When I ran in 2018 my platform included a section on public banking, something Toronto (and all of Canada) sorely needs. However, my ongoing research on the monetary system has led me to the conclusion that having a public bank that transacts in CAD and is still subject to the rules of bank charters in Canada is a losing proposition.
The kind of freedom we need to take hold of our destiny and secure our future will not be allowed by the political and banking elite. So we must take matters into our own hands and become monetarily sovereign, creating our own local currency, a TO dollar. However, in this page I have included both my latest section on a local currency and my past section on public banking, as there is still valid information in the latter.
A TO Dollar
In my last platform I spoke of a public bank for Toronto (see below), which comes with many complications. However with the advent of digital currencies, we can avoid the complications with creating a bank that must be incorporated into our monetary system.
Because we cannot rely on senior levels of government for reliable funding, especially for the various social programs needed so more people do not fall through the cracks, Toronto should have its own currency.
A digital currency
With the advent of digital currencies this is much easier than it sounds at first. Toronto can generate as much of a TO dollar as it needs, and it will be controlled as all digital currencies are, through a blockchain maintained by the city.
There are limitations to its uses, we will never be able to pay for infrastructure, or build housing, or import food with a TO dollar, because all those things come from outside Toronto and require CAD. However, it can easily be used for employment, like a youth job guarantee. If such a pilot proves successful, it can be expanded to fund a job guarantee for anyone who is unemployed or underemployed.
Acceptance
The problem with other local currencies, like when a BIA has tried to have its own dollars to spend at local businesses, is that there is no incentive for businesses to accept it. The businesses themselves cannot use it to buy their own goods or pay wages, and most importantly they cannot pay their taxes with it. This is where a TO dollar will be different.
Paying property taxes
When a youth finishes their summer job with the city they will have a digital wallet full of TO dollars they can spend at any retailer in the city. The incentive for retailers is they can pay their property taxes with a TO dollar, and will be gifted an extra 1% for every TO dollar they pay their property taxes with. No retailer is going to turn down an extra 1% off a portion of their property taxes. Retailers might even be incentivized to offer consumers a 0.5% bonus for spending TO dollars, so they can collect even more and still get a 0.5% bonus come tax time.
Exchanging for CAD
Conversely, if that youth finishes their summer job and wants to cash out their TO dollars to go camping up north they can totally do so, but at a 1% penalty. Putting a 1% bonus on paying property taxes with TO dollars and 1% penalty for cashing out TO dollars ensures the majority will be spent in Toronto, circulating in the local economy and generating new economic activity and spending.
Preventing misuse
It is easy with a digital currency to prevent any unscrupulous activity because you can make the currency non-transferable. All a person can do is earn the TO dollars, spend them, businesses can pay their rent with them, and land owners can pay their taxes with them. But you will not be able to give them to another person or pay people to exchange them. If you have earned them you can only spend them or cash them out with the city.
With an over $11 billion yearly operating budget Toronto has plenty of fiscal room for such a program without causing any ill effects, like inflation or boycotts. Starting small with a youth jobs program also makes it manageable and measurable.
The primary thing that makes a currency viable is if it can be used to pay a tax liability. With the city itself generating the currency, disseminating the currency, and collecting it as taxes, it creates a closed loop that will give Toronto more influence to aid the local economy.
Public banking
This is a proposition garnering attention the world ‘round, as more and more people realize the inequities of our debt-based monetary system and push for reform.
I can’t even take credit for the idea, incumbent councillor Kristyn Wong-Tam already wrote an excellent article in the National Post about it.
I was a member and researcher for the Committee on Monetary and Economic Reform (COMER) for years, a group founded by the respected William Krehm. COMER also tried to take the Bank of Canada to court for not being used to full potential.
As it turns out, use of our public central bank is not a legal matter, but rather a political issue. We just need to elect a party willing to use it to full potential.
A BANK OF TORONTO:
There are two reasons I advocate for a public bank for Toronto:
- So that we don’t rely on investors or senior levels of government for the money to fund our capital projects.
- Because this year Toronto is paying over $600 million in debt charges.
For anyone keeping score, that’s 5.4% of our $11 billion operating budget, larger than a few city departments. Imagine what an extra $600 million this year could do for our city?
WHERE DOES MONEY COME FROM?
Banking and monetary theory is a tricky subject to tackle with people unfamiliar with the topic. On one hand, I want to provide the loads of history and evidence in favour of the idea—much of which is from Canada’s own successful past history.
But at the same time, I don’t want to overwhelm people with information that will likely be so unbelievable they will discard it out of hand.
The best way to start is with the simple fact that approximately 97% (M0 divided by M3) of our money supply is created out of thin air by private banks, every time they make a loan. Yes, your mortgage, credit card, line of credit, and business loan were all created at the stroke of a keyboard.
Banks do not lend their own money, and they do not lend depositors’ money. They have the power to create digital money out of nothing, and lend it to you at interest.
If this sounds wild and fantastical (because on a certain level it is), don’t take my word for it. Here’s a brief excerpt from a federal website:
“However, it is important to note that money is also created within the private banking system every time the banks extend a new loan, such as a home mortgage or a business loan.
Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money (see Appendix B).
Most of the money in the economy is, in fact, created within the private banking system.”
This information is so foreign to most people’s concept of banking that they tend to reject it.
But it’s the simple truth, and has been since long before any of us were alive.
THE BANK OF CANADA:
Let’s briefly talk about Canada’s #1 public bank, the Bank of Canada.
Here’s another key excerpt from the same government page:
“One difference between the two types of money creation is that there is no external limit to the total amount of money that the Bank of Canada may create for the federal government…. The Bank of Canada’s money creation for the Government of Canada is an internal government process. This means that external factors, such as financial markets dysfunction, cannot cause the federal government to run out of money.”
This means the need for our federal government to go deeper in debt to cover deficits is false. Should they choose to do so, they could fund anything and everything they want using the Bank of Canada.
This is where the financial community would scream about inflation, but not only are such claims greatly exaggerated, most inflation in Canada is due to external sources, not domestic (an extreme example being the OPEC oil crisis, or a more recent possibility, trade disputes with the US).
Canada’s own history shows how the government funded many public works in the post-war expansion period without any significant inflationary effects.
More importantly, knowing that banks create money out of thin air when they make loans (including to buy government debt to cover the deficit), means that it’s impossible to claim creating money by the Bank of Canada is somehow inflationary. The claim that creating the same amount of money, to do the same public works, except created by private banks is somehow not inflationary, makes no sense.
I wrote a comprehensive letter about all of this to the Finance Minister when the Canada Infrastructure Bank was first being proposed, for those who wish to dig deeper into Canada’s monetary system.
BUDGETS STRAINED:
Toronto has been strapped for cash ever since the Harris cuts.
A big loss was the 50% operating subsidy of the TTC, and the burden of the downloading of services.
Toronto does not have the revenue generating powers of the province or the feds.
While the City of Toronto Act does give us some taxation powers that other municipalities do not enjoy, we are still mostly limited to property taxes and fees.
For example:
If Toronto creates more jobs, there is no direct benefit to city coffers, unlike the feds and province that can collect income taxes.
The city has dozens of council-approved capital projects that are left unfunded, not to mention the difficulties in funding large transit projects.
Not only could a public bank make low-cost loans to the city, it could also handle all the finances of the city instead of paying fees to private banks to do so. There is absolutely nothing in the way of accomplishing this, except the banking lobby and the politicians that cater to it.
If money is the lifeblood of the economy, then private banks are the heart pumping it through. Their power and influence cannot be underestimated, and it must be acknowledged that the arguments they provide against such ideas are self-serving and biased, because public banking threatens their power and profits.
A public bank would be a boon to Toronto, and as was asked of the former governor of the Bank of Canada once upon a time in the House of Commons, “Would you admit that anything physically possible and desirable, can be made financially possible? Mr. Towers: Certainly.”