1. The Origin of Perpetually Designed Nation Debt
The origins of perpetual National Debt and income tax in Canada may surprise you. First of all, the
Federal Government cannot legally collect taxes in Canada. The only way the Canadian Government
was able to enact an income tax was to bring it into effect under the War Measures Act in 1917 as the
Income War Tax Act. The Federal Government only needed an income tax in 1917 because in 1913 it
gave away its exclusive right to create the nation's currency and credit to private banks when it signed
the Bank Act of Canada.
Not coincidently, this was the very same year the United States
Government also gave away its right to create its own national currency
to a consortium of private banks with the deceptively titled US Federal
Reserve which is wholly privately owned and operated and has nothing
to do with the US Federal Government.
The Income War Tax was strongly opposed by those who knew that the
Federal Government did not have the legal right to collect income taxes.
The British North American Act clearly states that direct income taxes
can only be collected by the provinces. As a result, four provinces were
eventually included in the Income War Tax Act and served, at the time to pacify the critics. First, income
tax was to be voluntary, second it was to be temporary, lasting a proposed 24 to 36 months, third it was
to apply to only those earning in excess of $10,000 per year (equivalent to $300,000 today), and fourth,
it was to be applied at a rate of 10%. Under these terms, income tax was to pay off the debt for World
War I and then it was to cease.
This Income War Tax was imposed on Canadians primarily to pay for the cost of borrowing money from
private banks. On July 6,1913 the Government of Canada had inexplicably enacted a law known as "An
Act Respecting Banks and Banking" which was cited as the "The Bank Act". Under the terms of the
Bank Act of 1913, exclusive jurisdiction for the control and issue of the nation's currency and credit was
given away to the Canadian Banker's Association.
The issue and control of currency and credit, once out of government control, soon incurred a heavy
debt load. In 1913, Canada's national debt was a minuscule $550 million. Up until this time, import
duties and consumption taxes had been adequate to fund government services. Only four years later in
1917, it had nearly quadrupled to just over $2 billion. Today it is over $601 billion and continuing to
grow exponentially (http://www.debtclock.ca/). Instead of recovering those rights given away in 1913
and creating the money needed for the war, the Federal Government allowed the private banks to
create it and instead borrow it from them at interest.
This corruption of public finances is now at the core of the economic mismanagement we are
witnessing today. Almost all governments fail to recognize a fundamental principle of public finance that
has been ignored in order to benefit elite banking interest groups. This principle was clearly stated by
Dr. John Hotson, the late Executive Director of COMER, (Committee on Monetary and Economic
Reform) who said:
“No sovereign government, under any circumstances, should borrow money from commercial
banks and pay interest when it can instead borrow from its own Central Bank interest-free.”

2. This unnecessary cost of interest paid to commercial banks is the principal cause of the failure of
government tax revenues to keep pace with expenditures. To add insult to injury, these artificial deficits
are being used to justify the destruction of public infrastructure services such as health care, pensions,
welfare, unemployment insurance, education, cultural funding, and municipal services. The real agenda
of the banking and corporate elite is to replace them with private, profit-making corporate services to
again benefit the few at the expense of the majority of the people.
What economists and the corporate elite have taken great pains to disseminate is an irrational fear that
money creation and spending by governments are the root cause of inflation. What they endeavour to
hide with this smoke screen is that cash reserves, formerly used as inflation controls on the private
banks by the Bank of Canada, have been abolished and government has almost totally lost its ability to
directly control money supply in the public interest. This is the real source of inflation. The Bank of
Canada's control over reserves has been replaced by interest rate manipulation.
This practice of increasing interest rates to control inflation initially causes higher prices and then leads
to recessions and high unemployment. Only after recessions do prices eventually drop. Much more
effective inflation control is available by returning control of the money supply to Central Banks and by
restoring and increasing the commercial bank reserve requirements and can create as many loans and
as much credit as they want to out of thin air.
In fact, because 94% of our money supply is debt money, if we paid off our loans we could drastically
reduce our money supply, creating a major depression. Under this system, the only way the money
supply can be increased to match the growth in the economy is by government and private borrowing.
The Federal Government has the power to print notes, thereby circulating interest-free money, or
through the Bank of Canada to put low (1.5% - 2%) interest credit into circulation. This was done during
World War II and got Canada out of the bank-created money squeeze of the Great Depression. It also
fueled the 'good years' until the 1970's, when the Trudeau government changed our economic policies.
The current federal deficit is actually what the government borrows to pay the interest on the national
debt to the private banks. The entire national debt could be paid off over time if the federal government
took back its power to create money and credit. The Bank of Canada can be used to hold government
debt such that interest payments would go back into government revenues. Basically, we are now
paying high income taxes, GST and PST, etc. so that the banking and wealthy elite can earn a
substantial income by holding risk-free government debt. Almost the entire windfall profit of the private
banks in recent years has come from holding government debt.
Believe it or not, we are still paying income taxes under the Income War Tax Act of 1917.
From problems in Heath Care, Education, and Social Spending to National Unity, all may be traced
back to 1913. Twenty years after the signing of the Bank Act Mackenzie King was starting to see the
light and he made this radio address;
"Once a nation parts with control of its currency
and credit, it matters not who makes that
nation's law. Until the control of the issue of
currency and credit is restored to government
and recognized as it's most conspicuous and
sacred responsibility, all talk of the sovereignty
of parliament and of democracy is idle and
futile."
- Prime Minister Mackenzie King