Truth in Media Global Watch Bulletins

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TiM GW Bulletin 98/12-1

Dec. 2, 1998

Wither Canadian Sovereignty: Toward a "Federal Reserve Bank of Toronto?"

"Canadian" Banks Speculate Against Canadian Dollar

By Dr. Michel Chossudovsky


A Case of a 1998 "Northern Flu" Follows the 1997 "Asian Flu"

PHOENIX - Thought you'd be interested in the enclosed article contributed to TiM by Dr. Michel Chossudovsky. He is a professor of economics at the University of Ottawa, and author of "The Globalisation of Poverty, Impacts of IMF and World Bank Reforms", Third World Network, Penang and Zed Books, London, 1997.

Prof. Chossudovsky's piece illustrates the breadth and depth of economic perversion which the globalism has brought upon the world. Here we have, ostensibly "Canadian" banks colluding with their Wall Street colleagues to the detriment of the Canadian dollar and the Canadians in general.

A couple of clarifications are in order, however, before we let you take in Prof. Chossudovsky's latest contribution to TiM. First, a "loonie" is a Canadian expression for that country's one-dollar coin, which has a picture of a loon engraved on it. Second, "forex" is a Wall Street financial institutions' slang for "foreign exchange." Third, "Bay Street" is a street in downtown Toronto where its stock exchange is located; kind of like Wall Street in New York. Fourth, there are "bailouts" and there are "bailouts." And it's important to distinguish between the different kinds so as to keep things in proper perspective.

Prof. Chossudovsky says that, "Bailouts by global creditors do not solely apply to Mexico, Korea or Indonesia. Heavily indebted as a result of its failed attempts to prop up the loonie, the Bank of Canada was obliged to renegotiate a US$6 billion 'bailout' (Cdn$9.2 billion) with a syndicate of Wall Street banks."

The preceding statement could be confusing to some TiM readers. Because it's comparing apples and oranges. The "Mexico, Korea or Indonesia" bailouts were engineered by the International Monetary Fund. Meaning they were bailouts of Wall Street private bankers by the U.S. and other, mostly western, taxpayers' public funds. In the case of Bank of Canada, however, we don't have a "bailout;" we have a "conquest" by Wall Street (i.e., Wall Street's private bankers taking over another country). Just as we had it in Southeast Asia (see my March 1998 CHRONICLES magazine column, "Wall Street's Financial Terrorism").

And so, with this short preamble, we'll let you enjoy Prof. Chossudovsky's article...

OTTAWA, Canada - The tumble of the Canadian dollar has been casually ascribed by politicians and financial analysts alike to the "Asian flu" and "the associated downward pressure on the prices of the primary commodities that Canada exports". Yet Canada's primary exports account for less than one percent of total forex transactions, i.e. a drop in the ocean, a meager Cdn$337 million out of a total daily turnover of Cdn$55 billion dollars of which more than 90 percent is speculative in nature.

The public has been blatantly misled. The official justification for the dollar's decline does not stand up; it fails to address the workings of foreign exchange markets. The speculative wave which has swept the World's currency markets is not limited to the former "Asian tigers". It has also struck several western countries including Canada.

Bay Street has joined the speculative bandwagon. Canadian financial institutions including the chartered banks are routinely involved in speculating against the Canadian dollar. The amounts of money transacted by these institutions (using the gamut of speculative instruments) are staggering: more than Cdn$55.4 billion (US$36 billion) are transacted daily through Canada's foreign exchange market, i.e. 32 times the amounts paid to Canadians in the form of wages and salaries.

Of this multibillion dollar turnover, a meager Can$2.5 billion (US$1.6 billion) constitute bona fide merchandise trade. And 97 percent of forex turnover is conducted in relation to the US dollar indicating the extent to which Canadian banks are part of the US financial landscape.

Some 36 Canadian financial institutions including the chartered banks, trust companies, brokerage houses and foreign exchange dealers, are the main actors in the speculative assaults on the Canadian dollar. Only a fraction of this business is undertaken on behalf of the clients of Canadian financial institutions.

The loonie has been transformed into "the northern peso": the same deadly instruments used to destabilize national currencies in Asia and Latin America, have been routinely used by Canadian and American financial institutions in their assault against the Canadian dollar.

The implications are far-reaching. The speculative attacks against the Canadian dollar have led to the demise of monetary policy. Politicians have failed to acknowledge the existence of currency speculation and its deadly impact. The devaluation is seen as a blessing in disguise: a weaker dollar is said to contribute to job creation. Countervailing measures to avert the slide were not taken, let alone the imposition of a "code of conduct" on Canadian financial institutions. Political inertia provided an unequivocal "green light" to speculators.

The surge of speculative activity against the Canadian dollar has resulted in a dramatic drain of Canada's foreign exchange reserves. In recent months, the Bank of Canada has entered into multibillion dollar contracts in the forex market in a failed attempt to prop up the nation's currency: the vaults of the Bank of Canada have been assaulted by Canadian and American speculators; billions of dollars of Canada's central bank reserves have been transferred into private financial hands.

Wall Street Creditors to the Rescue of the Bank of Canada

"Bailouts" by global creditors do not solely apply to Mexico, Korea or Indonesia. Heavily indebted as a result of its failed attempts to prop up the loonie, the Bank of Canada was obliged to renegotiate a US $6 billion "bailout" ($9.2 billion Canadian dollars) with a syndicate of Wall Street banks (including Chase Manhattan, Citibank, Morgan Guarantee Trust, Credit Suisse First Boston). Politely labeled in the banking jargon as "a standby credit facility", the bailout is intended to restock the Bank of Canada's foreign currency reserves. The Central Bank (defined in our banking system as the "Lender of Last Resort") is obliged to replenish its reserves on borrowed money, an absurd situation.

In the present context, the "lenders of last resort" are the Wall Street creditors of the Bank of Canada. Since 1991, reserve requirements have been lifted, the commercial banking sector (rather than the Bank of Canada) fully controls money creation. In other words, privately held money reserves in the hands of Canadian and US financial institutions far exceed the limited capabilities of the Bank of Canada. Together with Canada's largest chartered banks, Wall Street ultimately "calls the shots". The banks --through speculative trade-- have triggered the tumble of the Canadian dollar and the demise of monetary policy.

Ironically, the same institutions which contributed to weakening the Canadian dollar have been called in --under the standby arrangement—to help the Bank of Canada prop up the loonie on "borrowed forex reserves". The latter constitute a large share of Canada's central bank reserves.

Speculation against the Canadian dollar marks the demise of central banking and the inability of the federal government through the Bank of Canada to control money creation on behalf of society. This signifies that monetary policy is in the hands of the Bank of Canada's Wall street creditors.

The modest budget surplus of Cdn$3.5 billion dollars (fiscal year 1997-98), announced by the Minister of Finance in October, will barely suffice to service the Bank of Canada's outstanding debt with Wall Street which has resulted from the short-term speculative assault on the Canadian dollar. No doubt, the government is also anxious to use part of the surpluses of the employment insurance scheme to reimburse the Bank of Canada's Wall Street creditors.

Toward a "Federal Reserve Bank of Toronto?"

What is the future of central banking? With its hard currency reserves depleted, the Bank of Canada may become (in the not too distant future) a mere "currency board" in which the Canadian dollar would be pegged (e.g. In a two to one split) to the US dollar. Alternatively, the loonie would be withdrawn altogether; Canadian prices and wages would be converted into US currency. The loonie would be replaced by the greenback and the Bank of Canada would become a mere appendage of the US monetary system: the 13th regional Reserve Bank of the Federal Reserve system of which Canada's chartered banks would become the stockholders.

Dr. Michel Chossudovsky, Department of Economics

University of Ottawa, E-Mail:

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Also, check out... "What's a Trill Here, a Trill There...?", "Services-based Economy Means Cheaper Labor," "Natives Are Getting Restless,"  "Toward Nations of Obedient Mutts", "Klinton's Amerika: Israel's Tomahawk", "Two Faces of Globalism", "Canadian Banks Speculating Against Canadian Dollar""Election '98: Much Ado About Nothing""A Spoof on Goof: ABC Adds God to Its Editorial Lineup," "Taking a Little Bite Out of the 'Big Apple'", "Greenscam's Meriwether Bailout,"  "Wall Street's Conquest of America,"  "Yeltsin-IMF Deal: Feeding Drugs to Drug Addict", "Like Watergate, Cover-up Worse Than Original Crime," "Death Merchants 80; U.S. Taxpayers 19" , "The Great American Divide Widens", "Was Buchanan Robbed in Louisiana, Iowa, Arizona?"

Or Djurdjevic's WASHINGTON TIMES columns: "When Will Wall Street's Bubble Burst?""Russia, IMF, and Global House of Cards""Rekindling NATO to Fuel Cold War...", "The Great American Hoover", "Russia, IMF and Global House of Cards" , "Christianity Under Siege: Toward a One World Religion,"

Or Djurdjevic's CHRONICLES columns: "Wall Street Financial Terrorism", "Wiping Out the Middle Class."