The Community Renaissance proposal will not be inflationary for the following reasons:Summary Statement: The current exorbitant and unnecessary costs of building and repairing community projects will be eliminated or substantially reduced under the Community Renaissance proposal, while genuine economic growth takes place, thus sustaining the purchasing power of existing dollars.
- There would be loans, not grants. Money put into the economy would be returned to the Bank of Canada as the loans are repaid and then removed from the money supply.
- Where there are unmet needs, an available labor supply, and necessary raw materials, but no money, money creation is not inflationary; it is absolutely necessary. Certainly, our infrastructure and environmental needs are monumental. The Canadian Water and Wastewater Association estimates it will cost $90 billion to bring municipal water systems up to scratch by 2002.
- Interest-free loans will always be at least less inflationary than interest-bearing loans. Interest contributes to inflation because the cost of interest must be added to the price of every product financed with interest-bearing debt. Interest does not add to the quality of the product, but only to the cost.
- When prices and wages are kept within normal limits by careful review of project costs, money created to finance municipal infrastructure projects is not inflationary.
- Additionally, the Bank of Canada could raise the reserve
requirements for the private banks, which are now at historically
low levels. This would force private banks to create less money,
as the public bank created more.