Thus The Globe and Mail Report on Business (22/08, "Consumer prices in July, boosting inflation to 2.1% by Marian Stinson) recounts: "Consumer prices posted their largest increase in nearly a year in July, fuelled by rising energy prices and higher cigarette taxes. The 0.5% rise from June in the consumer price index – higher than analysts had forecast – has bolstered expectations that the Bank of Canada will push up interest rates again in September.

"The core rate, which is closely watched by the central bank, was steady at an annual rate of 2.1% in July."

To appreciate the extent of the misinformation, we must go back 12 years ago when under pressure from COMER and others, the Government was forced to recognize that when it increases consumer price taxation, the resulting jump in end-prices has nothing to do with inflation. It is palpably something for which the government itself must answer. And when the Bank of Canada responds to that by raising interest rates "to lick inflation" – it becomes double-tiered fraud. How clearly we set this forth at that time appears from the following:

"Belatedly the hoax of salvation through usury is being uncovered. That task seems already underway at Statistics Canada. Thus it reports that the Consumer Price Index posted a 4.5% increase in the 12 months ending in May, down from 5.0% in April. That was the biggest monthly drop in nearly six years. The most important factor in the drop was the removal of the federal excise increase on tobacco and gasoline.

"Douglas Peters, chief economist of the Toronto-Dominion Bank and later member of the Chrétien government, summed up the disclosure: ‘The inflation numbers tell us what we’ve known for a long time – inflation has stayed at 4% for the last six years except for the idiot taxes that keep getting added in.’ The ‘core rate of inflation’ that excludes volatile factors of food and energy, fell to 4.4% in April from 4.9% a year earlier. The concept of a ‘a core inflation’ was introduced by the late Otto Eckstein in 1981.

"Far more important than the volatility of certain market factors is the part played in price movement by factors not originating in the market at all. It is essential that the price indexes be unbundled according to their component causes."(1)

However, it is notable how those in the saddle make use of or eliminate the non-core items according to their advantage at the moment. For example in the 1990 quotation when the tax on tobacco had been decreased, that was noted in accounting for inflation. Today when it has been increased, it is not mentioned in sounding the tocsin on inflation. The common purpose would seem to be exaggerating the extent of inflation. If you add to that, the detail that the previous BoC governor, Gordon Thiessen, apologized for even uttering the word "deflation" you have a case of cooking society’s books that can match anything on Wall St.

The recent G&M article continues in a mood of guarded skepticism. The caution has good cause. However, academia and journalism are littered with the blanched skulls of those too insistent of speaking the whole truth.

"The surge in cigarette prices was one of the key ingredients in the upward move in inflation last month and reflects the rise in excise taxes in mid-June. Without the increase, the overall inflation rate would fall to an annual rate of 1.8% from 2.1%.

"Electricity rose 3.2% in July, almost entirely because of a 9.2% increase in Ontario after it moved to a free-market pricing system. Rising demand because of heat waves caused prices to move higher during the month, Statscan said."

Two months earlier, Economic Reform quoted Greg Ip (Financial Post, 30/03/90): "Interest rates resumed their upward march yesterday raising concerns among some economists that the price of the BoC’s battle against inflation may be too great." The real point is not that the product is over-priced, but that it is fraudulent, contributing to the very problem it is advertised to solve.

"Until a couple of years ago, the orthodox view was that higher taxes kept inflation down. One could have hoped that the Goods and Service Tax, appearing as it does on the consumer’s invoice, would make it clear that some of our price rise may merely reflects the cost of more public services. Vain hope. To get around that little embarrassment the term ‘tax inflation’ has been introduced."(2)

But the distortions mentioned are the mere beginning of the tale. There are many other taxes – those on producers and property, for example, that consumers never set eyes on and hence are not aware exist. That helps identify any price increase with an excess of demand over supply that requires higher interest rates to repress. For interest rates a quarter of a century ago were proclaimed the only blunt tool against inflation. The many other successful methods used during WWII and the early postwar years have been done away with. Notably the fixing of interest rates at a low level in times of crisis, and the increase in the statutory reserves that private banks had to leave with the central bank as token collateral for their deposits from the public. While these reserves existed, instead of shoving up interest rates as a ‘one blunt tool’ to calm a speculative boom, the central bank could leave interest rates alone and merely raise these reserves. That would cut the credit the private banks could create. This made it unnecessary to push interest rates up to levels that clobbered the entire economy.

Most disturbing is the dogged resistance to recognizing that not all price rise can be identified with an excess of demand over supply. In fact a good part of it stems from the development of a high-tech, pluralistic society. That requires many more public services; and these for the most part are neither marketed or priced. However, they are not without cost. The obvious conclusion is that their cost – through a broadening layer of taxation – turns up in the price of what goods and services are marketed. Once that is recognized the whole economic model changes beyond recognition.

Though these lines of thought may seem novel, they are not that difficult to grasp. Far less so than the discredited official model of a self-balancing market to which all concerns must be left.

And beyond the respective technical merits of the two models, weighty moral issues are involved. The "one blunt tool" chosen – paradoxically – to enforce the model of a self-balancing market, happens to be the revenue of a distinct economic set – money-lenders. And these have been known, when opportunity beckons, to become voracious. That is attested by the stand of several great religions against usury and even against interest as such. The traumatic experience of millennia must have led to such a position. High interest rates take a toll on all producers. There is thus a glaring conflict of interest in the "zero inflation" model, and the elevation of interest rates as "the one blunt tool" to impose it. Worse yet, with the abandonment of even the notional gold standard in 1971 and the reduction of money to pure credit, the scope of that conflict of interest grew awesomely.

How then it could it have been overlooked by the very authorities who are playing sheriff to enforce morality on the high-flyers of Wall St.? That is the key question of our troubled times. There is not a doubt that proclaiming interest rates the one stabilizer has led to the transfer of more trillions of dollars from frayed pockets to the very wealthy than all the skullduggery on Wall St. that is now rocking the world. Moreover it helped set the stage for the latter. All this has still to be addressed in official circles.

As is the case with many of the key puzzles of our economy, at least the framework for an answer was worked out decades ago. Our problem is that such answers have simply been suppressed.

The best of these for our present purpose was provided by a leading French economist of the 1950s and 1960s, François Perroux. In his concept of "dominant revenue," he held that in every historic period the welfare of society is officially measured by the volume and rate of revenue of a particular class. In the early 19th century Britain it was the landlords with their ultra-protective Corn Laws. Then in sequence came the industrial capitalists, the speculative financiers who struck out with the collapse of the system in the great Depression of the 1930s. The creaking world economy was started up again by a coalition of industrial capitalists and government, with the trade unions as junior partner. In the 1970s this was replaced by the private banking system, and with the deregulation of the world economy by highly speculative financial capital. That system has crumbled resoundingly, and that is where we are.

Behind the elevation of a privileged revenue as the barometer of the system as a whole lies a bold assertion of power. The dominant revenue and its supporting theory are not advanced as a hypothesis to be defended against rival doctrines. They are proclaimed as a revealed faith. Alternative theories are simply eliminated from the media, the educational system and public discourse. Indeed the very language has been restructured to exclude competing models. In this way the reassessment of basic policies is ruled out.

Today the absolute power of deregulated and globalized finance is without precedent. To fashion their regime, bankers have studied and applied all the hard lessons they learned during their long years in the doghouse – 1933 to 1951. That experience was reviewed, analyzed, and strategies and tactics elaborated. Not the least of these was the complete occupation of the intellectual space so that critics do not have to be answered.

By silencing all warnings, such an arrangement guarantees not only major crises, but guarantees that they will swell to disastrous proportions before they are recognized for what they are. If Her Majesty’s government has no opposition in Parliament on the policy that led to our economic meltdown, little remains of democracy and its built-in defences. That situation in the economy today has seeped into our very political process.

— from COMER, April 2003