Q.   What tax bodies are included in this proposal?
 
A.  Local governments include Municipalities, Regional Districts, 
School Boards and Hospital Boards.
 
Q.   Would this be another government handout?
 
A.   No.  The Bank of Canada would supply the money at cost + 0%. 
It would be a loan, not a grant, and would not be used for everyday 
expenses.
 
Q.  If this a hardnosed, practical proposal, why has it not been 
suggested before?
 
A.  It has, and it has actually been done before.  During WWII,our 
Bank of Canada loaned about half the total money supply, not 
the less than 5% it issues today.  As recently as 1977, the Bank of
Canada was issuing over 20% of the nation's money supply. 
 
Q.  What would the money be used for?
 
A.   It could only be used for local capital projects.  Examples of 
capital projects are new or replacement schools, hospitals, water 
and sewage systems, environmental works and roads and bridges.
 
Q.   What is the benefit of this proposal to the taxpayers?
 
A.   The interest charges saved would cut all the projects costs in 
half or more and increase employment.
 
Q.   Can you mention an example of the savings?
 
A.   Under the Community Renaissance proposal the Dover Bay High 
School in Nanaimo B.C. would not cost $57 million. It would cost 
$25 million.
 
Q.  Would this proposal increase the Federal Government’s deficit 
and/or debt?
 
A.   No.  These loans would not come out of the budget.  The 
government also wins by receiving more tax income and by handing 
out less welfare as more people are employed.
 
Q.   Can the Bank of Canada make loans like this?
 
A.   Yes.  The Bank of Canada has the authority to make such loans 
to junior governments.  The Bank of Canada Act Sec 18 (c) states the 
bank may “buy and sell securities issued or guaranteed by Canada or 
any province”. The provinces in turn could provide the interest-free
money to the municipalities.
 
Q.   But surely these loans will increase the money supply and 
cause runaway inflation?
 
A.   The Bank of Canada can regain the authority to require the 
private Banking system to loan out less money, so that no extra 
money will circulate. Since no extra money will be circulating, these 
loans will not be inflationary.  The Bank of Canada Act Sec 19 once 
stated “The Bank may fix the percentage of the deposit liabilities 
that the banks are required by subsection 208(7) of the Bank Act 
to maintain...”

Even without reinstating this part of the Bank of Canada Act, the
money in circulation would not increase, since there will be less
government borrowing from the private banks, and hence less 
money coming into circulation from this source.  Instead, this
money would come into circulation through the taxpayer owned
Bank of Canada, at no interest.  

Also, if the loans are used to increase employment and utilize 
resources that are not in use, the money supply can increase, and 
there will still be no inflationary pressures added. There will only 
be economic growth of the type that truly adds to the wealth of a 
community. 
 
Q.   Can our elected Parliament order the Bank of Canada to 
make interest-free loans to junior governments?
 
A.   Yes.  The Minister of Finance has the authority to lower the 
interest rate that the Bank of Canada charges when it makes loans 
to governments. The Bank of Canada Act Sec 14 (2) states “If, 
notwithstanding the consultations provided for in subsection (1), 
there should emerge a difference of opinion between the Minister 
and the Bank concerning the monetary policy to be followed, the 
Minister may after consultation with the Governor and with the 
approval of the Governor in Council, give to the Governor a written 
directive concerning monetary policy, in specific terms and 
applicable for a specified period, and the Bank shall comply with 
that directive”.