History of the Bank of Canada This history has been neglected and ignored by our governments for the last four decades. Article 18 In spite of what PR spokespeople might say, the LAW is the LAW! In this section, we refer to Article 18 of The Bank of Canada Act, listed under BUSINESS AND POWERS OF THE BANK. Since 1938 the BoC has been owned entirely by the Federal Government. It is essential to understand what this means, in order to understand the full significance of the powers of the Bank of Canada. In a word, The Bank of Canada may create the money to finance federal projects on a near interest - free basis. It may, if it wishes, lend money to the Provinces and to the Municipalities as well. It works this way: The coupons paid on Government debt held by the 'Bank of Canada find their way back to the Federal Treasury, with the rest of the bank's earnings. In recent years this important function of the bank has been left, in large part, to rust. Article 18 - sets out the Bank's powers of lending to our Governments. Article 18 (c), dealing with funded debt-bonds or treasury bills - authorizes the Bank to "buy and sell securities issued or guaranteed by Canada or any Province." No restriction is set on such holdings; limits on these powers must then be sought in the real economy - whether or not further money supply created by such loans would add to the demand in an economy already employing all available resources. Were the Bank to go on increasing its lending to governments, under such circumstances, would indeed be inflationary. But such a state of affairs has not existed for decades. Article 18 (i) make loans or advances for periods not exceeding six months to the Government of Canada or the Government of any Province on the pledge or hypothecation of readily marketable securities issued or guaranteed by Canada or any Province. Article 18 (j) make loans to the Government of Canada or the Government of any Province, but such loans outstanding at any one time shall not, in the case of the Government of Canada exceed one-third of the estimated revenue of the Government of Canada for its fiscal year, and shall not, in the case of a Provincial Government, exceed one-fourth of that Government' s estimated revenue for the fiscal year, and such loans shall be repaid before the end of the first quarter after the end of the fiscal year of the Government has contracted the loan... Article 18 (j) Deals with unfunded loans to governments, ie, advances against their income not formalized in security issues. The passage "but such loans outstanding at any one time shall not ... " clearly implies that such unfunded debt may be rolled over when due.