Quote:
Originally Posted by Bitumen Bullet
Canadians do but not Western Canadians. As I pointed out the Canadian banking system was designed for and by Canada's Elite, a banking Elite who cares little about what is best for the Canadian economy.
Still if I was in Ontario I would say exactly what you said, but being in Western Canada I suggest we really do need to create a new monetary system, one that acts in our interests, or at the very least our own homegrown Elites.
The Central Bank or Bank of Canada should have provided loan capital, money used to build infrastructure and industries, money that has to be paid back. That isn't how the Bank of Canada has operated, particularly in Western Canada.
Instead they, and Canada's banking establishment work on the principle of equity investment, mostly from the USA. This is what they, Canada, means when they tell Western Canada that a low dollar is good for investment, good for jobs.
The problem with equity investment is jobs is all we get. With equity investments ownership transfers to the investors. The enterprise or industry becomes American (usually) owned and controlled and profits flow out of the province.
We, Western Canadians, cannot pay back the loan out of profits because we never got a loan, we just got the jobs, Ottawa gets our taxes. How the enterprise is operated, it's use of resources, the extent of processing in Alberta, the amount of research and development, even the decision to import technology from a foreign parent company or even to develop a network of sources in Canada are done by investors elsewhere, who usually decide on what is best for them and theirs.
IMO using the bank of Canada is not in the interests of a strong wealthy robust Western economy, even if they went back to 1973 practices.
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OK, the Bank of Canada (BoC) does not create jobs, or loan out money for infrastructure spending.
The purpose of the BoC, and pretty much any central bank, is to manage inflation, and be the lender of last resort.
The BoC manages inflation (with a target of 2%) primarily by changing the overnight interest rate it charges banks for borrowing money and pays on money deposited in to the BoC overnight.
Being the lender of last resort means that when at the end of a day a bank doesn't have enough money to cover outflows, since the days transactions may not balance out and transactions are usually not really processed after , the BoC loans the bank money at the set overnight rate. Banks with surplus funds at the end of the day either loan the surplus money to other banks to settle their accounts.
Lender of last result example:
You bank with Bank A, your utility company with Bank B
1) You deposit $100 cash into Bank A
2) You pay your $10 utility bill
3) The utility company happens to take out a $100 loan from the bank
4) The day ends and the banks look at their day end balance
5) The BoC's overnight rates are 5% paid on deposits and 10% owed on borrowed money (in reality this band is much closer hence the single number used to report the overnight rate)
6) Bank A has surplus money, but doesn't want to get 5% from the BoC because it can lend it out at 9% to another bank if it can find a Bank that needs money and undercut the BoC
7) To save money Bank B borrows from Bank A at 9% overnight
8) Rinse and repeat with different outcomes each day and the banks are able to cover everything but don't really loose any money since they make money by charging interest on money borrowed that will cover their operating costs, overnight losses, and then some for profit.
Bank A
1) +$100
2) -$10
4) $90
6) offers $90 at 9% overnight
Bank B
1) +$10
3) -$100
4) -$90
7) borrows $90 at 9% overnight from Bank A
BoC
5) 5% deposited, 10% borrowed