Paul Hellyer Speech


Ambassador Hotel, Kingston,
Thursday, March 31, 2016

Thank you for coming tonight.  This is the most important speech I have ever made because the stakes are the highest.  I am going to talk about the most urgent reform in Canada, and, by extension in the world, which is a banking system based on common sense rather than myth.  The most important problem is global warming but unless we end the existing private monopoly to create money there will be no cash to subsidize the super fast transition from fossil fuels to clean energy, upon which the future of the planet depends.

The present banking and financial system is, in reality, a global fraud, one giant ponzi scheme, and is the main contributor to some strange anomalies.  A couple of years ago I read a story reporting that 88 families owned half of all the world’s wealth.  A year or so later that number was down to 82.  A few weeks ago it was reported that now 62 families own half the world’s wealth.  Can you imagine anything so incredible?

A report in the Globe and Mail a few months ago indicated that the combined world debt has reached an all-time high, and is still rising.  But what would we expect in an international financial system where all money is created as debt – debt that has to be repaid with interests but where no one creates any money to repay either principal or interest.  It takes just a few minutes thought to conclude that the system is a dead end, and must cease forthwith.

I know many mainline economists and not one of them have explained how you can escape from a mountain of debt by increased borrowing.  The idea is pure delusion, if that isn’t an oxymoron.  Fortunately there are a few radical thinkers with see-through glasses waiting in the wings at this time of crisis.  It doesn’t matter whether you call it “positive money,” “stimulation money,” or “growth money” it all adds up to the same thing.  Canada’s economy, and the world economy desperately need a massive infusion of government-created debt-free money to dilute the all debt system, and give it life. There is no other solution. Period!

That is not news to me.  Decades ago I paid to have the late Mike McCracken’s company Informetrica Limited do simulations that proved beyond doubt the power of debt-free money.  It was these studies that finally convinced Pierre Trudeau; but by then he was no longer prime minister, and subsequent leaders of the Liberal and Conservative parties have not been willing to take time to listen.  Now is the time!  So a number of associates and I have joined forces again to urge the government to forthwith introduce a supplementary budget that will enable them to keep all their promises, and more, and make Canada the model upon which a revived world economy can be based.

First it will be necessary to review some monetary history and the decisions that got us into the present mess.

The Banking Scam and Origin of the Partial Reserve System

“Banking was conceived in iniquity and was born in sin.  The Bankers own the earth.  Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough money to buy it back again.  However, take that power away from them and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a happier and better world to live in.  But if you wish to remain the slaves of Bankers, and pay the cost of your own slavery, let them continue to create money.”

Sir Josiah (later Baron) Stamp, Director, Bank of England 1928-1941

The Goldsmiths’ Scam

Before 1640, it was the custom for wealthy merchants to deposit their excess cash — gold and silver — in the Mint of the Tower of London for safekeeping.  In 1640, Charles I seized the privately owned money, and destroyed the Mint’s reputation as a safe place.  This action forced merchants and traders to seek alternatives and, subsequently, to store their excess money with the goldsmiths of Lombard Street, who had already built strong, fireproof boxes for the storage of their own valuables.

The goldsmiths accepted gold deposits for which they issued receipts which were redeemable on demand.  These receipts were passed from hand to hand and were known as goldsmiths’ notes, the predecessors of banknotes.  The goldsmiths paid interest of 5% on their customers’ deposits and then lent the money to their more needy clients at exorbitant rates becoming, in fact, pawnbrokers who advanced money against the collateral of valuable property.  They also learned that it was possible to make loans in excess of the gold actually held in their vaults, because only a small fraction of their depositors attempted to convert their receipts into gold at any one time.  Thus began the fractional reserve system, the practice of lending “money” that doesn’t really exist.  It was to become the most profitable scam in the history of mankind.  It was also the quicksand on which the Bank of England was subsequently founded in 1694 — more than 300 years ago.

The Bank of England’s Scam

King William’s crushing defeat by France in the 1690 Battle of Beachy Head left England with no choice but to build a powerful navy.  No public funds were available, and the credit of the government was so low that it was impossible for it to borrow the £1,200,000 that was needed.

In order to induce subscription to the loan, the subscribers were to be incorporated

by the name of the Governor and Company of the Bank of England.  The bank was given exclusive possession of the government’s balances, and was the only limited-liability corporation allowed to issue bank notes.  The lenders would give the government cash  and issue notes against the government bonds.  In other words the bank was allowed to lend the same money twice — once to the government and again to its preferred customers — and collect interest from each.  This was not the first case of paper money issued by private banks in the modern era but it was the firstof great and lasting significance in the English-speaking world.

This arrangement was similar in principle to the system developed by the goldsmiths. By lending the same money twice the bank could double the interest received on it’s capital.

Bankers are by nature a greedy lot.  So they were not content with being able to lend the same money to two people, they began lobbying for an even sweeter deal.  In the early years of the 20th century, federally chartered U.S. banks were required to maintain gold reserves equal to 25% of deposits.  That allowed them to lend the same money four times.  In Canada, when I was young, banks were required to maintain 8% cash reserves; so, they could lend the same money 12½ times.

In recent times, with the advent of the monetarist revolution inspired by Milton Friedman and his colleagues at the University of Chicago, and the elimination of cash reserves in favour of a new system labelled “capital adequacy,” the leverage (the number of times banks can lend the same money) soared.  Bank leverage in the U.S. rose from about 12½ in 1974 to 25 or 30 in the 1980s.  This incredible abuse occurred because even ridiculously low capital requirements set by the Bank for International Settlements were never properly enforced.

Following the deliberately induced crash of 2007, the G20 spent most of its time trying to patch up this leaky and immoral ship on the basis of a leverage of roughly 20 to 1.  The deck is still stacked in favour of the bankers as 9 years of anaemic growth has shown.

Before continuing, I would like to say that the thousands of people working in the banking industry are just as nice as the rest of us. It is just the handful of families at the top of the pyramid who are both callous and ruthless.

Canada’s Current System.  (It’s Money Supply.)

 Our money supply is roughly as follows.

Coins of various denominations less than 1%.

Bills from $5 to $100 denominations approximately 2-3%

The balance of our “money stock,” about 97% of all existing “money,” consists of bank deposits.  But that isn’t real money.  Banks don’t have any real money (cash) to lend.  You are lucky if they have one or two cents in legal tender for each dollar you think you have in the bank.  What the banks lend you is their credit in a giant ponzi scheme that can best be described as grand larceny.

The system works this way.  You want to borrow $35,000 to buy a car so you visit your friendly banker who will ask you for collateral.  Once satisfied, he or she will ask you to sign a note at an agreed rate of interest.  When the paperwork is complete, and the note signed, your banker will make an entry on the banks’ computer system and, presto, a $35,000 credit will appear in your account.

The important point is that seconds earlier that “money” did not exist.  It was created out of thin air, so-to-speak.  It is a myth of banking that the money you borrow today is money that was deposited by someone else the day before.  The odds of that happening are infinitesimal.  Your money was manufactured especially for you.

To add insult to injury, banks only need to have 5 cents in capital for every dollar they create that has to be repaid in full with interest.

In effect, the richest most powerful people in the world are buying up assets for 5 cents on the dollar and become indecently wealthy in the process.  So you can understand why reformers are recommending an alternative that is both just and workable.  It is based on our own Canadian history for the period 1937-1974.

The Canadian Precedent 

Graham Towers, the first, and arguably the best, Governor of the Bank of Canada said that money was just a book entry.  If he were alive today he would say that money is just a computer entry.  That’s all it is.  A little history taken from the Governor’s answers to the Parliamentary Committee on Banking and Commerce 1939, sets the stage for the debate today.

Q:  “Will you tell me why a government with power to create money should give

that power away to a private monopoly, and then borrow that which Parliament can create itself, back at interest, to the point of national bankruptcy?”

Towers:  “If Parliament wants to change the form of operating the banking system, then certainly that is within the power of Parliament.” (p. 394) At one point the questioning turned to the impending war (WWII).

Q:  “You have agreed that banks do create money.  So as far as war is concerned, there will be no difficulty in raising the means of financing whatever the requirements may be?”

Towers:  “The limit of the possibilities depends on men and materials.”

Q:  “So where we have an abundance of men and materials, you have no difficulty, under our present banking system, in putting forth the medium of exchange that is necessary to put the men and materials to work.”

Towers:  “That is right.”

Towers was as good as his word.



In 1938 there were no job openings in Canada – none!  Then in 1939, World War II began and it was not long until everyone was either in the armed forces, or working in factories to build tanks, trucks, airplanes and ships required to support a really magnificent war effort.  Unemployment dropped to an historic low of one percent. You may wonder where the Canadian government got the money to initiate this unprecedented economic miracle.  The answer is that the Bank of Canada printed

  1. The Bank of Canada bought Government of Canada bonds and paid for them with newly minted cash. The government paid the Bank interest on the bonds which then, because the government owned 100% of the Bank’s shares, was returned as dividends, with only the cost of administration deducted.  In effect, it was near zero cost money that produced such wondrous results.

The newly created money that the government spent into circulation wound up in  the private banks where it became what the economists called “high-powered money.”  High-powered money was really ‘legal tender’ money or ‘real money’ that the banks could use as ‘cash reserves.’

These large infusions of first government created cash, followed by bank created credit, made it possible for Canada to be transformed from a largely agricultural and resource-based economy into a significant mixed economy that included a strong manufacturing, industrial and scientific base.  What made this all financially possible was a sharing of the money-creation function between government and commercial banks.

Government-created money played a key role in many of our infrastructure projects like the St. Lawrence Seaway development, the Trans-Canada highway, new airport and sea terminals and facilities.  It also enabled the federal government to assist the provinces, territories and municipalities with many of their major public works ranging from bridges to sewage-disposal systems.

This system of money-creation sharing between the government and private banks worked splendidly for 35 years until 1974, when the Bank of Canada unilaterally changed the rules.  This change was done without either advising or obtaining the consent of the Canadian government.


The Governor of the Bank of Canada, Gerald K. Bouey, simply announced that the Bank was adopting ‘monetarism.’  There was no mention that this was being done to conform to a policy of the Bank for International Settlements (BIS), in Basel, Switzerland.  Of much greater significance was the failure to disclose that the Bank was adopting the BIS’ prohibition of providing low cost money to governments.  In future, we would have to borrow in the market, and pay market rates.

Nor, of course, was there any mention that the change in policy was engineered by the international banking cartel controlled by the richest people on earth. Without a single shot being fired, the rich elite had captured the high ground in an all-out war against the poor – a monopoly on the creation of money which would lead to the greatest redistribution of wealth in history, and all in the wrong direction.

To add insult to injury the central banks induced two dreadful recessions in 1981-1982 and again in 1990-1991 in addition to the present one that began in Economies were starved, deficits followed that were rolled into debt,  which is now greater globally than at any other time in history.

The cost to Canadian taxpayers has been enormous.  From 1974/5 to 2014/15 we have paid 1.1 trillion dollars in interest payments, nearly all of it unnecessary. The result has been two generations of serious underfunding of virtually every aspect of Canadian life.

So Finance Minister Bill Morneau didn’t start with a level playing field.  It was tilted sharply downward from decades of financial erosion and austerity budgets.

The needs of First Nations have been largely ignored for decades.  Health, education, urban infrastructure, urban transportation, the arts and sciences have all  been short-changed.  Even the armed forces have had their needs postponed  regularly in favour of mandatory interest payments to the money lenders.  So he was faced with the $50 billion shortfall that Bank of Canada Governor Stephen  Poloz has forecast resulting from the collapse of oil prices, but a shortfall of an equal or greater sum across the board.  Under the present crummy rules meeting the real needs is an impossible task.

So we adopted a version of Keynesism after the British economist John Maynard Keynes.  He proposed that governments borrow money and spend it into circulation to increase aggregate demand, i.e. purchasing power in the hands of the people, in bad times to promote increased economic growth.  Then, when the economy becomes robust, use the increased tax revenue to pay off the accumulated debt.

The first half of the equation works as you would expect.  Increased expenditures in a slack economy will stimulate growth.  It is what happens next that is key. Increased tax revenues will be necessary to meet the rising cost of existing programs as well as unaddressed problems, leaving no surplus to pay down the addition to the debt.  That means that a larger slice of total income will be required for interest payments.  It appears that Keynes believed that the system is ultimately self-adjusting.  It is not.  There is no way that could be true in a system where all new money is debt.

It should be self-evident that the only way to rescue the Canadian and world economies is a massive injection of government-created money to permit governments to operate their economies at full capacity without recourse to borrowed debt money.  That is also the only way to eliminate the volatility of the old system and the private bankers power to create both booms and busts.

Fortunately for Canadians, we have a ready-made solution that can be Implemented immediately.  Of all the ideas on the table I believe it is the best balanced and most comprehensive.  It is also, in principle, a solution that can subsequently be applied on a global basis.  It was first presented to Finance Minister James Flaherty on March 21, 2013 by 40 very concerned Canadians who gave it the following label.  (Figures have been updated.)


In view of the fact that our present banking and financial system is unstable, unsustainable and basically immoral, we the undersigned, on behalf of all Canadians, demand that the federal government use its constitutional power over all matters pertaining to money and banking by forthwith taking the following action to benefit all Canadians

  1. The government of Canada should print fifteen non-transferable, non-convertible, non-redeemable $10 billion nominal value Canada share certificates.
  1. Simultaneously the Justice Department should be asked for a legal opinion as to whether the share certificates qualify as collateral under the Bank of Canada Act. If not, legislation should be introduced to amend the Act to specify their eligibility.
  1. The government should then present the share certificates to the Bank of Canada that would forthwith book the certificates as assets against the liability of the cash created, and deposit $150 billion in the government’s bank accounts. The federal government should immediately transfer $75 billion to the various provinces and territories in amounts proportional to their population, with the understanding that they would help the municipalities, as appropriate, so there would be no need to cut back on essential services, or sell valuable assets.
  1. Amend the Bank Act to reverse the 1991 amendments that eliminated the requirement for the Canadian chartered banks to maintain cash reserves against their deposits and provide the Minister of Finance, or someone acting on his or her behalf, the power to set the level of cash reserves for banks and other deposit taking institutions up to a maximum of 34%, provided the increase, beginning in fiscal year 2016/17 is not less than 5% per annum until the new 34% base has been established in 7 years. This will ensure that there will be no inflation resulting from the government-created money.
  1. Repeat the action prescribed in Sections 1 and 3 for six additional years untilbank cash reserves reach 34% of deposits.
  1. In each fiscal year following 2022/23 the amount of GCM spent into circulation will be 34% of the desired increase in monetary expansion for that year, with the remaining 66% to be the prerogative of the chartered banks.

N.B.  The great advantage of changing the system over a 7 year period is to allow all levels of government the certainty of a cash flow adequate to complete projects once begun, and to facilitate a smooth transition to the new stable and sustainable system.

  1. The amount of GCM created during the transitional period should exceed prudent budgetary requirements in some cases, so governments at all levels should take advantage of the opportunity to pay off significant amounts of their outstanding debt. It is estimated that the federal government could reduce its net debt by as much as one-third, providing further relief to hard-pressed taxpayers.

Transferring 50% of the government-created money to the provinces and territories on a per capita basis, with no strings attached, will produce near miraculous results. It will help resolve the century old problem of federal-provincial relations and give the provinces greater freedom to manage their own affairs.

Infrastructure projects can be launched without federal approval, except in rare cases where the outlay is so large that federal help would still be required. The proposed squeeze on transfers for health care spending would no longer pose a great problem. But the greatest advantage in promoting economic growth and job creation would be a three or four hundred percent acceleration with fourteen governments making decisions rather than just one.

The idea of using share certificates as collateral instead of bonds is (a) to conform to the technical requirement of the Bank of Canada to have collateral to book as an asset equal to the cash it creates that is booked as a liability;
(b) bonds are no longer expedient, as they were in the early post-World War II years when gross debt was insignificant.

Today, when we already have too much debt on the books, to add hundreds of billions or a trillion dollars in bonds, even at a zero interest rate, would distort the optics of the real situation grotesquely.  So let’s avoid it.  As Thomas Edison, inventor of the luminescent lamp said when discussing the question of GCM,“Any government whose credit is good enough to create a bond can create a bill.”

The division of the money-creation function between governments 34% and banks 66% (as opposed to the current 97%) is a carefully reasoned estimate of what each requires to do its job adequately.  The lower figure of 34% each year for government should produce a cash stream adequate to allow governments at all levels to provide essential services with reasonable tax rates and still balancetheir budgets. At 66% of new money creation banks will still be able to provide service to Individuals and small business, and temporary assistance to big business, but not to finance hedge funds, finance giant takeovers, play at derivatives and other activities that have turned the world financial system into one giant casino.

Remember that the people own the patent to create money.  The banks do not!  They are simply licencees that enjoy the unique privilege of creating what we call money (bank deposits) to the extent approved by parliament. Government-Created Money is Not Inflationary!

If you ask a politician or bureaucrat why they don’t support GCM, and they respond, “That would be inflationary” it is because one of their professors told them so, and they repeat it as rote.

How do I know it is not inflationary?  It is because we Canadians created large sums of GCM for 35 years and our economy was no more inflationary than the average.

As anyone in the business should know, it is the amount of money created that determines prices and not who prints it.  Money is money whether it is government-created (GCM), or bank-created money (BCM). Government-created money would be inflationary if the banks were allowed to use it as a lever to increase their production of virtual (debt) money.  But that can be easily avoided by passing legislation to require the banks to keep the cash as collateral against their deposits.  In fact, that is the only kind of control that iseven designed to work credibly.

Under the current system of so-called “capital adequacy” the banks are really free To increase their capital, print more money, and create an inflationary bubble, as they have on many occasions.

The current system where banks create about 97% of the total money supply, and all of it as debt, and all of it as debt on which interest has to be paid, while no one creates any money with which to pay the interest, is inherently inflationary.  That is due to the fact that to keep the economy growing it is necessary to create
(a) enough new money each year to pay the interest on the existing debt and
(b) enough additional debt money to keep the economy growing, however slowly. Here is a good example of government-created money being used for a long period without inflationary effects.  The Isle of Guernsey has printed money for 200 years to pay for all of its public  works.  The result has not been inflation! The result has been full employment and no debt!

On the other hand the failure of the present system to maintain the value of money can be illustrated by the fact that one U.S. dollar at the time that the Federal Reserve System was established just over 100 years ago, is worth less than 5 cents today.  Talk about inflation!

One of the many advantages of the New Social Contract is the fact that it can be applied universally, and should be. There are special problems in some instances.  The Eurozone for example would have to amend their treaty to allow the Governor of the European Central Bank to accept shares from the various member countries in exchange for the appropriate number of euros relative to their population.  But it can be done, and the incentive is enormous when such astronomical amounts of cash are required to reduce unemployment to a tolerable level.

It has been estimated that E100 increase in public investment would be required to reduce unemployment by one million.  So the initial requirement would be several trillion euros, which would be available under the recommended formula. Even more important, solving the liquidity crisis might be the glue that would keep the EU from coming apart at the seams.

The United States would be the toughest nut to crack.  It would require a president and congress willing to put the people ahead of Wall Street, nationalize the Federal Reserve System, and eliminate campaign contributions from financial institutions to politicians and candidates for office.  It is a long stretch, but they couldn’t afford to let the rest of the world enjoy an advantage that would make them less competitive.

In major projects such as the one under discussion it is usually suggested that Canada wait and let some other country go first, to prove the feasibility.  In this case we have already been there, done that.  We used copious quantities of GCM  and thrived as we never did before, nor since we let the banking cartel rob us of our inalienable rights – a theft that they are attempting to set in concrete with their ingenious dispute settlement mechanisms in the Canada-Europe Trade Agreement (CETA) and the Trans-Pacific Partnership (TPP).  So we have to be first off the mark and use the power granted under the Canadian constitution before we lose it.

Canada is the only country in the world that I know of that has all of the essentials for quick action and implementation. First, and probably most important, we have done it before.  And we can do it again. Second, the Bank of Canada is publicly-owned.  The Minister of Finance holds all the shares in trust for us all. Thirdly, the Minister of Finance has the final say over Bank of Canada policy.

The only caveat is that in the case of any differences with the governor, the minister’s opinion must be put in writing and published in the Canada Gazette.  And, finally, I am ready, able and willing to assist the minister with the legislation and implementation.  I was one of the authors of the original plan, and the only one with political experience.  Banking reform has been a passion since college days when my professors were unable to give me an acceptable answer as to whether or not recessions and depressions were necessary.  I had to figure out for myself that they were not.  They were phenomena of a highly leveraged, partial reserve system – a system that has been responsible for inestimable human suffering, and there is no end in sight.


The whole problem has to be framed in moral terms. Is it moral for a government to borrow money in the market, and mortgage our future when they have the constitutional and legislative power to obtain debt-free money to meet all our legitimate needs? Is it moral for one small group of individuals to lend the same money to 20 different governments, businesses or people and collect interest from each? 

Is it moral for 62 families to own half of the world’s wealth when millions of people are hungry and in need of life’s necessities?

The world is in crisis on many fronts.  It is crying out for a leadership of hope.  There is no leader who is better positioned than our own extraordinary prime minister to take the bold first steps on which the future of our planet and species depends.

The day the prime minister took the oath of office I wrote to him suggesting he would have to decide if he was going to be just a good prime minister or make the extra effort to be a great one, ranking with the best ever.  A unique, once in a lifetime opportunity exists to confront the private money-creation monopoly that has been such a curse for so long with its chains to austerity budgets, and anemic growth.

If he persists with the present budget, and settles for a hundred thousand or so new jobs when full employment is possible, and leaves us with a legacy of an even higher federal debt, when a significantly smaller one is possible, he will have to settle for good, at best.  But if he seizes the opportunity of a century, and sets the people free from the bondage of being slaves to debt as a signal of hope for the world, he will rank with the greatest of leaders – another Lincoln.

I hope and pray that all Canadians will urge Prime Minister Trudeau and his Minister of Finance to take the high road, and set us free.


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