Matthew Ehret-Kump and Jean-Philippe Lebleu presented the following report on Sept. 14, 2013. The whole presentation can be viewed here:
JP: Welcome to another edition. Today we are going to talk about one of the main issues on the idea of national credit and national banking. Some of you who may be familiar with our ideas or proposals have probably already heard about a very specific form of banking reorganization called Glass-Steagall, which is a policy for banking separation that will in effect bankrupt Wall Street and protect the population from this banking collapse that we are living in right now.
There is a second proposal, alongside Glass-Steagall, called the North American Water and Power Alliance (NAWAPA), which is an enormous water project for North America and which will require the further development of nuclear energy, specifically nuclear fusion, as sufficient means for building such an enormous project .
There is a third issue, that of national credit and national banking, that some of you may be less familiar with, simply because our present education program in Canada, the United States, and elsewhere has taught people to think about these issues in an inept way. When people think about the economy, think about credit, they equate it to debt; credit card debt and money. People have been effectively brainwashed on this question of economics, such that they forget the essentials, which we are going to go through today with the intention that with an understanding of what a credit system really is, that we may finally rid ourselves of the idea that money is what ultimately drives an economy.
Matt would you like to start us off?
Matt: Sure. The key point that LaRouche has been laying out in many of his latest webcasts is that that we are currently on the verge of WW3. This is not about Syria as we’ve gone through in past videos, this is about a war which will escalate to a confrontation between a collapsing system of NATO, consisting of countries underneath the Anglo-American banking structures which are now melting down, and countries that are going for progress and war avoidance such as Russia and China. This reality is being shaped by a bigger program for One World Government and depopulation, and this is not something that was started yesterday but has been undergoing since the death of Franklin D. Roosevelt, who had a different idea of what the post-war world was going to look like, in opposition to Churchill.
So now we have come to a point where we have a choice, we are looking at two potential futures; one based upon this war drive and the other based upon reorganizing our economy around a national mission that is contributing to an international policy for the continuation of humankind. Such missions as the NAWAPA project which you already mentioned are pivotal if we are to avoid mass genocide on this continent. The Bering Strait Rail Tunnel which is another major program which Russia has recently made their national policy to work with Canada and the United States in uniting these two major continents with rail through the Bering Strait, which would create millions of jobs and new alliances for progress is another. Artic Development is another major point which Canada plays a major role in, in terms of opening up this new frontier towards permanent science cities, permanent bases for development, new resources and collaboration with our Arctic partners the United States and Russia. And finally, Space Exploration which is absolutely key to our survival as a species, in dealing with the threat of a large meteor impact that will cause the loss of billions of lives if we are not equipped with the technology required to avoid such a calamity.
Real Economics vs “Money”
So to do this requires a rediscovery of the principle of economy. These cannot occur in the framework of a collapsing monetary order like the one we now operate in and as you`ve already said, most people have been brainwashed by an imperial education to not understand what a real economy is based on. It`s not debt, it`s not money as such, nor is it peoples’ personal desires to satisfy their pleasures and avoid pain. There is another principle embedded within it, and this is what we are going to go through today. In last Friday`s webcast, LaRouche made a quick point that there is a difference between a monetary system and a credit system, when he said,
“What we have to do, is simply understand what the principles are, which the United States (implicitly Canada), and Europe, too, have almost lost memory of what the principles are.
The principles are a credit system, not a monetarist system. In other words, in the monetary system, somebody puts out paper money, or a similar thing as paper money. They say, `now you can use our money, our paper money, and you can go into debt to use that money.` And that creates the usual monster we get, as a result. That`s how the depression cycles and so forth occur. “
So whenever you see the famous mythology that there is just a natural cycle of “ups and downs”, “bulls and bears” in the marketplace, of depression then growth then depression then growth, this is not an intrinsic component of an economy, that`s an intrinsic component of a debt-based monetary system. You can only get into debt to a certain point that justifies the creation of new money, which is always using and creating profits based off of greater margins of debt. That gets into speculation and other things, which creates certain limits that all bubbles have, which is that they all eventually pop. So this type of depression cycle is not a natural part of the economy. This type of cycle is a sign that you are doing something wrong.
LaRouche went on to say,
“If you, on the other hand, operate on a credit system, what you do is you look at what the productive powers are and how they`re organized in the nation. For example, it used to be that farmers would have one period, where they would be doing the work and not getting much income from it; until they harvested it, it couldn`t realize the benefits.
But once they harvested it, and the thing changed, because now you get the other forms of productive employment and they cut in. And that was what was done by Alexander Hamilton (the first Treasury Secretary of the United States). He ran a cyclic system, where every part made a contribution to the system, and every part participated in the contribution to the system.“
So this idea of a cyclic system is not what we just went through prior to the quote. This is a different idea. Everything in life has a certain cycle. You have a process where cycles exist, but the process is not governed by a state of equilibrium of the markets where things go back to square one.
JP: Money is not your measure.
Matt: Exactly. So there is an idea of progress. Where Alexander Hamilton pointed out; yes, the farmer will reap his harvest at a certain point, but this is going to have to harmonize with the growing potential for new technologies and industry in the cities which will feed back to new technologies on the farm, new tractors etc, and this will in turn feed people in the cities. The purpose of Hamilton was the idea that it is the increased productive powers of labour, through the increased productive powers of the mind, which determine value. Not market desires. It is the quality of mind that actually determines how money is permitted to behave, and where it`s channels of investment are going to be located (ie: canal building versus building casinos). So it is the idea of the nation as a whole, and not every part fighting against each other for scraps as we see today that determines economic policy (1).
In his famous 1791 Report on the Subject of Manufactures, Hamilton is clear on this point stating that:
“To cherish and stimulate the activity of the human mind, by multiplying the objects of enterprise, is not among the least considerable of the expedients, by which the wealth of a nation may be promoted.”
JP: Yes, it`s the idea of having a pie full of money and you have to divide that pie, and the pie will never change. When actually, what we are trying to say, is that mind is your measure for whether you are going to improve economically, and therefore improve the culture and society or whether you are going to collapse as a system, as we are experiencing today.
Matt: Right, and this is what LaRouche has been going through for a long time. In the 1990s, he unveiled this device to allow people to conceptualize what is really going on.
Here posted is the most updated version of his triple curve[Graph 1], and what you see is that there are three curves and one function. One process. You have in your two top curves, the financial aggregates and the monetary aggregates. The ‘monetary aggregate’ is the sum of the money supply which has been increasing at a hyperbolic rate since the early 1970s where this curve begins. Beside it you have the ‘financial aggregate’ curve, which are generally the monetary contracts, such as derivatives, which are not the money per se, they are contracts, I.O.U.s. But what people have lost a sense of is the third and most important curve, which is the collapsing one at the bottom… the physically productive economic input-output curve. The investments into your physical economy (agriculture, industry, infrastructure), and this is where the real crisis resides.
Real vs. Fictitious “Growth”
LaRouche has pointed out, that if we`re honest to ourselves and take this third curve into consideration, we must confront the fact that we really haven`t had any growth since the time of John F. Kennedy`s assassination. But people will say “oh but there’s been population growth, because now there are seven billion people while back then there were barely three, we’ve had new technologies introduced, there’s more money now then ever before, so of course there’s growth!”
That’s the fallacy we have to carve out of our cultural paradigm fast because its that very belief which is killing us. In trying to get this understanding across to people between the difference between real vs. artificial growth, LaRouche has used the example of a slumlord. You can ask “how is it the case that the slumlord produces more profit than a respectable landlord of an apartment building?” Why is that the case?
The answer can be found by simply looking at the buildings which a slumlord maintains. All of the profit margins that he is registering on his books are actually the ABSENCE of investment into the building’s basic infrastructure. Everything is falling apart. It’s a slum! That’s not real profit. That’s what is called “fictitious capital”. If you’re a mathematician or an accountant, just looking at the books, you’d say “wow, what a great businessman this guy is”.
JP: Another example of ’fictitious capital’ is the videogame industry in Canada. It is very big, and you’d see that if a government financed that kind of industry, but let education, agriculture, infrastructure collapse, then an idiot could claim that profits were being made even though the truth was that you were actually losing your real infrastructure which is supposed to maintain your whole population. So you’re making money… but your economy is crashing. That’s not economics, only entertainment.
Matt: Exactly. A third type of ‘fictitious capital’ is what comes from the creation of economic bubbles. People do have a sense after all, that Canada is sitting in the midst of a global collapse that didn’t begin yesterday. You have a global derivatives bubble popping for one. If you just look at the interval of time which overlaps LaRouche’s triple curve, you can clearly see an explosion of global derivatives, of speculative contracts and since the late 1980s when Alan Greenspan [the former Federal Reserve Chairman] normalized these to deal with the economic collapse that had struck in 1987. You just look at the increase of these derivatives since that time, and you can see that they now represent anywhere between 10 and 20 times the world GDP! [Graph 2] THIS is what Canada’s banks are locked into. Our big six banks alone have upwards of $22 trillion of exposure in the derivatives market. They mean virtually nothing. Its fictitious capital.
Then you can look at the housing bubble that we’re sitting on, where the average price of a house in Canada is well above what the average price was in the United States right before the bubble blew out in 2007 [Graph 3]. These are statistics which a lot of people will look at and comment about, but again, when you have solutions presented to deal with such issues, the thinking is generally tainted by a statistical, MONETARY conceptual framework. So that’s what we’re really going to hammer at in this presentation. The key is that it is that collapsing bottom curve which will provide us the solution to the conceptual problem, and we’ll begin with the question “how has this collapse of the physical economy manifested itself in Canada between the interval of the early 1970’s to the present?”
The Physical Economic Breakdown of Canada
The two aspects to the physical economic collapse in Canada that we will address are: 1) The collapse of our infrastructure and 2) The collapse of our manufacturing.
Let’s begin with the first point.
The 2007 Federation of Canadian Municipalities report called the Coming Collapse of Canada’s Municipal Infrastructure is a good example for Canadians to begin to really understand what is really going wrong. Saeed Mirza, who is a civil engineering professor, had been commissioned to conduct an inventory of the state of Canada’s infrastructure across all of the municipalities and the results were sobering. The conclusion was that not only did we have a $127 billion deficit, but that 80% of our municipal infrastructure was “structurally deficient” (2). That includes sewage systems, water management systems, electrical grids, bridges. And Mirza was asking “how did it get this bad?” In this chart used in the report, it is revealed 41% of our infrastructure is less than 40 years of age. 31% is between 40-80 years old while 28% is 80-100 years old! [Graph 4]
What Prof. Mirza points out is that from 1955-1977 there was approximately 4.8% growth per year of investments into new infrastructure. Yet from 1978 to 2000, around that period where you see the major collapse of the triple curve’s bottom line, the investments dropped down to 0.1%. Even though it is pointed out that since 2000 there has been an upswing of investments into infrastructure, it isn’t even coming close to making our infrastructure useable in a safe way. And there’s no money for it. People don’t have an idea where the financing will come from.
We will get at the solution to this problem a little later, but for the time being, we must recollect that it’s not just infrastructure, but it’s also our manufacturing that has collapsed. Since 2002-present, we have lost approximately 630 000 manufacturing jobs in Canada. So those jobs are not merely Walmart, or services, but rather highly skilled people working in the machine tool sector [Graph 5].
JP: That’s a quarter of the total. That’s huge. You talked about the collapse of infrastructure but you can also look at the vital infrastructure that SHOULD be there but was cancelled. We’ve seen for example, the flood in Calgary, we had Toronto a bit before, and before that we had Manitoba and Quebec (St. Jean Sur Richelieu) hit by huge floods that cost billions of dollars in damage. Flood controls were the sort of thing that should have been put in place a long time ago, but for budget cutting reasons they weren’t.
Matt: Sure. Just look at what’s happening in Vancouver where the entire west coast is facing death, where the Cascadia subduction zone can pop at any moment and a major earthquake can hit off the coast of the Pacific. Fukishima would be nothing compared to something like that.
JP: It seems that the problem can be understood by looking at how people understand the meaning of “debt” since its often said that we can’t prepare for such crises because we have too much debt already. Members of government and even the population believe that we’ve just got to save this dying financial system at all costs. They believe we’ve got to save Wall Street because they take care of the money. We have to cut our budgets to pay the bondholders of our debts, even if it kills people. Well actually if they had a proper understanding of economics, they could just laugh at those guys and say “lose your job as a speculator, I’ll give you one as a farmer so that you can be productive for the rest of your life”. Can you say a few things on this? First on the subject of “debt” and then something on the Bank of Canada based on that?
The Issue of Credit vs. Debt
Matt: Absolutely. A lot of people who we encounter who are very good on the subject of the national bank, or the need to have a Glass-Steagall reform to split the speculative debt from the real physical economy. They have a sensitivity to these needs, but there’s a big problem in not understanding the meaning of debt. They’ll look at the graph showcasing the growth of the national debt from 1867 to present, and they’ll say “oh wow, look at the days before the mid 1970s when we were still using the national bank” our debt was very low. Now its over $600 billion [Graph 6].
Now while the Federal Reserve in the United States is a privately run body, run by Wall Street and British interests intent on subverting the United States, the Bank of Canada is in a certain sense a public institution. It’s true that while we were still using it to provide loans to the federal and provincial governments at very low interest for infrastructure and other needs, our debt never exceeded $23 billion. But when Pierre Elliot Trudeau and Gerald Booey cancelled the use of the national bank and gave those rights to issue loans to the big private banks, its true our debt skyrockets to over $600 billion.
You’d think “wow, we must have gained a lot, to have racked up such a debt in only 30 years”, but that’s not the case. As you recall from what we just went through, our infrastructure is still collapsing. Our manufacturing and physical productive jobs have been destroyed. We’ve got nothing for it. We only created a cancerous debt bubble in the place of the economic potential we once had. So what is this debt? It’s nothing. It’s a trap, and it’s always been a trap. It necessarily had to happen after the Bretton Woods fixed exchange rate system was taken down in 1971 whereby the U.S. dollar was then floated to the global speculative markets. At this point debt FOR ITS OWN SAKE became the basis of increase of the money supply, not production. France did something similar to its national bank. This was a time bomb that was built into the system. The intention was always to create a system that would self destruct.
JP: I think when you’re looking at all these things, you’re wondering how can we know if our country is going into the right direction? How can we know BEFORE the policies are implemented that we’re going to go in the right direction? Lyndon LaRouche has mentioned many times his conception of anti-entropy, and recently he’s brought up the need for what’s called “economic leapfrogging”. This means we have to ask, “after all of this laissez-faire’ destruction of our real economy, are we to rebuild the same thing as we had before, or are we to bring something new and more productive? Because the development of a country isn’t a linear thing. You don’t have to go through every gradual step from the burning of wood, to coal to coke, to oil, etc… you can actually leapfrog and go towards the highest level possible for your production. Can you say anything about this, and if there are any examples in Canadian history?”
Matt: Sure. But before I touch on that, I just want to bring something important up which ties into what you’re saying, because there’s another fallacy behind popular ideas of the Bank of Canada which hardly ever gets addressed. Because as a Crown corporation, this entity is also under the influence of the crown, and the structure of the Bank of Canada was always set up to be used under a British monetarist “accounting” system in opposition to an American credit system. 
This is a British monetarist system that forces the mind to believe in the natural pre-eminence of a perfectly balanced equilibrium around which the budget must be continuously balanced.
Under this monetarist framework, the idea of a highly capital intensive program like John F. Kennedy’s space program would be very difficult. JFK’s program was vectored around the idea of leapfrogging, instead of gradually moving from lower to higher technologies. Today, we would want to skip a whole bunch of useless steps and go towards fusion power as quickly as possible. Going to these higher platforms under a monetarist system like the one the Bank of Canada currently operates within could never let that occur. You can’t invest the way you would need to faced with the currently terrible conditions, and this comes out just by looking at article 18 (j) of the Bank of Canada’s Charter which reads:
“The Bank of Canada may make loans to the Government of Canada or to 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”.
JP: That’s a pretty serious demand
Matt: Very much so. It may be argued that this is a tolerable constraint IF everything is already set well in place and you’re NOT on the verge of a collapse. Maybe in such a case, you could maintain a certain practice of using zero/low interest loans to keep your infrastructure financed, and maybe you could even make some new things too. This mandate is a big handicap, however, if you want to build something as grand as the North American Water and Power Alliance (NAWAPA) which requires moving literally 160 million acre feet of run-off water per year down from Alaska and the Yukon and into Mexico and the Great Lakes. To do something on that magnitude, let alone all of the other things we need to do to get a real recovery in motion, could never be accomplished with that type of obstacle.
So like you said, we really need to look at how the increase of energy flux density determines the behaviour of money, and ask the question: “how has the American Credit System of Alexander Hamilton provided the means which great men like Lincoln, FDR and JFK were able to use in order to overcome the limits to growth that were facing them?” The effects of their use of the Hamiltonian system did after all, provide America with an increased power of production, and this must be investigated.
Having so little firsthand experience of this Hamiltonian system in Canada, it is a lesson that must be learned extremely fast. We do fortunately have a few examples in our history that we can use as a reference point when the Bank of Canada ALMOST functioned this way.
Two Cases of the Hamiltonian Credit System in Canada
The first case: After the bank was nationalized in 1937, the creation of Victory Bonds that were issued by the bank were close in practice to a form of Hamiltonian credit. There was a NATIONAL MISSION to win the war, while the issuing of the victory bonds were governed by a need to increase the national productivity. This increased productive power was necessary to build the tools so necessary to fight the war against Hitler. That was one good example, but it didn’t last very long. After the war, we got ourselves quickly stuck into an anti-Roosevelt Keynesian framework. Canada was, after all, one of the first countries in the world, to adopt a fully Keynesian approach to economic planning which was one of our greatest mistakes.
The second reference point in Canadian history takes the form of the failed attempt of John Diefenbaker to develop his northern vision. This is important and so little understood today. Now Diefenbaker was a guy who had a lot of problems and we’ve written about him in our Canadian Patriot review. At his core, what makes Diefenbaker a great man, was that he was a humanist, and a lover of progress. He was a great admirer of Abraham Lincoln and Roosevelt. Sadly, he was also an admirer of the British traditions and of the Queen, which made him very blind to certain operations run against him from British operatives within his own cabinet and outside of it too.
But again, he was a lover of progress and that animated his creative method of overcoming a huge crisis that he encountered upon becoming Prime Minister in 1957. In 1958, the solution came to him and a grouping of his brain trust, who were more into problem solving than they were into party bickering. The problem that they faced had several facets. The first facet was that there was a global recession which had just begun in 1957 with the collapse of a bubble that was built into the auto sector. That recession was making it very difficult for him to follow through on his promises to provide his New Deal for Canada which he called his “Northern Vision”.
This vision was based on the idea of going into the new frontier, which was the arctic, and expanding civilization… not just by raping the resources, but rather BUILD scientific advanced cities, and open up new regions for permanent habitation. Build rail in the arctic, dams and nuclear energy. This idea stimulated the imagination of Canadians to such an extent that he was swept into office with the greatest majority of any government in history. Obstacles to his accomplishing his vision involved the recession, like I mentioned, and you also had a British operative named James Coyne, who was an Oxford-trained Rhodes Scholar operating as the Governor of the Bank of Canada who, in the face of the recession, had a program of a “tight money” policy. As with many economists today, the idea was “well look, there’s a recession, so we should contract the money supply and focus on paying our debts, not building anything. If we spend more money that’s inflationary which will accelerate the recession”. Purely monetarist garbage, but this guy put a huge obstacle in Diefenbaker’s vision (4).
Now on top of THAT, there was yet ANOTHER problem which compounded the situation even more. You see, all of the Victory bonds issued by the Bank of Canada to win World War 2 were also maturing. The first wave of maturation of these victory bonds, where people would call in their loans to the government for money were coming due. So Diefenbaker had this three-fold problem: 1) Recession, 2) British operative in the Bank of Canada not cooperating and 3) paying for World War 2. All this while you have a bold arctic vision to accomplish. Now how did he come up with a solution to this problem?
Diefenbaker’s Hamiltonian Solution
Diefenbaker, the ardent monarchist, actually touched on a similar solution to the problem confronted by Alexander Hamilton, 170 years before. After America had won their independence from the British, what was the problem Hamilton faced? The new nation was about to be sucked right back into the British machine since all of the states had gotten into such a deep level of bankruptcy via loans from European and other lenders during the war, that the ability to repay those loans was non existent.
They were so vulnerable because they still had no real nation to speak of. They had poor infrastructure, poor manufacturing, and within but a few years of winning the war, people were already looking for ways to get some security by returning to the imperial fold. People weren’t eating much, there was no security and Hamilton’s solution to this problem was similar to what Diefenbaker tried to do later on. He said “lets take all of the state debts, and federalize them into the form of a national debt which will then be converted into productive credits to be invested through a National Bank of America, into our vital infrastructure. Canal building, transport, industry, schools and other internal improvements. This was the way the United States was able to overcome its paradox and build itself into the most productive nation in the world within a few generations after the American Revolution. Its debts were soon repaid, its population quadrupled within 40 years, standards of living boomed, and the overall energy flux density of the nation was increased.
Now lets look at a speech that Diefenbaker gave on July 14, 1958 which is very indicative of this Hamiltonian intention:
“This, the largest financial project in our history, offers an opportunity to all holders of victory bonds which were purchased as an act of patriotic faith during the war years, to re-invest them for the greater development of greater Canada. These monies that were advanced during the days of war, and which contributed to the victory, we now ask to be made available to speed the pace of peaceful progress and the program of national development… The action we are taking will make it possible for our nation to embark on a new era of peacetime prosperity far and beyond anything we have ever known. I sincerely believe that great objectives can and will be attained by the faith and enterprise of all our people. To that end, your Government believes that the steps we are taking are necessary in order to create the climate in which this can come to full fruition…
In saying that a major result of this new load is to make other necessary funds available for immediate participation by the federal government in the development of resources, I need hardly remind you that such participation is not, by any means, an end in itself. Its chief objective is, of course, to provide essentials such as access roads, railroads, and 
energy sources and the business climate which will attract private investment to newly developing and lesser developed regions in our country, in amounts many times in excess of the government investment. It is confidently expected that the debt refinancing which we announced today will clear the decks for greatly increased private investment in our future, just as surely as it will do so for government investment.” (5)
This was vectored around the idea of Roads to Resources, a national energy board, an energy policy vectored around nuclear power and one of the model cities advanced was based on a concept which today, only the Russians are advancing. This was the idea of an advanced domed arctic city which was to be built in Frobisher Bay (Nunavut). This was commissioned by the Department of Public Works in 1958. $75 million was to be allocated by Diefenbaker for this project. It was designed to house 4500 families with all of the amenities of a comfortable city in Toronto [Figure 10].
This is the type of vision which, as Diefenbaker said, would have created a wealth which would have far outpaced the investment necessary to begin the projects. This expresses the principle that is the essence of a credit system.
JP: I think from there we can say a few closing words. We have been saying since the beginning that the issue is really about nations fighting for their survival against an imperial system. This imperial system uses that idea of “money as the center of economics” as a way to control people, such that, when faced with a crisis, nations will tend to try to find as much money as they can rather than increase their productive powers (also known as their energy flux density). They will cut in their budgets, healthcare, pensions, or national infrastructure will simply be sold to Public Private Partnerships whereby they say “we’re saving money because we’re not taking care of the infrastructure, and now the private sector can manage it because they have more money”. This is all a big fraud.
We must be able to say “we don’t need Wall Street, but we do need engineers and thinking productive citizens. That’s the basis for your economy. From this standpoint, how do we solve this problem in the economy? How do we reconnect with what guys like Diefenbaker were trying to do?
Reviving the Diefenbaker Method
Matt: This is actually one of the simplest problems when you just look at how we built our society. The precedents that are available are really amazing. The techniques that have been used and proven to function are all there. So the lesson is “do what works”.
If we bring back Glass-Steagall as a first step, first in the United States, then quickly in Canada and in European governments, then Wall Street and the City of London are gone. They are taken off of life support and are no longer factors of control in the world economy. At this point, re-instating a principle of capital budgeting comes next. What is Capital Budgeting? Well just look at the St. Laurence Seaway [Figure 11].
We didn’t build that amazing project with the intention to pay back our investment in the next quarter or something. No. That was a long term investment into a multiyear endeavour, where its architects were thinking deeply into the future. So the Capital budget was merely a separate budget outside of the day to day expenses which you would have to repay in the next quarter or fiscal year. The Capital budget was allocated to specific long term capital intensive projects which you would have to wait 5 or 10 or 20 years before it started giving off major returns on the initial investment.
The Capital budget was phased out, as a matter of practice around the same time that the Bretton Woods system was destroyed, when the Bank of Canada was replaced by the private banks (6). Before this phase shift, we still had a parity pricing system which is something else we would have to revive to rebuild our way out of the current crisis.
Parity Pricing
What was Parity Pricing? This is simply where you say that, unlike what is practiced today, where it is the global markets that determine the price of a commodity, value under a Parity Pricing system is determined by the cost of overhead to the producer. The current market-based approach to pricing is at the heart of the reason why average farmers in Canada haven’t been able to turn a real profit in decades, because they are forced to compete with things like Monsanto that can out-produce and under-charge any small or medium farming enterprise. Or try to compete with foreign cheap labour markets as a Canadian-based hi tech farming enterprise is forced to do. The price of a good produced by a slave versus a similar good produced by a highly trained laborer, and while the quality will be lower, the price will be lower too, such that the skilled laborer will not be able to compete. It won’t work.
In the final analysis, it is only due to government subsidies that farmers have even continued to eke out a meagre existing, keeping their noses just a slight bit above water. But no farmer wants to survive off of subsidies.
To recap, Parity Pricing simply meant that the cost of your produced goods is on par with the cost of your operating costs. Thus, if it costs you $10 to produce a few bushels of wheat, the price that you are expected to receive on the market cannot be lower than what it cost you to produce. It can fluctuate a little bit, but there’s a minimum, but it can’t be so high either that people can’t afford to purchase it. You’re not going to let people starve.
JP: It has to be based on the economic production of your country. Not some arbitrary rule that somebody set up in some other country for banking institutions.
Matt: Yes. This is something which we still have to a certain degree with our poultry and dairy in Quebec. Under the framework of globalization, it doesn’t work, but in principle it is a fine and vital component to any sane economy.
So let’s recapitulate: National Credit. Capital Budgeting. Parity Pricing. With the stability brought back into the system beginning with a Glass-Steagall standard, all of a sudden, nations like Russia, India, China, Iran, Syria, etc… will be able to work together with us as our allies in mutual development projects. We have so many common points of interest on a fragile world which is constantly being bombarded by cosmic radiation, and asteroids, let alone extreme weather phenomena and ice ages which are being shaped by our solar and galactic environment. We have enough problems outside of what the Anglo Dutch oligarchy is causing us.
END NOTES
(1) This process can be seen manifest inthe animosity felt between the dairy/cattle and wheat farmers in Canada. When the price of ethanol goes up, it increases the price of wheat, which is financially good for the wheat farmer but bad for the dairy farmer who has to feed his cattle wheat, and so they end up hating each other. In reality the world suffers by a lack of sufficient production of food as the dairy/cattle farmer produces less milk and meat, while the wheat farmer’s crops are burnt in gasoline tanks instead of feeding hungry stomachs
(2) Mirza made the point that the rate of infrastructure decay is non-linear, but rather exponential. This means that the actual price tag today is probably double the 2007 estimate. The whole report can be downloaded on http://www.fcm.ca
(3) Matthew Ehret-Kump, Diefenbaker and the Sabotage of the Northern Vision, Patriot 4, 2013
(4) Diefenbaker would go so far as to fire Coyne two years later for his insubordination, although by that time, it was too late and the damage Coyne and the agents of London had done tied Diefenbaker’s hands.
(5) Diefenbaker, Memoirs vol 2 pg. 270
(6) It must be noted that the Bank of Canada is used today, but only in the manipulation of interest rates, which in the context of Globalization, merely serves to act as a subsidiary of the world speculative derivatives market. The interest rates in Canada are largely being used to prop up a global bubble
