The Moral Banker
Throughout history man has sought to manipulate currency levels, first with the clipping of coins, then the slightly more sophisticated debasement of coin content to the fiat banking which we have today. This money manipulation raises many moral questions.
At one time banking deposits used to be backed with gold, meaning if the bank accepted your deposits they had to, by law, maintain that amount of gold in their vaults in case you wanted your money back. All dollars were backed with gold. Then fractional reserve banking took over. This meant that banks only had to keep a certain percentage of their deposits accessible (backed by gold). This allowed the banks greater flexibility in making loans, basically allowing them to lend out the money of their customers and earn themselves interest on that money (which was not theirs in the first place).
The next step was fiat banking. Fiat banking does not require banks to hold onto any certain amount of gold to back deposits, and citizens are required by law to accept bank notes as money. Fiat banking has always been the last step to destroying financial stability of a country (see world history). The western world thinks they have overcome this by guaranteeing deposits via a central bank. The way this vulnerability is overcome is by backing all bank deposits with the Central Bank of Canada. The Central Bank has the power to print notes at its discretion. Now if everyone wants their money all at once, the bank of Canada has the power to print notes to cover everyone’s deposits. As well, bad loans are guaranteed by the taxpayer (central banks can back bad loans by printing more money, which essentially means you and I guarantees loans, because we are the one affected by inflation). This is why high risk massive loans to the third world are more advantageous than mortgage loans.
Having said all of this I want to ask why we pay interest on money created out of thin air? Why does my government (me) pay interest on money arbitrarily created? This is the best racket going. A private institution prints money and then has the right to charge interest on that money! Sign me up. In Canada 15 cents of every dollar collected from income tax goes toward debt financing. Worse yet is the fact I have to produce real wealth (earn real money—this means drilling for real oil, mining for real gold, making real sneakers, baling real hay) to pay the interest on imaginary money that was loaned.
As Canadian we debate Conservative vs. Liberal, left vs. right, capitalist vs. socialist, but is this debate not trivial at best when the rulers have already socialized the money supply. No?