus quelling the fires of inflation. This one major adjustment also encourages citizens to start saving, not a bad idea in itself. Fighting inflation by raising interest rates is like trying to put out a fire by dousing it with gasoline, you only tend to make matters worse.

The soaring interest rates that benefited bondholders in the past ( short term bonds yielding as high as 18% in 1981) illustrate quite clearly why we now have such a huge debt load. With usurious interest rates being inflicted on the nation perhaps it does not take too much of a stretch of the imagination to believe that the elites of this country may have pre-planned the demise of our social infrastructure some twenty odd years ago.

Privatization of the entire economy was, and still is the goal of this behind the scenes group.

After all, why else would most politicians and many highly regarded economists back then blame overspending on social programs as the one of the major causes of government debt, and nary a mention of the nation being obviously ripped off by exorbitant interest payments to the money lenders.

Canada..... BEWARE.... you are about to become the next third world nation.............Claire Foss.