Authored by Bryce McBride via The Mises Institute,

In the current Ontario election campaign, the Progressive Conservatives are hoping that a focus on the corruption scandals of the governing Liberals will deliver them the keys to Queen’s Park. This is a proven winning strategy as corruption (defined as the abuse of public office for private gain) is an issue that enrages people worldwide.

Just last month the International Monetary Fund, under the leadership of Christine Lagarde, committed to tackling corruption on a global level as, in her words, “By siphoning off precious reserves of trust, corruption makes it harder for society to take the collective decisions needed to advance the common good.” 

However, the corruption of the Liberal Party (and of other governing political parties elsewhere), while obvious, is an almost insignificant distraction compared to the pervasive and absolutely ruinous corruption of the currency which has taken place at an ever-accelerating rate over the past 50 years at the hands of the banking system.

Amazingly, this corruption of money has been performed in so subtle a fashion as to be almost imperceptible, even as the harm it has inflicted on most of us is all too obvious. How has this monstrous fraud been perpetrated undetected?

The first step was to break the connection between our currency and its tangible backing. Until 1967, coins had an intrinsic silver value and bills had an implied value in gold. A Canadian silver dollar contained six tenths of an ounce of silver, a quarter contained a quarter of this amount (15 hundredths of an ounce) and a dime a tenth (6 hundredths of an ounce). Canadian paper money, meanwhile, could be valued in terms of gold, as under the terms of the Bretton Woods agreement the price of gold was fixed at $35 US dollars an ounce.

Starting in 1968, though, the silver content of Canadian coins was reduced and finally eliminated while in 1971 the United States Treasury ‘temporarily suspended’ the convertibility of dollars for gold at $35/ounce. As the temporary suspension has now lasted 47 years, it should be clear that the currency now in our wallets and chequing accounts will never have any value over and above the value we give it by continuing to accept it in payment for goods and services.

This severing of the connection between our currency and hard to acquire (and hence valuable) precious metals set the stage for radical changes in both central and commercial banking. No longer was the quantity of money issued by the Bank of Canada limited by the quantity of gold and silver available to back bills and mint coins. Perhaps even more importantly, no longer were banks constrained in their ability to make loans by the amount lent to them by depositors.

Consequently, from the early 1970s onwards the amount of money circulating in the Canadian economy (using the M3 measure) has grown immensely,...