Right Hon. R. B. BENNETT (Prime Minister) moved:: That the name of Mr. Stewart (Lethbridge) be substituted for that of Mr. Stanley on the select standing committee on mines, forests and
*That the name of Mr. Stanley be substituted for that of Mr. Stewart (Lethbridge) on the select standing committee on banking and commerce.
That the name of Mr. Kennedy (Peace River) be substituted for that of Mr. Gardiner on the select' standing committee on privileges and elections.


[Stage Direction]
Motion agreed to.


[Stage Direction]
Hon. HUGH GUTHRIE (Minister of Justice) moved for leave to introduce Bill No. 22, to amend the criminal code (cheques without funds and grand juries).
Some hon. MEMBERS:: Explain.


Mr. GUTHRIE:: This is an effort to amend the section of the criminal code in regard to obtaining money by false pretences in order to make it apply to the issuing of cheques where there are not sufficient funds. The matter was pretty well discussed in the house last session, and the government then decided to introduce a bill to remedy the evil. The other branch of the bill has to do with the abolition of the grand jury system in British Columbia. The amendment is proposed at the request of the government of that province. .
Motion agreed to and bill read the first
time.	[DOT]



FINANCE ACT AMENDMENT

[Stage Direction]
Mr. H. E. SPENCER (Battle Creek) moved for leave to introduce Bill No. 23, to amend the Finance Act.
Some hon. MEMBERS:: Explain.


Mr. SPENCER:: Mr. Speaker, under the Finance Act chartered banks have the right to deposit various securities with the Treasury Board in exchange for dominion notes. The amendment is for the purpose of giving the provinces the same right.
Motion agreed to and bill read the first time.



QUESTIONS

[Stage Direction]
(Questions answered orally are indicated by an asterisk).

Mr. YALLANCE:: 1.	Is Dr. Frederick Guest surgeon in the Royal Canadian Mounted Police at Regina?
2.	If so, when was he appointed?
3.	Is this the same Dr. Guest who was medical officer for the Soldiers' Reestablishment at Regina?
4.	If so, why did be give up that appointment?
5.	Was he dismissed?
6.	If so, for what reason?


Mr. GUTHRIE:: 1.	Yes.
2.	27th February, 1931.
3.	Yes.
4.	No information.
5.	No.
6.	Answered by No. 5.


PROVINCIAL MINISTERS OF AGRICULTURE- CONFERENCE
Mr. DONNELLY:: 1.	Was a conference of all the provincial ministers of Agriculture called at Ottawa, in November, 1930, and later adjourned to Toronto?
2.	If so, what was the total cost of this conference, showing amounts incurred by each province?
3.	Was the total cost borne by the dominion, and if not, what amounts were paid by the dominion on account of each province's expenses, and to whom?
4.	Was any new agricultural policy agreed upon at this conference, and if so: (a) what was the policy; (b) has it been carried into effect?

Questions


Mr. WEIR (Melfort):: 1.	Yes.
2.	No expense federal government-No knowledge provincial expenses.
[DOT] 3. No! None.
4.	No.
"back-to-the-land" movement


Mr. BOTHWELL:: Of the 44,000 persons taken from the industrial centres of Canada and placed upon the land, as stated by the Minister of Labour on February 23, 1932,
(a)	What number were placed as settlers in each of the provinces of Canada?
(b)	What number were placed as farm labourers in each of the provinces and for which a contribution was made by the employer ?
(c) What amounts have been paid to employers in each province as a contribution towards the keep or employment of farm labourers?


Mr. GORDON:: (a)	Under the "Back-to-the-Land" movement 6,352 families (averaging 5 members to a family) have been settled by coordinated effort of the Department of Immigration and Colonization and the Canadian National and Canadian Pacific Railways, without financial assistance by the government or any other agency.
Under the "Back-to-the-Land" movement 13,199 single men have been placed as farm labourers by coordinated effort of the Department of Immigration and Colonization and the Canadian National and Canadian Pacific Railways, without financial assistance by the government or any other agency.
Distribution by provinces is as follows:-
Families Single
Province	settled men
		placed
British Columbia		.... 534	156
Alberta			3,520
Saskatchewan			1,929
Manitoba			2,002
Ontario			4 165
Quebec			747
New Brunswick		.... 42	393
Nova Scotia			276
Prince Edward Island		.. .. 14	11
Total souls			44,959
(b and c), answered by (a).


MARINE CABLE-ST. LAWRENCE RIVER
Mr. POWER:: 1.	Did the government carry out the work of laying or repairing a marine cable in the St. Lawrence river between the island of 
Orleans and Montmagny, and the other small islands situated in the St. Lawrence and lying between Ue-aux-Grues and the island of Orleans?
2.	If so, who was in charge of this work?
3.	Was it carried on by contract after tenders had been called?
4.	What was the total amount expended and to w'hom wrere payments made?


Mr. STEWART (Leeds):: 
UNEMPLOYMENT RELIEF-MONTREAL
Mr. RINFRET:: 1.	What sum of money was placed at the disposal of the city of Montreal, since April 1, 1931, for work in connection w'ith unemployment?
2.	.Must said sum be expended previous to March 31, 1932, or is it renewable?
3.	What amount of said money contributed by the dominion government for said work had the city of Montreal at its disposal in September, October, and November, 1931, respectively?


Mr. GORDON:: 1.	Under the Unemployment Relief Act, 1930, the city of Montreal was granted $3,500,000 for the purpose of carrying out public works to relieve unemployment, of which sum the dominion government agreed to contribute $875,000.
Under the Unemployment and Farm Relief Act, 1931, the city of Montreal was granted $4,800,000 for the purpose of carrying out public works to relieve unemployment, of which sum the dominion government agreed to contribute $1,200,000.
2.	The date set for completion of works under the Unemployment Relief Act, 1930, was December 1, 1931.
Under the Unemployment and Farm Relief Act, 1931, the date for completion of works is May 1, 1932.
3.	Payments to the province for reimbursement to the city of Montreal for the months of September, October, and November, 1931, are as follows:	September, $268,982.90;
October, $139,512.15; November, nil.

Questions
IMMIGRATION, 1931 Mr. LUCHKOVICH:
1.	How many immigrants arrived in Canada in 1931?
2.	What was their racial origin?
3.	How many immigrants were deported in 1931?
4.	What was their racial origin?


Mr. GORDON:: 1.	27,530.
2.	Answer attached, showing racial origin.
3.	6,582.
4.	Answer attached, showing nationality. No. 2-Immigration to Canada, by Racial
Origin, for the Calendar Year 1931.
Via
Ocean From
Ports	U.S.A.	TotalsAlbanian	. 5	5Arabian	. 1	1Armenian	. 5	6Belgian	. 54	43	97Bohemian	
British-[DOT]	22	22English	. 4,599	4,818	9,417Irish	. 871	1,877	2,748Scotch	. 2,010	1,815	3,825Welsh	. 198	173	371Bulgarian	. 14	3	17Croatian	113	5	118Czech	. 69	9	78Dutch	. 38	270	308East Indian	. 52	52Esthonian	. 8	1	9Finnish	. 100	36	136French	94	2,844	2,938German	. 797	1,592	2,389Greek	. 23	43	66Hebrew	. 214	456	670Italian	. 467	166	633Japanese	. 174	174Jugo-Slav	. 65	13	78Lettish	. 1	1	2Lithuanian	. 59	6	65Magyar	. 493	37	530Maltese	. 5	5Mexican	1	1Moravian	1	1Negro	. 14	90	104North American Indian.	29	29Persian	1	1Polish	560	120	680Portuguese	5	5Roumanian	.. 28	20	48Russian	. 71	40	111Ruthenian	
Scandinavian-	. 503	38	541Danish	65	110	175Icelandic	10	10Norwegian	. 66	196	262Swedish	. 62	214	276Via Ocean Ports	From U.S.A.	TotalsSerbian.. .. -	.. 34	16	50Slovak	.. 338	6	344Spanish	.. 10	16	26Spanish American. ..	.. 1	1Swiss	.. 37	35	72Syrian	.. 15	16	31Turkish 	.. 1	1	2Totals	. ..12,335	15,195	27,530
No. 4-Statement of Deportations for the Calendar Year ended December 31, 1931.
Total
Nationality	Deports
Arabian		1
Austrian	 44
Belgian	 51
British
English	:	2,268
Irish Northern	 393
Irish Free State	 15&
Scotch	1,169
Welsh	 260
Australian	 10
British Straits Settlements	 1
British West Indies	 7
Newfoundland	 12
New Zealand	 2
South Africa	 6
East Indian	 2
Maltese	 1
Bulgarian	 6
Chinese	 82
Czecho-Slovak	 242
Dutch	 57
Esthonian	 8
Finnish	 221
French	 11
German	 210
Greek	 16
Hungarian	 121
Italian	 19
Japanese	 7
Jugo-Slav	 60
Latvian	 2
Lithuanian	 21
Luxemburg	 1
Polish	 335
Roumanian	 150
Russian	 15
Scandinavian-
Danish	 143
Icelandic	 1
Norwegian	 95
Swedish	 59
Spanish	 1

Questions
Total
Nationality	Deports
Swiss	 43
Syrian	  7
Turkish	 1
Ocean Port Totals	 6,319 U.S.A. citizens	 263
Grand Totals	6,582


BAIE STE. CATHERINE, QUE.,-WHARF REPAIRS
Mr. CASGRAIN:: 1.	Has the government made any repair works to the wharf at Baie Ste-Catherine in the county of Saguenay in the year 1931?
2.	If so, what was the amount and nature of said repair works?
3.	Were the said works done by day's labour or under contract?
4.	Who was the superintendent or foreman of said works?
5.	Who recommended him for such a position?
6.	Does the wharf at Baie Ste-Catherine belong to the government?


Mr. STEWART (Leeds):: 
ROYAL CANADIAN AIR FORCE
Mr. AHEARN:: 1.	How many officers and other ranks of the Royal Canadian Air Force have received notice that their services will be no longer required?
2.	What is the date set in these notices?
3.	How many of these officers and other ranks are married men?
4.	How many of these officers and other ranks are married men with children?
5.	How many of these officers and other ranks served in the Royal Flying Corps during the world war?
6.	How many served in other services during the war?


Mr. SUTHERLAND:: 1.	69 officers, 100 other ranks.
2.	48 officers on March 31, 1932; 2 officers [DOT]on April 4, 1932; 3 officers on April 5, 1932;
1 officer	on April	6, 1932;	3 officers	on	April7,	1932;	1 officer	on April	9, 1932;	2 officers[DOT]on April	12, 1932;	1 officer	on April	16,	1932;1	officer	on April	17, 1932;	1 officer	on	April
21, 1932; 1 officer on April 22, 1932; 1 officer on April 27, 1932; 1 officer on April 28, 1932;
2	officers on April 30, 1932; 1 officer on May 4, 1932. All other ranks on March 31, 1932.

3.	38 officers, 7 other ranks.
4.	26 officers, 4 other ranks.
5.	27 officers, nil other ranks.
6.	15 officers, 2 other ranks. (This excludes the 27 officers shown in answer to question 5.)


PAUL LANGLOIS-ROMEO LATULIPE
Mr. CASGRAIN:: 1.	Is the government aware that Paul Langlois, propagandist for the raising of sheep in the county of Charlevoix-Saguenay, has been replaced by Romeo Latulipe?
2.	If so, were complaints made against said Paul Langlois?
3.	What was the nature of said complaints?
4.	Who made the complaints?
5.	Who recommended said Romeo Latulipe to replace said Paul Langlois?
6.	Has said Romeo Latulipe passed the civil service examinations?
7.	If not, why?
8.	On what date was said Romeo Latulipe appointed?


Mr. WEIR (Melfort):: 1.	Yes.
2.	No.
3.	Answered by No. 2.
4.	Answered by No. 2.
5.	No one.
6.	Yes.
7.	Answered by No. 6.
8.	January 7, 1932.


UNEMPLOYMENT AND RELIEF ACT-P.E.I.
Mr. MacLEAN:: 1.	"What amount of the sum of $125,000 allotted to Prince Edward Island under the Unemployment and Relief Act has been paid to that province, and on what date or dates were payments made?
2.	Will the balance, if any, of the $125,000 not yet paid be paid to the province, if so, when?


Mr. GORDON:: 1.	$106,193.86-February 25, 1932.
2.	Yes. When certified statements of expenditures are received from the province.


BINDER TWINE
Mr. LUCHKOVICH:: 1.	How much binder twine manufactured in Canada is sold in Argentina, and at what price?
2.	What are Canada's imports from Argentina?


Richard Bedford Bennett: It will be difficult to
indicate the prices at which manufacturers sold their products, as various manufacturers may have sold at various prices. The government has no information with respect to this.


Mr. SPEAKER:: Stands.

Unopposed Motions for Papers


TRANS-CANADA HIGHWAY
Mr. BOTHWELL:: 1.	What amounts of money were allocated to
each of the provinces of Canada for the trans-Canada highway:	(a) for reconstruction and
repairs to roads and bridges; (b) for new construction work; (1) under the Unemployment Relief Act, 1930; (2) under the Unemployment and Farm Relief Act, 1931?
2.	What proportion of the expenditures on the trans-Canada highway is being borne by the dominion government in the respective provinces ?


George Gordon: I would ask, Mr. Speaker, that this question be dropped. All that is contemplated by it, will, I think, be included in the report under the act, which I hope to have tabled sometime late this week. To answer this question would be merely a duplication of the material that will be found in the report.


Pierre Édouard Blondin: Question dropped.



CANADIAN FARM LOAN ACT

Mr. LUCHKOVICH:: 1.	How many applications were received under the Federal Farm Loan Act?
2.	How much money was loaned?


Mr. RHODES:: 

BUTTER AND CHEESE IMPORTS-1931

Mr. CAYLEY:: 1.	How many pounds of:	(a) butter; (b)
cheese were imported into Canada for each month of 1931?
2.	What was the origin of such imports and how many pounds of each did each import into Canada?
3.	What was the value of such imports?
4.	What were the different rates of duties imposed?


Mr. STEVENS:: Stands as order for return. Return now tabled.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. FONTAINE:: 1. How many viaducts or terminals have been built or are under construction in Canada, since January 1. 1931, with respect to:_ (a) level crossings of the Canadian Pacific Railway Company; (b) level crossings of the Canadian National Railways?
2.	In what localities has said work been done or is it being done, and at what cost in each case?
3.	In regard to the cost of the abovemen-tioned 'works, what has been or what is the contribution in each case: (a) of the dominion government; (b) the provincial government; (e) the Canadian National Railways and the Canadian Pacific Railway; (d) the municipalities interested?


INTERNATIONAL EXHIBITIONS
Mr. LAPOINTE:: 1.	For how long has the dominion government been participating in any manner, in international, European, American or world-wide exhibitions?
2.	What were the yearly amounts spent for this purpose, either under the immediate supervision of the departments of Agriculture, Immigration, Commerce, or any other department?
3.	Is it the intention of the government to take part in 1932 or 1933, in any exhibition of equal or superior or inferior importance?


HARBOUR COMMISSIONS-EXPENDITURES, EMPLOYEES, 1931
Mr. RALSTON:: 1.	What amount of money was expended by each of the following harbour commissions during the year 1931: (a) Quebec; (b) St. John;
(c)	Montreal; (d) Sorel; (e) Halifax?
2.	What amount, if any, was expended by
each of the following harbour commissions without direct authority by order in council during the year 1931:	(a) Quebec; (b) St.
John; (c) Montreal; (d) Sorel; (e) Halifax?
3.	What amount was expended by each of the following harbour commissions prior to authority being issued by order in council during the year 1931: (a) Quebec; (b) St. John;
(c)	Montreal; (d) Sorel; (e) Halifax?
4.	What was the number of employees on the pay-roll of each of the following harbour commissions for each of the weeks ending August 8,, August 15, August 22, August 29, September 5, 1931: (a) Quebec; (b) St. John; (c) Montreal;
(d)	Sorel; (e) Halifax?



UNOPPOSED MOTIONS FOR PAPERS


Mr. RALSTON:: For a copy of the correspondence, documents, accounts and vouchers respecting the expenditure authorized in the province of Nova Scotia for federal public works to be paid for under the authority of the Unemployment Relief Act of last session, showing: (a) the amount authorized; (b) the amount expended.
For a copy of the correspondence, documents, accounts and vouchers respecting the expenditure for contribution to works being constructed or contributed to by the provincial or municipal authorities in the province of Nova Scotia under the authority of the Unemployment Relief Act of last session, showing: (a) the amount authorized; (b) the amount expended.
Unopposed Motions for Papers

For a copy of the correspondence, documents, accounts and vouchers respecting the expenditure for direct relief in the province of Nova Scotia under the authority of the Unemployment Relief Act of last session, showing: (a) the amount authorized; (b) the amount expended.
Motions stand.



ST. NICHOLAS, QUE., POST OFFICE

Mr. MARCIL (for Mr. Casgrain):: For a copy of all documents and correspondence exchanged between the citizens of row' (rang) St. Nicholas, in the parish of St. Ferreol, county of Montmorency, and the Postmaster General, or any other official of his department, at Ottawa or Quebec, in connection with the opening of a post office in said parish.
The correspondence for 1931 will be sufficient.


Pierre Édouard Blondin: Motion carried as amended.



JOHN MALONEY

Mr. CASGRAIN:: For a copy of all reports, correspondence and other documents in connection with the dismissal of Mr. John Maloney, superintendent of Indians at Mingan, on the north shore, in the county of Charlevoix-Saguenay; also a copy of all reports, correspondence and other documents in connection with an inquiry held in 1931 by L. P. Cote, with reference to charges brought against said John Maloney, including the proof and evidence given by all the witnesses heard at said inquiry, and the decision arrived at by the said commissioner.



DERILAS LANDRY

Joseph Philippe Baby Casgrain: For a copy of all reports, correspondence and other documents in connection with the dismissal of Mr. Deri I as Landry, lighthouse keeper at Natashquan. on the north shore, in the county of Charlevoix-Saguenay; also a copy of all reports, correspondence and other documents in connection with an inquiry held in 1931 by L. P. Cote, with reference to charges brought against said Derilas Landry, including the proof and evidence given by all the witnesses heard at said inquiry, and the decision arrived at by the said commissioner.



FRANCOIS HARBOUR

Joseph Philippe Baby Casgrain: For a copy of all documents, reports, correspondence in connection with the dismissal of Mr. Francois Harbour, superintendent of Indians at Oka, in the county of Two-Mountains. Also a copy of all reports, correspondence and other documents in connection with an inquiry held in 1931 with reference to charges brought against said Francois Harbour, and the temporary appointment in his place of Mr. Francois Brisebois, including the proof and evidence given by all the witnesses heard in said inquiry before the Commissioner, Mr. J. A. Beaulieu, Montreal, and the decision arrived at by the said commissioner.



ST. DAMASE, QUE., POST OFFICE

Mr. FAFARD:: For a copy of all reports, correspondence and other documents, for the years 1930-1931-1932, in connection with the post office at St. Damase, county of L'lslet, Quebec.



ST. ROCH-DES-AULNAIES POSTMASTER

Joseph-Fernand Fafard: For a copy of all reports, correspondence and documents, relating to the dismissal of the postmaster at St. Roeh-des-Aulnaies, county of L'lslet, Quebec.



HARRY T. WRIGHT

Mr. HEPBURN:: For a copy of all correspondence, including letters, telegrams, memoranda, reports and other documents exchanged between any person or persons and the government of Canada; or any minister, department or individual including the Prime Minister, Right Hon. Senator Meighen, J. M. White, M.P., A. M. Jarvis of London, and Inspector Reynolds, or any other official of any government department, relating to the entry, deportation and reentry of Harry T. Wright, an alien citizen.



J. A. LARRIVEE

Mr. FOURNIER:: For a copy of all reports, correspondence and other documents in connection with the dismissal of J. A. Larrivee, as postmaster at White Deer, county of Hull, and the appointment of his successor.



OSWALD PINARD

Mr. DUBOIS:: For a copy of all correspondence, telegrams, letters, sworn statements and other documents, including all evidence taken, and the report of the commissioner who held the inquiry in connection with	the	dismissal	of	Mr.	Oswald
Pinard, as lighthouse keeper at Nicolet, county of Nicolet.



ALFRED VIGNEAULT

Lucien Dubois: For a copy of all correspondence, telegrams, letters, sworn statements- and other documents, including all evidence taken, and the report of the commissioner who held the inquiry in connection with	the	dismissal	of	Mr.	AlfredVigneault, as	mail	conductor	at	St.	Raphael
d'Aston, county of Nicolet.



J. B. R. MANSEAU

Lucien Dubois: For a copy of all correspondence, telegrams, letters, sworn statements and other documents, including all evidence, and the report of the commissioner who held the inquiry in connection with the dismissal of Mr. J. B. R. Manseau lighthouse keeper, at Nicolet, county of Nicolet.

Motions for Papers



J. H. COUTURE

Mr. BOULANGER:: For a copy of the complete file in connection with the dismissal of J. H. Couture as postmaster at Frampton, county of Dorchester, and the appointment of his successor.



ISIDORE JEAN

Mr. POULIOT:: For a copy of all correspondence exchanged between Mr. Isidore Jean, of Sully, Quebec, and the Department of Pensions and National Health in connection with the position of postmaster at Sully, Quebec.



SUI.LY, QUEBEC POSTMASTERSHIP

Jean-François Pouliot: For a copy of all correspondence, telegrams, inquiry and reports in connection with the dismissal of the postmaster at Sully, Quebec, and the appointment of the present postmaster.



ST. ADOLPHE DE CHAMPLAIN, QUEBEC POSTMASTERSHIP

Charles Marcil: For a copy of the report of the commissioner who held the inquiry in connection with the charges of political partisanship against J. R. Trudelle, postmaster at St. Adolphe de Champlain, Quebec, and all other documents and correspondence relating to said charges.



WEST JEDDORE, HALIFAX COUNTY, BREAKWATER

Mr. VALLANCE (for Mr. Ilsley):: For a return showing the pay sheets and vouchers in connection with moneys spent during and since the year 1931 for the building of a breakwater at West Jeddore, Halifax county, Nova Scotia, showing the total cost, the amount spent for logs, timber and planking, the names of all men employed and in what capacity. the rate of pay of each man, and payments additional to wages, if any.



EXPENDITURES OF HARBOUR COMMISSIONS

James Layton Ralston: For a copy of all correspondence passing between the Department of Marine or any other department or any member of the government or any minister, deputy minister or any official of any department of government, and each of the following harbour commissions since January 1, 1931, dealing with or concerning expenditures made previous to authority therefor, by order in council or for obligations incurred by such harbour commissions previous to such authority, namely: (a) Quebec; (b) St. John; (c) Montreal; (d) Sorel; (e) Halifax.



LUMBER AND AUTOMOBILE IMPORTS

Mr. CHARTERS (for Mr. McGibbon):: For a return showing:	(1) the amount of
lumber; (a) hardwood; (b) softwood, imported into Canada during the past year by the manufacturers of motor cars and trucks; (2) the number of motor car or truck bodies or frames, either wholly or partly made of wood, imported into Canada during the past year, showing the rate of duty, the amount collected, the kind of wood and the prices f.o.b. at the mills.


Mr. RYCKMAN:: In the absence of the member, I would ask that this stand.
Motion stands.



UNEMPLOYMENT RELIEF

Mr. STEWART (Edmonton) (for Mr. Lapointe):: For a copy of all orders and regulations of the governor in council made under the act, chapter 58 of the statutes of Canada, 1931, for relieving distress and providing employment.


George Gordon: The same observations I have made with respect to similar motions apply to this one. These orders in council will all be included in the papers which will be tabled.


Mr. MACKENZIE KING:: Stands.
Motion stands.


Charles Marcil: For a copy of all correspondence, telegrams, letters and all other documents, exchanged between the Minister of Labour, all members of the cabinet or officials or any federal department and the city of Hull or other persons in connection with the work to relieve unemployment and the help granted to unemployed, from September, 1930, to February 1, 1932.


George Gordon: Stands.
Motion stands.



MOTIONS FOR PAPERS


James Layton Ralston: For a return showing the pay sheets of men employed on the breakwater on the south side of Cape Sable island, in connection with the expenditure of moneys during the last six months under the Unemployment Relief Act of last session.


Mr. STEWART (Leeds):: Mr. Speaker, this and the two succeeding motions are to stand, pending the bringing down of the return under the act.


Pierre Édouard Blondin: This motion and the two succeeding motions will stand.
Motion stands.



UNEMPLOYMENT RELIEF-ST. HYACINTHE

Mr. FONTAINE moved:: For a copy of all correspondence, telegrams, letters and all other documents, exchanged between the Minister of Labour, all members of the cabinet or officials of any federal depart-
Motions for Papers

ment and the city of St. Hyacinthe or other persons, in connection with the work to relieve unemployment and the help granted to unemployed, and especially as regards the construction of a tunnel under the Canadian National railways, at St. Hyacinthe, since January 1, 1931.


George Gordon: I would ask that this motion stand also.
Mr. SPEAKER.:	This notice will stand
pending the bringing down of the return.
Motion stands.



BARACHOIS, N.B., WHARF

[Stage Direction]
Mr. VENIOT (moved:
For a copy of the pay sheets in connection with construction of a wharf at Barachois, Aboujagan river, county of Westmorland, New Brunswick, and a return showing:	(a) the
names of the men employed, and their respective wages since the work was undertaken to date; (b) the quantity of stone and lumber purchased, from whom purchased and the prices paid for such material; (c) the amount expended to date; (d) to whom cheques were sent in payment of wages and material; (e) whether or not the expenditure was made under the Unemployment Relief Act; (f) whether or not the work was done under contract or by days' work.
George Gordon: This motion, and the one following, stand in the same position as the others to which I have made reference, and I think it is desirable that they stand until the report comes down. If the report does not contain all the information required it can be supplemented later on.	.


Mr. VENIOT:: The information is contained in the pay sheets, so I do not see the reason for the delay.


Pierre Édouard Blondin: Is the hon. member willing to let it stand or shall I put the motion?


Peter John Veniot: Let it stand.
Motion stands.



IMPORTATION OF OIL

Mr. YOUNG moved:: For a copy of all correspondence exchanged between any or all of the Canadian oil refining companies and any department of the government, since May 1, 1930, in regard to the importation of oil or oil products.


Edgar Nelson Rhodes: Mr. Speaker, this motion came to my notice for the first time just a moment ago. I have very grave doubts, upon reading it, as to whether it is one which ought properly to pass, and as to whether the information is not such that my hon. friend is

precluded from securing it in full. But rather than do him any injustice by a hasty judgment I would ask him to be good enough to let the motion stand, so that in the meantime I may have an opportunity to inquire more fully into the matter.
Motion stands.



FEDERAL TAXATION


Mr. W. T. LUCAS (Camrose) moved:: Whereas, it is becoming increasingly apparent that the present methods and extent of federal taxation are inadequate to meet our requirement, and
Whereas, an extension of the principle of commodity taxation has been suggested as a means of meeting the situation, and
Whereas, the drastic fall in price levels and the consequent increase in the purchasing value of money has seriously affected the producer and the business man, while being of corresponding benefit to those whose incomes, derived from certain classes of bonds, mortgages, etc., are still undiminished, if not increased.
Therefore be it resolved,-That, in the opinion of this house, the government should take into consideration, in order to equalize the weight of taxation and that an additional burden be not placed upon the shoulders of those who are already the chief sufferers from present conditions, that any increase in taxation found necessary should take the form of adjustments in the Income Tax Act, in order that those best able to pay should be the first and most heavily affected.
He said: Mr. Speaker, the resolution which I am presenting this afternoon is worded in such a manner as to practically speak for itself. I think it will be agreed that owing to the drastic fall in commodity prices and the general depression which exists, the question of taxation assumes an added importance at the present time. May I say at the beginning that I fully appreciate the difficulties with which the government is confronted in times like this. I believe that the right hon. the Prime Minister and the members of his cabinet are sparing neither time nor energy m endeavouring to meet the situation and to make conditions better in Canada. They are faced with a very difficult task and my hope is that the resolution which I am sponsoring this afternoon may assist in pointing the way to a better method of securing the moneys required from the people for the carrying on of the business of government in a manner that will 'be fair and equitable to all.
There is a very old saying that the only two things man is sure of in this life are death

Federal Taxation-Mr. Lucas
and taxation. I believe that the average man avoids meeting both as long as possible. The question of taxation is an old one. It was fought out by the British people many centuries ago when the principle was established that there should be no taxation without representation. Under our democratic form-of government the theory is that if the people are well and truly represented laws will be made and a system of taxation devised that will be fair and equitable to all. If this were really true, then if adversity did come, how appropriate would be those lines which the Prime Minister (Mr. Bennett), when bringing down his budget last year, quoted from the chronicles of the Pilgrim Fathers:
It wonderfully encourageth men in their duties when they see the burthen equally borne.
If we are passing through a depression for which no individual is responsible, then all should bear their share according to their ability to carry the load. The income tax system in Canada was first introduced as a war measure and was known as the Income War Tax Act of 1917. In the fiscal year 1930-31 the amount derived from this source was $71,048,022. Of this amount of income tax collected, $26,624,181 was paid by 143,601 individuals, and S44,423,841 by 7,603 corporations. The receipts of last year's income tax have been exceeded only -once since its imposition, when in 1921-22 $78,600,000 was received. In that year individuals paid $39,820,000 and corporations $38,863,000. It is worthy of note that practically the same percentage of people contribute -to the income tax in Canada as do the taxpayers in the United States, namely, one and one-half per cent.
In the United States the income tax system was first introduced ahout the time of the Civil war and was later found to be unconstitutional; but so convinced were the people of that country that the system was
a fair and equitable means of raising revenue that they amended their constitution, a very difficult thing to do when we consider that they had to receive the consent of three-fifths of the state legislatures. This consent was received in 1913, and so successful has been tihe income tax in the United States that in the year 1925 nearly fifty-seven per cent of the total federal revenue came from income tax collections. In the same year in Great Britain over fifty per cent of the total revenue was derived from the income tax, and in Canada less then twenty per cent comes therefrom, so that the income tax in Canada, comparatively speaking, is not a burdensome tax. It might be further stated -that to-day Germany, France, Belgium, the Netherlands, Norway, Italy, Czechoslovakia, India, Japan, South Africa, Australia, the United States, Jamaica and other countries have adopted and retain the income tax -as a means of raising revenue.
We find that a number of the provinces have either adopted or are about to adopt the system of taxations on incomes. I believe I am right in stating that the province of Quebec at the last sitting of its legislature imposed a one per cent income tax upon corporations. One of the principal arguments against the raising of the income tax is that if the tax is increased, capital will be withdrawn from the country. I wonder if that is true? What about Great Britain? In the year ended April, 1931, the British people paid income tax, including surtax, amounting to $1,576,310,000; an enormous sum.
With the consent of the house I should like to place on record comparative figures which show the rate of income tax paid in Canada, the United States and Great Britain. These figures deal with a married person without dependents, and give the rate for Canada, the present rate in the United States, the proposed new rate in the United States and the rate prevailing in Great Britain. The figures are as follows:



COMPARATIVE STATEMENT OP INCOME TAXES PAYABLE IN CANADA, GREAT BRITAIN STATES-UNITED STATES PRESENT RATES AND PROPOSED NEW RATES

[Stage Direction]
Income
Canada
Present Rate U.S.A.
3,000	Nil	Nil5,000	$ 32	$ 16 8810,000	232	101 2515,000	632	311 2530,000	2,880	1,488 7550,000	6.704	4,563 75100.000	19.064	15,743 75200,000	51,496.	40,743 75300,000	87,048	65,743 75500,000	162,952	115,743 751,000,000	362,928	240,743 75
Proposed New Rate U.S.A.
$	7 50
37 50 165 00 515 00 2,275 00 6,095 00
22.575	00
65.575	00
109.575	00
199.575	00
429.575	00

[Stage Direction]
Britain $	242 33
649 69 1,764 16 3,281 95
18,891 78 45,777 07
292,882 07
Federal Taxation-Mr. Lucas
[Stage Direction]
These figures show that in Canada a man receiving up to $3,000 per year is exempt from taxation. The present rate in the United States allows a like exemption, but under the new rate, this man will have to pay $7.50, while in Great Britain a man receiving a similar income has to pay S242.33. A man receiving 810.000 per year pays in Canada, $232; in the United States, under the proposed rate, $165, and in Great Britain, $1,764. On a $50,000 income the tax in Canada is S6,704, the proposed new rate in the United States will be $6,095, while in Great Britain the tax amounts to $18,891. One can readily see that Canada as compared with Great Britain certainly is not overtaxed
on income. The present rate of taxation in the United States runs from one and one-half to five per cent, with a surtax running up to twenty per cent. The proposed new rate runs from two to six per cent, with a surtax running up to forty per cent. It will be readily seen that the income tax in Great Britain is much higher than the tax in Canada, and yet will anyone say that there has been a flight of capital from Great Britain on that account? Are Canadians less patriotic? The proposed new rate in the United States will be higher than ours, especially on the larger incomes.
The United States has a tax of twelve pel cent on corporations, while ours is only ten per cent, and we have no tax on dividends received from foreign investments. This should be rectified, for it will not prevent foreign capital coming here because the home country makes -an allowance if the dividends have already been taxed. In this respect I understand mcst countries pursue a different policy from that of Canada.
There is another source of revenue to which I should like to call the attention of the Minister of Finance (Mr. Rhodes). In doing
a tvt1 should like t0 read a short article by A N. Wolverton, of Vancouver, past president of the Vancouver stock exchange. This article reads, m part, as follows:
r,™ dominion of Canada and most of the provinces are assiduously searching for additional sources 0f tax revenue Every imagin.
and vif fl"el appear? to have been investigated,
to balance budget.11184618	* 'heir wits' end
But the most obvious source for such additional taxes is overlooked and has beeu overlooked for so many years that it leads to the suggestion that there must be some influence fimehght10Unt lmportallce keeping it out of the
Like most other modern countries, there are now hundreds of millions of dollars' worth of
[Mr. Lucas.}
bonds held by Canadians. A very large proportion of such holdings are in the form of bearer securities.
Unlike most modern countries, however, bond coupons in Canada are not taxed at the source.
In the United States or England, no corporation nor individual can walk into a bank and cash a block of coupons at maturity unless a satisfactory income tax exemption form is attached. That tax exemption certificate is to all intents and purposes an affidavit-and if it is not forthcoming, the tax is collected then and there by the bank or financial house cashing the coupons-and there is no question about it.
In Canada, however, there is comparatively little check made of income tax from bearer bonds. The holders of countless millions of bond coupons walk into any bank and receive one hundred per cent of the face value of their coupons without question, and without any proof that either dominion or provincial income tax has been satisfied.
No suggestion is made that citizens of the Dominion of Canada are either more or less honest than the citizens of any other modern nation. Perhaps those millions of coupons are declared in personal or corporation income tax returns, but no other country in the world appears to be so confident in its citizens' honesty -and it is a practical surety that at least some of them "forget to declare" a substantial percentage of those maturing coupons.
If this matter is not already being dealt with by the minister, this article should disclose a source of revenue which has heretofore been neglected. The third clause of the resolution reads as follows:
Whereas the drastic fall in price levels and the consequent increase in the purchasing value of money has seriously affected the producer and the business man, while being of corresponding benefit to those whose incomes, derived from certain classes of bonds, mortgages, etc., are still undiminished, if not increased.
That is a statement which cannot be denied. Commodity prices have fallen so sharply as materially to increase private debts, lake the case of the farmer. He contracted private debts when wheat was over $1 per bushel and now is attempting to pay them off with thirty and forty cent wheat. One can see quite readily the position he is in-it simply cannot be done. The farmer cannot meet any increase in commodity taxation, whereas the man on income finds that his purchasing power has been increased and consequently he is in a better position than before. The hon. member for Toronto Northwest (Mr. MacNicol) stated in a recent debate that since 1790 this continent has had twenty-five periods of prosperity and we are now in the twenty-fourth period of depression. I believe that each succeeding depression is becoming more severe, and the wealth of the nation is being concentrated in the hands of

Federal Taxation-Mr. Lucas
fewer people. In support of this statement 1 should like to read a short excerpt from the Golden Age, as follows:
As Men and Monkeys View It Perhaps the following figures from reports of the United States treasurer and bureau of statistics may shed some light on at least one fruitful cause of our present business depression.
In 1920 incomes of $1,000,000 or more totalled $77,078,139. In 1929 they totalled $1,185,135,330. In 1920 incomes of $5,000 or less totalled $15,274,217,215. In 1929 they totalled $8,282,000.000.
Thus in the last ten years the many skilled workers, small business men and the professional classes, those who usually spend about all their income, keeping the money moving in the channels of trade, have had their incomes cut almost in two, while the super-rich, who were already receiving vastly more than they put back into the channels of trade, now have fifteen times as much income as they had ten years ago, and are obliged to hunt "foreign markets" to loan their "surplus" because the dear people at home have no more gilt-edged security to put up for it.
Our wise statesmen and expert financiers seem somewhat addled, according to all their conflicting pronouncements, regarding the cause of and cure for our distressed condition. Among the numerous causes they assign they would have us believe it is because our granaries and banks are bulging with a "surplus" of commodities and money. Yet we see millions of our people suffering from want.
We believe there would be no suffering from hunger among a tribe of monkeys because nature had produced more coconuts than the monkeys could consume. But had they been endowed with as much intelligence as our efficiency experts and had nature also made all the leaves on the trees dollar bills, most of the poor monkeys would have to go hungry to bed because of an overproduction of food and an inflation of the currency.
' There is a great deal of truth in that article. The farmer has been suffering for a long time, but as the depression continues, other classes are now being affected. It is like a creeping paralysis and I believe 'at the 'present time the great majority of the skilled workers, small business men and professional classes who usually spend most of their income, thus keeping the money moving in the channels of trade, find themselves to-day in a losing game. They are finding that the dice are loaded against them. If the system under which we are living -permits of the control and manipulation of money by a few people for their special benefit, then a system of taxation should be devised to collect from them their proper share of the taxes, so that the burden may be borne equally by all. The average citizen to-day is carrying upon his shoulders a load which is hard to bear and to add to it is going to be most discouraging. The cost of living has fallen and salaries are being cut
to meet that drop, but interest charges remain sacred. Is there any valid reason why the citizen who works should be penalized while the citizen with an income over and above a decent standard of living should be left to enjoy a premium? At this point I wish to place on record a resolution which was passed by the United Farmers of Alberta at their last annual convention:
Whereas, in the raising of the revenue of Canada the basic principle should be taxation according to the ability to pay, and
Whereas, the income tax is the only tax which is based upon this principle;
Therefore be it resolved, that we protest against reduction in the income tax on large incomes, while at the same time increasing taxes of the people;
Further be it resolved, that we stand for the increase and extension of the income tax so as to provide a much larger proportion of the revenue of Canada.
I am well aware that there may be in the house members who say that the farmers are glad to pass resolutions of this kind and who follow that up by saying that this is because the farmer evades paying income tax. I believe farmers as a class are no more honest or dishonest than any other class of people in Canada, and if they are not paying income tax to-day it is for the very obvious reason that they have no income on which to pay. It does not 9peak very well for the system under which we are living that those who are engaged in the 'basic industry of the country and who are producing the primary wealth, find themselves in such a position.
If I might quote the figures of the reduction in the value of the field crops of Canada in the last three years, bon. members will have some idea how the farmer has had his purchasing power reduced. The figures are as follows:
Estimated value of field crops
Year	of Canada
1931	 $431,251,000
1930	 631,592,900
1929	 948.981.400
With the tremendous drop in the prices of all basic commodities, the purchasing power of the dollar is greater to-day than it has been for a long time.
The Prime Minister, speaking on Friday last on the proposed reduction of the salaries of the civil service, placed on record figures from the Department of Labour, showing that as compared with 1926 the average cost of living had dropped 14-4 per cent and that salaries were being cut by ten per cent. The inference to be drawn from those figures is of course that the individual, even with the ten per cent cut, is better off than he wae in 1926.
Federal Taxation-Mr. Lucas
[Stage Direction]
I am endeavouring here to score an important point and I trust hon. members will appreciate its significance. If the figures presented by the right hon. gentleman are correct and the cost of living has fallen by 14-4 per cent, this means that the purchasing power of the dollar has increased by the same amount. Then, may I ask: If all the citizens of Canada are to be treated alike, why should those fortunate enough to be drawing incomes from investment not also contribute a like ten per cent? Surely the citizen who is fortunate enough to be drawing an income from investment is no less patriotic than the man who is living on a salary. I would make this exception: I would adhere to our present exemptions, thus the aged and the poor widow, for whom so much concern is shown whenever this matter is discussed, would not be denied a decent standard of living. I trust we are not going to adopt in peace time the same policy that we do in war and say: You may conscript my own flesh and blood; you may sacrifice those who are near and dear, but keep your hands off my almighty dollar. I believe the time is coming shortly, if indeed it is not already here, when the great masses of the people will no longer submit to this doctrine, especially since they are getting wise to the way in which a great deal of wealth is being accumulated, namely, through such deals as Beauharnois and other similar methods of high finance. While most classes are suffering, the man with the high income finds himself in ia preferred position. Take the man with an income to-day of $10,000: in Canada he pays an income tax of $232 while in Great Britain he contributes $1,764.
Mr. ARTHURS:: And in the United States?


William Thomas Lucas: Under the proposed new tax he will contribute $165.


James Arthurs: But the present tax?


William Thomas Lucas: $101. The proposed new tax shows a considerable increase. If the man with an income of $10,000 were being dealt with in the same manner as the man on salary who is receiving a cut of ten per cent, this would mean that the man with an income of $10,000 would pay another $1,000 which would make $1,232 as compared with $1,764 in Great Britain. An income of $50,000 pays in Canada $6,704 and in Britain $18,891. An income of $100,000 pays in Canada $19,064, and in Britain pays $45,777. Another ten per cent on the Canadian income would bring the Canadian's tax up to a little over $29,000, or roughly speaking, $30,000, which would leave him $70,000 upon which to exist. This might be a little difficult, but he would at least not have to worry.


James Arthurs: If the hon. gentleman
wants to make his argument absolutely fair, he should include the income rates in the United States at all stages.


William Thomas Lucas: Our income tax in Canada
has not in the past been based upon the United States income tax; we have had a much higher rate, but the proposed new rate in the United States will be higher than our present rate when we reach the higher incomes. If we take a few thousands more from the man with the higher income, the worst that can happen is that we may hurt his feelings, possibly very badly. But when you propose to take from the lower classes an amount which brings their earnings below what we consider to be a necessary standard of living, it means real hardship; it means real sacrifice; it means under-nourishment for growing children, future Canadians; it means lack of proper medical attention; which in turn means Canadian children facing life under handicaps which may perhaps ultimately never be overcome. To me it is unthinkable, Mr. Speaker, that in this so-called enlightened age we would for a moment consider sacrificing human lives and human happiness to the god of gold.
I should like to call the attention of hon. members to the change in the trend of opinion which has taken place in the last fifty years with regard to taxation. Take, for instance, succession duties, or the inheritance tax. Less than fifty years ago it was considered that	a man's savings	during	hislifetime were	his alone to-	pass	or to	hisheirs just as	he saw fit.	We	know whata change of	opinion has	taken place	in
that regard, and that at the present time every person's estate is subjected to a very steeply graduated inheritance tax. To-day public opinion is growing in favour of a steeply graduated income tax, and I think that field should be further explored at the present time with a view to meeting the further taxation that may be required. I believe the time is coming in Canada when our income tax must be so adjusted that those enjoying higher incomes will have to assume their rightful share of the burden of taxation. For these reasons, Mr. Speaker, I trust that the house may see fit to adopt my resolution.


Mr. ALFRED SPEARMAN (Red Deer):: Mr. Speaker, we in this corner of the house have frequently been accused of bringing forward and presenting for the consideration of the house resolutions and suggestions which have been said to be wholly academic in character, vague in their application, and hav-

Federal Taxation-Mr. Speakman
ing no immediate relation to the everyday problems of the present time. As to whether this accusation is wholly justified, that is another story, but one which I do not propose to discuss at the moment save to say this, that there is a remote possibility that some of these so-called academic resolutions which suggest more or less fundamental changes in our social and economic systems may in point of fact be just as practical and possibly of very much greater value to the future of this country than many of the so-called practical suggestions, the absence of which is so greatly deplored by our critics. However that may be, no such criticism can be offered in respect of the present resolution, dealing as it does with a matter which is of immediate import and of immediate effect upon the wellbeing of every individual citizen of this country, as well as upon the financial necessities of the state, and which from every point of view is at once highly opportune and eminently practical.
Nor is this proposal advanced, Mr. Speaker, with any purpose of embarrassing the administration. On the contrary, it should be welcomed by the Minister of Finance (Mr. Rhodes) and by his associates in that it affords an opportunity to the members of this house of pronouncing upon this important question, and if supported by the majority of the members here the resolution will greatly strengthen the hands of the government in dealing with a matter which in the very nature of things is bound to be highly unpopular in many influential quarters.
The hon. member for Camrose (Mr. Lucas) in introducing this resolution has presented the case with such clarity and has supported his contention with such a wealth of irrefutable logic that little remains to be said by myself in seconding the resolution or by others who may speak in its support save to reiterate, to amplify and stress the arguments which have already been advanced in my hon. friend's most excellent and convincing address, and to anticipate so far as possible some of the objections which may be raised by those who are opposed to this method of taxation.
As to the necessity of increased taxation at the present time, little need be said. We are all familiar with the position of the national exchequer to-day, and if further argument were required it may be found by a glance at the estimates which are now before the house, estimates in which in a noble effort to balance the budget we find that most of the services have been cut most drastically, that staffs in many of the departments have been materially reduced, and that throughout the service the
salaries have been slashed to a point which in some cases will fail to come up to the level of a satisfactory or even a decent livelihood. We find that there is a net reduction in the proposed expenditure appearing in the estimates for the coming year of some 843,000,000. Indeed, the actual reduction is more than that figure would indicate, because we also find that there is an increase of some $13,000,000 of interest on the public debt to be paid during the coming year. So the net reduction in controllable expenditure will be in the neighbourhood of $56,000,000. I am not at the moment going to discuss the wisdom or otherwise of this policy. I am not at the moment going to analyze the situation and consider whether the ultimate effect of these drastic cuts will be to relieve or to intensify the difficulties of the situation, but for the moment looking at it wholly from the point of view of the administration and the Prime Minister, the necessity of balancing the budget at all costs, we must realize that even these sacrifices in themselves will not achieve the objective and bring about a balanced budget without some increase in our national revenues, which means increased taxation. This fact I think is generally recognized throughout the country, and the question being asked at the present time on all sides and in many quarters with anxiety and deep concern is as to what method of taxation may be adopted and upon whose shoulders will the added burden fall. Indications have already appeared in the press suggesting the methods which may be adopted, suggesting increases in our present fields of taxation as well as new fields which may be explored. Those indications have been taken so seriously in many quarters as to form the basis of many comments, adverse and otherwise, and to have aroused much discussion both public and private, as well as inspiring many resolutions by various organized bodies of business men. Of these resolutions it would be premature for me to speak at this moment, until we know more definitely the intentions of the government. May I, however, make this comment? All of the resolutions which I have seen and all of the discussion which I have heard are based upon the anticipation that these increases will take the form of increased commodity taxation of one sort or another, either by way of an increased sales tax, a turnover tax or what not; but whatever method is adopted, it seems to be universally expected that the increase will follow that principle of commodity taxation. I most fervently hope, Mr. Speaker, that such will not be the case.

Federal Taxation-Mr. Speakman
It is not my intention at the moment to enter upon any general discussion either of conditions or of taxation, but may I comment upon one phase of both which is a factor, and a most potent factor, to be considered at the present time and in the present situation. I think it is generally recognized that in this country is sufficient wealth to enable us to meet all our obligations, to meet every demand made upon us, and to provide an acceptable livelihood for all our people. It is also, I think, generally recognized that this wealth is not equitably distributed amongst all classes of our population. That some greater equality of distribution should be brought about is a consummation devoutly to be desired. The method by which it may be accomplished is a problem which is as yet unsolved and towards the solution of which, so far as I know, no full and comprehensive plan has yet been offered. It has been stated by the Minister of Trade and Commerce (Mr. Stevens) that all of us are anxious that this should be done. It has also been stated, and by the same hon. gentleman, that so far no plan has been offered and that this desirable consummation remains but a pious aspiration. I am not challenging that statement, nor am I attempting to suggest to this house any such full or comprehensive plan.
But in admitting that this problem does exist, in admitting that this inequality of wealth is present in our land, we are also admitting a certain definite responsibility, in that so far as we have power within our hands to control the situation we should use that power to rectify rather than enhance it. At the moment and without discussing more deep-seated, more fundamental changes of any kind, the most potent weapon we have in our hands for this purpose is the power of taxation, and in the resolution we are proposing that this weapon should be used, and should be used effectively. As stated in the [DOT]esolution itself, while the great body of producers in Canada have suffered, and are suffering, tremendous losses through the tragically low prices of all our primary products, a small but disproportionately wealthy class of our citizens-who were in a position to invest in the recent issues of national and provincial bonds, for example-are actually profiting from the situation. Amidst the crash of falling values there is one commodity which has not only retained but actually increased in its market value-the commodity of money. Those who own and control that commodity are undoubtedly enriched both by the higher interest rates which are now prevailing-higher than I have ever known in 
respect of dominion or provincial bonds during my residence in this country-and by the increased purchasing power of each dollar. This being the case,-and I think no one here will challenge the accuracy of the statement-equity and sound policy alike would indicate that any increased taxation should be levied, not upon the goods already produced below cost, but upon the money itself-upon the one commodity which shows a constantly increasing profit.
Revenue from taxation, whether direct or indirect, must in the end be paid out of income, and the soundest and most economical way to collect that tax upon income is to collect it directly. Unquestionably, Mr. Speaker, the inevitable effect of present price levels, with the value of money and commodities so completely out of line-the money value of commodities so extremely low, and the commodity value of money so excessively high-must be to make the rich richer, and the poor poorer. The main corrective that we have for this situation is, as I stated, our control over taxation, the power and authority which lies in this house to take for the use of the national exchequer a fair proportion of all incomes, particularly of the larger ones. The argument which is most frequently advanced by those who are opposed to any increase of taxation upon the larger incomes is that it is to these incomes you must look for investment, for the expansion of existing industry and for the creation and establishment of new industry. While this is partially true, it is also true that it is to the multitude of those earning small incomes we must look rather than to the comparatively few wealthy individuals when we seek a- market for the products of our farms and our factories. Unquestionably a million dollars divided among ten thousand individuals is of infinitely greater value to the agricultural, industrial and commercial life of this countiy than the same sum in the hands of a dozen wealthy men, because the smaller the income-and this is a truism, but it is so frequently forgotten apparently that it is well to reiterate it at times-the greater proportion of that income that must be spent upon the so-called necessities of life; in other words, upon the goods which are produced in this and in other countries. As a result, the greater the number amongst whom purchasing power is distributed the greater must be demand for those goods. For after all, as a consumer, the consuming capacity of the wealthiest man is extremely limited, and he can only spend a comparatively trivial percentage of his wealth on those goods which

Federal Taxation-Mr. Speakman
are produced. Any reduction therefore in these smaller incomes must lead to a general curtailment of consumption throughout the country, it must lower the standard of living for thousands of our families, and it must mean a corresponding diminution in the already inadequate markets which are available to our producers.
It is on these grounds, Mr. Speaker, that we are urging the adoption of this resolution, as well as upon the ground of immediate expediency. For after all there are still two main pillars upon which every sound system of taxation should rest, that each individual shall contribute to the state in proportion, first, to his ability to pay, and, second, to the benefits which he derives from living and doing business in the country. Both of these may be expressed in terms of income. May I venture, then, to suggest to the Minister of Finance that just as they say, gold is where you find it, so the place to look for money is where money is. At the present time it is not in the hands of the producer, the wage earner or the low-salaried man, but of those whose incomes are derived from the possession of money itself. These by means of certain adjustments of the Income Tax Act may be made to contribute a much larger proportion to our federal revenues than is at present the case.
It is true that in suggesting the most obvious and the most logical source for increasing our national revenue will be found amongst those who possess the largest part of the wealth of this country we are suggesting a very radical departure from prevailing practice. It is not too much to say that the opposite has been the definite policy of this and of most other countries. An extremely vivid illustration of this practice will be found in the juxtaposition of two incidents which took place in this house on Friday last. Two bills were then introduced, the first providing for something over 811,000,000 for the Canadian National Railways, necessitated in large part for the protection of the bondholders of the railway in respect of interest due. The second bill was that which provided for a ten per cent cut in 'the salaries of our civil servants. These two motions taken together, Mr. Speaker, were to me most significant. The interest upon capital is sacred, it must ibe protected; the wages and salaries of our working people must be sacrificed upon the altar of financial necessity and to provide a balanced budget. Yet why ghould this be? It is true, as has 'been stated more than once, that the interests of our
bondholders are protected by statute and by our given word. So, too, were the salaries of our civil servants. Were those two motions symbolic of the relative status we accord those two great partners in our national development, in all our national undertakings, capital and labour? I trust not, and if not, if it is our policy to accord to both an equality of status, of dignity and of respect, the income tax affords us our opportunity.
May I suggest also, Mr. Speaker, that we should have some consideration for our more wealthy citizens. We should not refuse to them the glorious opportunities which have been accorded our civil employees. As I heard the Prime Minister and listened to that splendid eloquence with which he illustrated and illumined the really noble sentiments which he uttered, as he spoke of the patriotic motives which actuated at least part of our civil service in accepting the reduction, not reluctantly or grudgingly but gladly and joyfully, taking a deep and keen pleasure in this opportunity of being of service to their country in her hour of need, I thought to myself: Why should we selfishly restrict this pleasure to a limited class? Why not afford that same opportunity and grant that same privilege to the relatively wealthy men and women who are in Canada to-day? In this, as in other matters, our motto should be equal rights to all and special privileges to none.
I have indicated, Mr. Speaker, that in spite of all the foregoing facts, and in spite of the glowing words of the Prime Minister, this suggestion might prove unpopular in some quarters, and it has been stated, as indicated also by the hon. member for Camrose (Mr. Lucas) in his address, that the chief exponents of an increased income tax are those who, like the organized farmers, do not come under this form of taxation. That the average farmer does not pay income tax unfortunately is true, but that does not militate against tihe soundness of the proposal. If you consider for a moment, Mr. Speaker, the situation in which agriculture finds itself, with the price levels of all the commodities produced so low, you will readily appreciate the fact that it is the misfortune of the farmer and not his fault that he does not pay income tax. Nothing would please the average farmer more-not to be taxed; I am not going to say anyone likes to be taxed1-than to operate upon such a basis as would bring him within the terms of our Income Tax Act, and may I further add that the great percentage of our federal revenues always have been obtained through one form or another of

Federal Taxation-Mr. Campbell
commodity taxation, and of this the farmer always has paid and probably always will pay his full share. Indeed, it is this very fact that the average farmer does not and cannot pay any form of income tax, that bis income and profits alike have been reduced far below the vanishing point, which affords the most potent and cogent argument in favour of this resolution.


Richard Bedford Bennett: Would the hon. gentleman permit me to ask a question? He spoke of two measures introduced in this house on Friday. One was to provide for the payment of debts that bad been incurred. Do I understand him to contend that this country should repudiate its obligations?


Alfred Speakman: No, Mr. Speaker, I made no such suggestion. I simply called attention to the juxtaposition of those two motions showing the degree of protection afforded to one class, as against the degree afforded to another class of people in this country.


Richard Bedford Bennett: But that is not the point. One is an obligation outstanding which must be met or else the credit of this country will go [DOT] and we will become rapudiators. That is all.


Mr. M. N. CAMPBELL (Mackenzie):: Mr. Speaker, the case for the resolution has been so ably presented by the two hon. gentlemen who preceded me that there is very little left for me to say. However, I wish to direct the attention of this house to the fact that the income tax rate in Canada to-day is very much lower than the rate in effect during the years 1921 and 1922, when we had the last depression. I believe our income tax rates could be increased substantially and still be lower than the rates which were in force at that time.
During the lifetime of the preceding government substantial reductions were made from time to time in the income tax, and each of those reductions was opposed from this corner of the house. I believe in every instance we moved an amendment to the budget expressing our disapproval of that l*licy. To-day this country finds itself in a financial position more serious than we have ever faced before, and if there was justification for this exceptionally high rate in 1921 surely there is double reason for it now.
I should like to place on record a few of the figures in order to show the extent to which these reductions in the income tax have been made since 1921. I may say that

these figures refer to a married man without children. The incomes, with the amounts contributed under the income tax in 1921 and 1930, are as follows:
Income	1921	1930$ 3,000	$ 40 00	$ 	3,500	60 00	84,000	80 00	165,000	126 00	326,000	178 50	567,000	283 50	888,000	388 50	1289,000	504 00	17610,000	619 50	23220,000	2,089 50	1,23230.000	4,084 50	2.88040,000	6,604 50	4,71250,000	9,649 50	6.70460,000	13,219 50	8,85670.000	17,314 50	11.16880,000	21,934 50	13 640100,000	32,749 50	19,064150,000	64,249 50	34,544300,000	169,249 50	87,048400,000	243,799 50	124,200500,000	318,349 50	162,952
I understand that this is the highest income in Canada to-day, so I need go no further. The previous income tax was put into effect by the present party occupying the treasury benches. They left office in 1921 with the income tax as it was then, and surely if the financial condition in 1921 justified the maintenance of a tax of that kind there is double necessity for it to-day. I therefore appeal to the same party who first placed this income tax legislation on the statue books to make a substantial increase in the present figures and so assist the country in the worst financial crisis through which it has ever passed.


Miss AGNES MACPHAIL (Southeast Grey):: I just want to add one thought to
the very excellent presentation of this resolution, and that is that a great many people in Canada who have really large incomes have them because of special privileges that were granted to them or to their forbears by this parliament. As all of us know, the great incomes can pretty well be traced to the special privileged groups such as the financial and banking group, those who benefit from tariff protection and those who have legally been able to clear out with a large portion of Canada's natural resources. When one thinks of Ottawa one thinks of people immensely wealthy through lumber they got for next to nothing in the early days. That being true, that the great incomes have come almost wholly from special privileges granted to these groups by this house, it does seem to me only fair, it is nothing but justice, that they should pay back in income tax, and quite a saucy

Federal Taxation-Mr. Rhodes
income tax too, out of the income that special privilege has allowed them to accumulate. Every other point I can think of has been covered and I cannot see how this house can vote against the resolution with times as they are at the moment.


Mr. J. L. BROWN (Lisgar):: One point
that might be given consideration, a point that has not been recognized, is the importance of drawing a distinction between income derived from investments and income from salaries. I believe that distinction is drawn in the income tax legislation in the old country. When discussing this question in the past, urging further taxation of incomes derived from bonds and dividends, we have always heard of the hypothetical case of the poor widow who would be severely penalized by a tax on an income of three or four thousand dollars derived from investments. Some of us did not give much consideration to an argument of that kind and I do not think it is worthy of consideration. In my opinion a distinction should be drawn between income derived from investments, which is a permanent thing, and income derived from salary.
Let us take the case of the widow, which has been referred to in the past, whose husband has left her a large investment. She has that income going on from year to year-


Mr. GOTT:: She may not be living to-day.


John Livingstone Brown: That is a remark one might expect from that quarter of the house. Her husband, as I was saying, might have left her an income derived from a large investment, and she is in an entirely different position from the widow whose wage-earner died and left her without any income.


Richard Bedford Bennett: She pays no tax.


John Livingstone Brown: In both cases, while the
husbands were alive, the income might have been the same, derived in one case from an investment and in the other from a salary. I am not going to discuss the matter at any length; it has been very ably presented; but I do want to call the attention of the house to that point, that there should be a distinction between incomes derived from investments and those derived from salaries or made perhaps by conducting a certain business.


Mr. BOYES:: What about the sessional indemnity of members of the House of Commons? Does the hon. member refer to those as being exempt?
41761-JO


John Livingstone Brown: Just at the moment I do
not feel called upon to discuss that question. Now that it has been raised, however, I may observe that, as everyone knows, the sessional indemnity of $4,000 is not all income by any means. I think everyone knows that while we are taxed on $4,000 we are taxed on money that we have to spend in many ways.
I do not know why the hon. member should have raised the question at the moment.


Frank Boyes: You spoke of salaries.


John Livingstone Brown: Just at the moment I do
not care to discuss that question. We have accepted the reduction in the indemnity because we have realized that it is necessary, but I do not suppose that we, any more than anyone else, accept gladly or gratefully any reduction in income. But the question is entirely apart from the subject under discussion.


Edgar Nelson Rhodes: I could not help contrasting the attitude of those who have spoken on this resolution to-day with the attitude of the house when the proposals were first made in the year 1917.
I recall the situation at that time very well indeed. In fact, the then Minister of Finance, the Right Hon. Sir Thomas White, in bringing down his proposals, was at pains to point out that the provinces and municipalities were limited in their scope of direct taxation whereas the dominion field was unlimited and very much larger in its area than that afforded to either the provinces or the municipalities. He took the point of view at that time that the question of income tax was one purely for the provinces and municipalities. He said on that occasion:
As I have stated, the provinces and the municipalities are confined to direct taxation, and I have not regarded it as expedient, except in case of manifest public necessity, such as I believe exists at the present time, that the dominion should invade the field to which the provinces are solely confined for the raising of their revenue.
My more particular purpose in making reference to that question is this. Those who have spoken on this resolution-I regret that more have not done so-have apparently overlooked entirely the fact that the income taxpayer is called upon to pay not only by the dominion but by the municipal and provincial treasuries as well; and there is a disposition in both those fields to increase very heavily the burden of the income taxpayer. As a matter of fact, if my memory serves me rightly, in

Federal Taxation-Mr. Rhodes

one province alone it is contemplated during the present year to double the existing income tax.
One would rather gather from the remarks of hon. gentlemen who support the resolution that there has been a marked disparity between the income taxpayer and others who pay taxes in the country, very much to the advantage of the income taxpayer. Particular reference was made to the man who pays very large income tax. Whatever may be said with respect to the rates themselves, so far as their application to individuals is concerned, there is nothing whatsoever in that contention. Take the case of our own country last year. We had a total of 143,601 persons who paid income tax, the total amount paid by them being a little more than $26,500,000; 1 speak now of purely personal income tax. Of that number, some 13,447 paid no less a sum than $23,256,550; in other words, the number which I have just indicated paid that sum as against $3,367,631 paid by some 130,154 income tax payers in the lower categories.


Mr. MacINNIS:: How much had they left after they paid that large income tax?


Edgar Nelson Rhodes: My hon. friend will be
able to answer that question himself by an examination of the income tax tables, but the figures which I will give in a moment will afford an answer in part.
I regret I could not follow the hon. member for Camrose (Mr. Lucas). I heard him only indistinctly at this distance, whether it was because I am slightly deaf as a result of a cold or because of the acoustic properties of this chamber, I do not know. However, I heard him make one or two particular remarks, to which I will refer. If I have missed others, I hope he will understand why I am not referring to them as well.
The hon. gentleman referred to the income tax in Great Britain as compared to the tax in Canada. He must bear in mind that not only have we a dominion income tax, but we have in addition municipal and provincial income taxes. There is another very important point which should be kept in mind when making comparisons with the Canadian income tax, and that is that our tax must bear some reasonable relationship to the rates prevailing in the United States.


Mr. MACKENZIE (Vancouver Centre):: How many provinces in Canada have an income tax?


Edgar Nelson Rhodes: I cannot answer that question off hand.


Richard Bedford Bennett: Four, at the moment.


Edgar Nelson Rhodes: It does not require any
perfect argument to indicate the danger of our income tax in Canada being substantially out of line with the rate of taxation in the republic to the south. Capital is very sensitive and it will not remain long upon one side of an imaginary line if it can transfer to the other and be more lightly burdened. However, this is altogether apart from the merits of the question of whether we have or have not at the present time a sufficiently high income tax in Canada, and upon this point I will touch later on.
At the present time low as our income tax may be as compared to the tax in Great Britain or as compared to the rates prevailing in 1921, as pointed out by the hon. member for Mackenzie (Mr. Campbell), they are substantially higher than the taxes applied in the United States. I have the figures before me, but I will not weary the house by reading them in full; I will quote only a few examples. A married man without dependents with an income of $4,000 would pay in Canada an income tax of $16 as compared with $5.63 in the United States. An income of $8,000 would pay in Canada $128 as compared to $56.25 in the United States. An income of $14,000 would pay $536 in Canada and $258.75 in the United States. An income of $20,000 would pay $1,232 in Canada and $618.75 in the United States. A $30,000 income pays $2,880 in Canada and $1,488.75 in the United States.


Milton Neil Campbell: Are those the present United States figures?


Edgar Nelson Rhodes: Yes; I am not speaking of the proposed increased taxation.
In making a comparison between the rates of income tax in Canada and in the United States I would point out to the right hon. metnbeT for Mackenzie that he must not overlook the fact that federal, state and municipal bonds are tax exempt in the United States. This makes a vast difference in dealing with the question of income taxes, as this condition does not obtain in Canada.


Milton Neil Campbell: Those bonds command a higher rate on the market and for that reason there is a lower return to the purchaser.


Edgar Nelson Rhodes: I do not see how that has any bearing upon the question of income tax.


Milton Neil Campbell: It means that the bondholder receives a lower rate of interest on his -bond because it is tax free.


Edgar Nelson Rhodes: That depends entirely upon what the income of the man may be. He

Federal Taxation-Mr. Rhodes
might very well be able to afford to purchase tax free bonds returning one per cent if it reduced his income tax below a figure which would involve a high degree of taxation.
A man receiving an income of $50,000 pays $6,704 in Canada and $4,563.75 in the United States. An income of $100,000 pays $19,064 in Canada and $15,743.75 in the United States. We come now to the class of which most of us only read in the story books but which seems to give considerable worry to my hon. friends diagonally opposite. A man with an income of half a million dollars pays an income tax of $162,952 in Canada and $115,743.75 in the United States. The man who may have a million dollars of income pays $362,928 in Canada whereas in the United States he would pay a tax of $240,743.75.
Not to go at length into the merits, it might be interesting to know that even with a rate which is regarded by hon. gentlemen diagonally opposite as being too low, during the last fiscal year the income taxpayers of Canada paid twenty-three per cent of our total federal income. It is worthy of note that since the income tax first came into vogue fourteen years ago, the income taxpayers have paid into the treasury no less a sum than $743,000,000.


Charles A. Stewart: The average would be a little more than twenty-three per cent, having regard to the higher rates which have prevailed.


Edgar Nelson Rhodes: Having regard to the fact that the present rate is much lower as compared to the years preceding, the rate in former years would be substantially higher, although I have not the exact figures in that regard.
The hon. member for Camrose referred to some remarks made by the Prime Minister (Mr. Bennett) in the house last week, wherein he indicated that the cost of living had diminished to the extent of 14.4 per cent. My hon. friend said that that argument might be turned around and it might be said that money was now worth 14.4 per cent more in purchasing power. Very good. Then he said: Why should the income tax payer not pay an extra ten per cent, or in other words have his income cut to that extent in the same manner as civil servants were called upon to make a contribution of ten per cent? I would think perhaps in the circumstances the income tax payer would be very happy to accept that as a final settlement of the question. But the point I want to make in connection with that is that it is not at all in keeping with the resolution of my hon.
friend. His resolution, stripped of its verbiage and brought down to bare essentials, means this, that to the extent that we require additional taxation in this country we must take the whole of it from the income tax payer. That is rather a far-fetched proposition, it seems to me. Leaving aside altogether the question of the comparative rates as between ourselves and the United States, leaving aside the question of the merits as to just how high income taxation can be, one must realize there is a limit beyond which you may not go in any field of taxation. There is a line and if you attempt to go beyond it, it will serve to defeat the very object you have in mind. You are not going to produce revenue in proportion to the amount that you increase taxation. That has been found out not only in this country but in other countries times without number.
But having said so much, let me say this to my hon. friend: I would not take exception to a resolution which took the sense of the house as indicating that there should be a substantial increase in income taxation, although I might point out that it would not be incumbent upon me at this stage and upon a resolution of this kind, to pronounce any policy with respect to the attitude of the government in regard to the matter of increased taxation. But that is not what he has submitted. Apart altogether from any inequalities which are bound to arise in taxation, he would debar us from entering any other avenue of taxation which we might very properly enter, and he would have the whole burden with respect to any increase in revenue w'hieh we might require, laid upon the income tax payer.


Ian Alistair Mackenzie: He asks the government only to give consideration to it.


Edgar Nelson Rhodes: Quite so, but were the principle in this resolution to be accepted, the government would be debarred from entering any other field of taxation open to it. That is as I read the resolution. If I have misread it, I am open to correction. The hon. member's resolution reads:
Any increase in taxation found necessary should take the form of adjustments in the Income Tax Act, in order that those best able to pay should be the first and most heavily affected.
I do not think I am doing my hon. friend any injustice and I believe I am putting a proper interpretation on the resolution when I say that, bearing that in mind, we are ab^ solutely precluded from accepting it. Having
628	COMMONS
Federal Taxation-Mr. Stewart (Edmonton)
said so much, I would hope that it would suit the purposes of my hon. friend to withdraw his resolution, but if that does not meet with his wishes, especially having in mind the fact that there is a slimly attended house and the further fact that so few have spoken on the resolution, I would take the opportunity of moving the adjournment of the debate.


Charles A. Stewart: Mr. Speaker, before you put the
motion, may I interject that I think my hon. friend (Mr. Rhodes) is perhaps taking rather i drastic course with respect to this matter, f intended to say something about this contention that if the government accepted the motion, this would be the only field of taxation which the government would be allowed to enter. If my hon. friend will look at the concluding words of the resolution, he will see that such is hardly the case.


Edgar Nelson Rhodes: I moved the adjournment only for the purpose of enlarging the discussion because apparently nobody else wished to speak. If any other hon. member wishes to speak, with the consent of the house, I will withdraw my motion.


Charles A. Stewart: I should
like to occupy the time of the house for a moment or two on this question. I am sorry I do not get out of the resolution the same meaning that the Minister of Finance has taken. I do not believe that if it were accepted he would be precluded from increasing taxation in other fields. If he were, cf course I can quite see the handicap under which he would be acting in accepting the resolution.
As was very aptly pointed out by the hon. member for Red Deer (Mr. Speakman) the attitude of the government with regard to taxation has been to increase taxes upon commodities. There have been substantial increases and last year the then Minister of Finance, the Prime Minister (Mr. Bennett), introduced a substantial change in the income tax which was not carried into effect. Just what that change would have meant, it is difficult to say because we had not the opportunity of discussing it. I should not be forecasting what the government intend to do at this session, but I have no doubt we shall have some substantial changes in the income tax. It seems to me the house is entitled to expect this inasmuch as we have had substantial increases in other lines of taxation. Having in mind the fact that the individual must of necessity have the income before he can be taxed, I cannot feel any great sym-

pathy for those who would oppose an increased tax upon incomes. I quite recognize the fact that there is double taxation so far as incomes are concerned, but is that not true in almost every other field of taxation upon which we are asked to make payments? Of course the municipalities and the provinces do not invade the field of taxation in regard to sales, but in many other respects we find duplication between the provinces and the municipalities. It seems to me, if an individual is in receipt, after all deductions are made, of a very substantial income, he should be called upon, particularly at times like this, to pay a much larger proportion of the taxation of the country than he is asked to pay under the present schedules. It is true I was a member of a government that reduced those schedules, but at the same time we were reducing commodity taxation as well. It is also true that hon. members to my left opposed those reductions, but we had a feeling that if we were reducing taxation, having in mind the fact that commodity taxation was fairly adjusted, we were entitled to make reductions in the income tax. Now that taxation is increasing, I wish merely to say that I am entirely in accord with the resolution that the government should take into consideration this field of taxation when undoubtedly they will have to make increases, if not all along the line, at least in a good many avenues from which they are now deriving taxes. For that reason, believing that the government are not precluded from taxing in other fields, I am going to support the resolution.


Mr. WILLIAM IRVINE (Wetaskiwin):: Mr. Speaker, just before you put the question I should like to make a remark or two upon this resolution. The Minister of Finance (Mr. Rhodes) has indicated that it was the opinion of some parliamentarians some time ago that income taxation should more properly fall within the jurisdiction of provincial government. I agree with that point of view. The Dominion government has the right, I presume, to place a tax on anything or on anybody, whereas the field of taxation for the provinces is very considerably limited.


Pierre Édouard Blondin: I would point out that a motion to adjourn the debate is not debatable.


Edgar Nelson Rhodes: Pardon me, Mr. Speaker.
I said that with the consent of the house I would withdraw my motion.


William Irvine: I was saying that the field
for provincial taxation is very considerably limited. As far as I am concerned, I agree

Federal Taxation-Mr. Irvine
with the point of view that this particular field should be left entirely to the provinces, but unfortunately the provinces do not seem to have awakened to the great opportunity which is here afforded them and they have not taken any action in that respect. I think such action should have been taken by the provinces long ago, and so for that reason the Dominion government might well perhaps set an example to them by indicating a field in which rich harvests might be reaped. At the present time the provincial governments are all in need of funds, as are all governments everywhere. I believe that there has been before the provincial government of Alberta a resolution somewhat similar to the one that is now under discussion here. I do not know, of course, what action the province of Alberta will take, but I do hope that they will impose an incpme tax. Meanwhile we have an income tax here, and the question is whether we should increase it or leave it as it is, in view of the present circumstances. The Minister of Finance (Mr. Rhodes) took the ordinary course which finance ministers usually take in connection with a resolution of this kind when he pointed out that any action taken by this country in this respect must have a reasonable relation to the amount of income tax imposed in the United States in order that there might not be a flight of capital to that country. I do not think that the flight of capital argument need be very seriously considered at this time, for this reason:	Never perhaps in the history of
Canada was there so much money lying around waiting for an opportunity to be invested as now, and in face of that fact it is a strange thing that the provincial governments should be paying as high as six and in some cases six and a half per cent for the money that they borrow. If this is not ruled out of order, Mr. Speaker, I think that that practice is a very dangerous thing, for you cannot expect people to invest money in industry, where there is always a risk, when they can get six and one-half per cent from a provincial government guaranteed by the entire wealth of the province. I think that the provincial government should be raising money at three per cent, and if they cannot get it at that rate I think they should conscript it so as to force money into investment in other channels to give employment in this country. There is no danger of money fleeing from Canada to the United States at the present time because they have more money there than they know what to do with, just the same as we have here, and they have no place to invest it because no place is safe just now, and so there is no danger of
a flight of capital from this country to the United States.
I	ought to take the opportunity to point out that the Prime Minister perhaps misunderstood the point of the hon. member for Red Deer (Mr. Speakman) when he drew a *contrast between one bill which asks for
311,000,000 and another which provides for the cutting of the salaries of the civil servants. The hon. member for Red Deer was not suggesting that there should be a repudiation of the debt, but rather that, without repudiating the obligation, there (Should be increased taxation upon those who stand to profit by 'the country fulfilling its obligations. That puts the matter in a very different light.
Another point which might be brought forward in connection with the criticism of the Minister of Finance is that there cannot be much danger of capital fleeing to the United States from 'Canada when in .this country we impose on a million dollar income a tax of $362,000, whereas in the United States the income tax on the same income is only $240,000. If capital will not flee when there is a difference of over $120,000 in income taxation on a million dollars, how much of a difference will it flee for, I would like to know? I would like to know just how far we can go safely and Still prevent it from fleeing. I would not mind risking going a little further and see what happens.
I think we all appreciate the point taken by the Minister of Finance, that he does not wish to commit the government in anticipation of the budget by stating to what extent the government will consider an increase in taxation in any respect, but I believe that he read the resolution somewhat narrowly, if I may 'be permitted to say so, for it merely asks that the government consider the question that any increase in taxation found necessary should take the form of adjustments in the Income Tax Act, in order that those best able to pay should be the first and most heavily affected. The point to be emphasized is that those who have the 'highest incomes should be the "first," and they should be asked to pay first because they have the money with which to pay. They also should be the most heavily taxed because they are the best able to pay it. I think the Finance minister suggested that if that part of the resolution had been a little more reasonably worded the government might have permitted it to go through without committing itself in anticipation of the budget, so therefore I would move, seconded by the hon. member for Mackenzie (Mr. Campbell), that the motion
Federal Taxation*-Mr. Elliott

be amended by inserting after the word "that" in the fourth line of the last paragraph of the resolution the words "to the extent found possible."


Richard Bedford Bennett: How will it read then?


William Irvine: It would simply mean then, any increase of taxation contemplated would be imposed upon incomes to the extent found possible.


Mr. BOWMAN:: Should not the amending words be inserted after the word "increase" instead of after the word "that"?


Mr. MACDOUGALL:: Before the amendment is put, Mr. Speaker, I would like your ruling as to whether the original motion is in order. Personally I do not think it is in order for a private member to move a resolution involving the expenditure of public money.


Pierre Édouard Blondin: The resolution simply asks that the government take the question into consideration. I think it is quite in order. Mr. Irvine moves that this resolution be amended by inserting after the word "that" in the fourth line of the last paragraph of the resolution the words "to the extent found possible."


Richard Bedford Bennett: That does not make sense.


Ian Alistair Mackenzie: I do not think the amendment improves the resolution at all. I can quite see the objections of the Minister of Finance. I am personally in sympathy with the spirit of the resolution, but the objection voiced by the Minister of Finance is I think that any increase in taxation found necessary should take the form of adjustments. That is absolutely mandatory upon the government. If my hon. friends would permit the resolution to be phrased somewhat along this line, that among the increases in taxation found necessary there shall be given consideration to adjustments in the income tax, it would I think overcome the objections of the minister and would also carry out the principle advocated by my hon. friends to my left.
Mr. SPEAIvMAN: I do not rise to address the house again, Mr. Speaker, but merely to ask the hon. gentleman a question. Would not the last paragraph read perfectly intelligibly in either case; that is, either in its present form, or with the words "to the extent found possible" instead of the words "found necessary"?


Edgar Nelson Rhodes: Mr. Speaker, I think I
indicated in the course of my remarks that

if this resolution had meant that the government in considering increased taxation should consider increased income tax, the resolution would be acceptable. But I do adhere to the objection which I took to the original motion, and which I think still obtains to the amendment moved by my hon. friend from Wetaskiwin (Mr. Irvine). In that respect I may say that I am wholly with my hon. friend from Vancouver Centre (Mr. Mackenzie). If an amendment to this motion were couched in terms similar to those suggested by him it would be entirely acceptable to the government.
Amendment (Mr. Irvine) negatived.


Hon. J. C. ELLIOTT (West Middlesex):: Mr. Speaker, my hon. friend the Minister of Finance (Mr. Rhodes) was good enough to let me have a glance at the comparative figures of income taxation in Canada and in the United States. There is attached a schedule of the new income tax that is likely to be imposed in the United States. I notice that our tax on a $4,000 is about three times as much as that levied in the United States- roughly about $16 to $5. But on an income of $100,000 the United States taxation is about double that of ours.
That in my opinion is the proper principle of income taxation. We are now in a very serious condition with regard to obtaining the money to carry on the administration of the country. We are at a point where taxes must be obtained from those who are best able to bear them. That, after all, is the real test of taxation. But whether this taxation is the most equitable or not, we have to resort to the means which will give us the required revenue. In other words, we must tax the people who are able to pay. I would suggest to the hon. minister that in his budget he follow the practice of our neighbours to the south to which he has just referred and make the higher incomes bear a much greater taxation in relation to the lower incomes than they do at the present time. I have no doubt from the manner in which my hon. friend referred to these comparisons that he has in mind to apply this principle when he makes his next revision of the income tax schedules. This should be done.


Mr. A. W. NEILL (Comox-Albemi):: Mr. Speaker, after what the Minister of Finance (Mr. Rhodes) has said it is evident that the resolution will not pass in its present form. Being in sympathy with its principle, I should like to see it amended so that it might pos-

Federal Taxation-Mr. Gardiner
sibly pass in a manner acceptable to both sides of the house. Therefore would the minister consider the following amendment? To insert before the word "any" in the third last line the word "in"; in the second last line strike out the words "should take the form of" and insert the words "consideration should be given to." The last three lines would then read "that in any increase in taxation found necessary consideration should be given to adjustments in the Income Tax Act, in order that those best able to pay," and so on.


Edgar Nelson Rhodes: Mr. Speaker, I can rise at this moment only with the consent of the house because I have already spoken. I did Dot follow my hon. friend from Comox-Alberni (Mr. Neill). I would need to have the text of his amendment before me in order to be able to express an opinion upon it.


Alan Webster Neill: I will read it again.


Edgar Nelson Rhodes: But it does seem to me that this debate will have served its purpose by expressing the opinion of those hon. members who have spoken. Obviously that is the chief purpose to be served. I can only repeat that if an amendment is moved which meets the objection I pointed out, it will be quite acceptable. I have already intimated that one couched in the terms suggested by my hon. friend from Vancouver Centre would be accepted. I do not see how I can be expected to go very much further than that.


William Thomas Lucas: I thank the hon. Minister of Finance very much indeed. We have been endeavouring to get an amendment which will meet his views.


Pierre Édouard Blondin: The hon. member speaking now will close the debate. If the hon. member for Comox-Alberni desires to proceed he should do so now.


Mr. ROBERT GARDINER (Acadia):: Mr. Speaker, it is not my purpose to discuss the merits of this resolution inasmuch as many of my colleagues have indicated our viewpoint. I do not think the objections raised by the hon. Minister of Finance (Mr. Rhodes) are very serious, for the resolution merely asks the government to take into consideration these things. However, in view of- his declaration, we should like to see the resolution amended in such a way that it would be acceptable to the hon. minister and to the house. Therefore I move the following amendment:
That all the words after the word "that" in the fourth line of the fourth paragraph of the resolution be struck out and the following substituted therefor:
"amongst increases in taxation found necessary adjustments should be made in the Income Tax Act in order that those best able to pay should be the first and most heavily affected."
This amendment is seconded by the hon. member for Battle River (Mr. Spencer).


Alan Webster Neill: Mr. Speaker, I have already moved almost identically the same amendment.


Edgar Nelson Rhodes: I do not want to quibble over language, though I must say it seems to me that the objection I took to the first amendment was sound. Now we come to this amendment submitted by my hon. friend from Comox-Alberni (Mr. Neill). He may not have intended to do so, but certainly he has placed in this amendment words which I would not accept personally and which I could not ask the government to accept. He might very well have couched his amendment in other language, if what he had in mind was that the attention of the government should be directed to the Income Tax Act as a further source of income in the event of increased taxation being considered. That would be well and good; I would have no objection to that, and I think I'made it very clear that the government is quite prepared to take into consideration the discussion of this afternoon.


Alan Webster Neill: I think the minister is referring to the amendment of the hon. member for Acadia (Mr. Gardiner).


Edgar Nelson Rhodes: I understood Mr. Speaker to say that it was the amendment of the hon. member for Comox-Alberni, but the same objection holds good. I was dealing with the amendment itself and not with the source from which it came.


Alan Webster Neill: Mine is a somewhat different amendment.


Mr. E. J. GARLAND (Bow River):: Frankly I am at a loss to understand the position of the government in respect to this matter. There have been two amendments moved in an attempt to meet their point of view. The first objection taken was this: It was alleged by the spokesman for the government that this resolution committed or directed the government to an increase in income tax only. Both amendments which have been offered since removed that obstacle, and in this amendment in particular it is very clearly stated that this is not to be the only method of taxation.
632	-COMMONS
Federal Taxation-Mr. Garland (Bow River)


Edgar Nelson Rhodes: While my hon. friend is on his feet will he elucidate, for the benefit of the house, the proposition as contained in the amendment, that the income tax payer is the man best able to pay? That is the first statement, and the second is that he shall be the most heavily affected.


Edward Joseph Garland: I rather
suspect "heavily affected" were the words that touched the heart of the hon. gentleman. I have noticed so frequently that those who have a heavy income very much dislike any heavy adjustment unless it is a downward adjustment.	.


Edgar Nelson Rhodes: My hon. friend flatters me.


Edward Joseph Garland: I am not
flattering the hon. gentleman a bit; rather I am commiserating with him in his misery at the present time. The amendment strikes out all the words after "that" in the fourth line and substitutes these words: "amongst increases in taxation found necessary." Surely that very clearly removes the first objection taken by the minister.


Pierre Édouard Blondin: I think the hon. member meant the fourth line of the fourth paragraph in the main resolution.


Mr. GARLAND (Bo* River):: Yes. At
any rate, the point is that when you include the words "amongst increases" you very clearly remove the objection of the minister to the original motion, which might be interpreted by one who is a stickler for those things to indicate that no increases shall take place except in income taxation. Then the amendment says:	" Amongst increases in taxation
found necessary, adjustments should be made in the Income Tax Act in order that those best able to pay should be the first and most heavily affected." Is there any doubt in the mind of the hon. gentleman or of any other member of this house that those in this country best able to pay taxes are those who have incomes? So is it unfair to ask that they should have their incomes taxed heavily in the face of existing conditions?
The Minister of Finance (Mr. Rhodes) himself, defending the position of the government in connection with this resolution, quoted statistics to show the income tax paid in this country in 1931. He indicated at the same time that those who had incomes were contributing substantially to the pulblic revenue, * and had been doing so in past years. If he had read the statistics from another point of view he would have found out something else, namely that of some ten million people in Canada only 143,000, in round figures, have 
incomes upon which to pay a tax. If that does not demonstrate the concentration of wealth in a very few hands, a concentration which is at present increasing, I do not know how it could be demonstrated. Surely, therefore, in view of existing conditions a heavy income tax on those who have incomes is fully justified. But if the minister had taken the trouble to analyse the income tax figures further he would have found even more support for my argument concerning the concentration of wealth.
It is difficult to speak, Mr. Speaker, when the minister himself, the Prime Minister and everyone else across the way is occupied with something else. I suppose it does not matter much.


Mr. SHORT:: Go ahead; you are holding
up the business of parliament.


Edward Joseph Garland: If my hon. friend is paying attention I am sure that is all that is necessary; his weight with the government will be sufficient to ensure proper consideration of anything he may recommend.


Harry Bernard Short: Very clever.


Edward Joseph Garland: Yes, not
bad, considering that I had not much time to think it up. But I wonder if I may have the attention of the Minister of Finance for a moment.


Edgar Nelson Rhodes: Perhaps my hon. friend
would postpone his vaudeville performance for a moment, as an act of courtesy, while I reply to a query put to me by an hon. member sitting close to my hon. friend.


Edward Joseph Garland: I had no
idea I was putting on that sort of performance. I am debating in this House of Commons a matter of a great deal of importance at the present time. The minister is occupied with something else. I do not know what he is considering, but certainly his remarks are not courteous or in keeping.
When the Minister of Finance was making his analysis of the income tax figures, showing the enormous burden already carried by income tax payers he would have found an intense concentration of wealth in few hands in Canada. As I said, 143,000 people make enough on which to pay an income tax, but if my hon. friend had analysed the figures a little further he would have found that of the 143,000 income tax payers in 1931, some 6,600 paid about $21,700,000 out of a total of $26,100,000. In other words a little more than six thousand people paid almost the entire income tax received. The rest of income tax payers, 136,979, paid only $6,186,000. These

Federal Taxation-Mr. Campbell
figures can be traced back year after year and we find that the only difference is, not in the relationship between the two, but in degree as the income tax increased this incidence. In 1930, 6,014 income tax payers paid $20,959,000, while 136,000 paid only $6,500,000, in round figures.
The fact of the matter is that Canada, in common with the United States in particular -I separate these two countries from the rest of the world-has through special legislation, as the hon. member for Southeast Grey (Miss Macphail) pointed out in her few remarks, and special bounties, bonuses and all sorts of grants of land and rights to power in thp past, laid the basis for great fortunes which to-day possess not only the wealth of this country but the great power that goes with it. We are in the hands of this government, and the government has an opportunity to serve the public and not wealth. The resolution introduced by the hon. member for Camrose (Mr. Lucas) urges upon the government to consider fairly in its budget proposals this year the taxation of wealth in order that the conditions of the working people in this country may not be further handicapped by the imposition of increases in duty taxation.
I doubt whether there is an hon. member who does not realize that in Canada in eight out of every ten households the family lives in the shadow of unemployment. Savings are not possible with the average wage paid in this country, if anything like a decent living standard is to be maintained. As a matter of fact, even in the civil service itself amongst the best paid wage earners in Canada, the average wage is only $1,500 a year, and that includes all the tops as well as all the very low salaries. It must be clear from such figures that the average worker, the average woman in Canada, has not an income upon which to maintain a decent standard of living and at the same time to save anything. The whole condition of this country typifies, in the present crisis we are faced with, a concentration of wealth under capitalism which in itself will destroy the capitalistic system my hon. friends are bo fond of, unless they take such reasonable steps as are now proposed to redistribute in the form of taxation the capital income and wealth of the nation. I have only this further to say. We have gone a long way to meet the views of the minister and I sincerely trust he will accept the amendment. If he does not accept it then I want to place myself on record as definitely in favour of the amendment and, if that is defeated, in favour of the original motion.


Milton Neil Campbell: In
justice to the minister it is only fair to say that when he suffered some criticism at the hands of my hon. friend from Bow River (Mr. Garland) I was the one really guilty and not the minister. I had taken the liberty of consulting him for a moment to see whether it was possible to secure an amendment which would be acceptable to all sides of the house, and I therefore beg now to move a subamendment which I believe will cover the situation. In order to put the motion clearly before the house, as thus amended, I will read the resolution fully with the amendment I propose.
I move, seconded by the hon. member for Wetaskiwin (Mr. Irvine), that the resolution be amended by striking out all the words after "consideration," and adding the words, "a substantial increase in the income tax." The resolution before the house would then read:
Whereas, it is becoming increasingly apparent that the present methods and extent of federal taxation are inadequate to meet our requirements, and
Whereas, an extension of the principle of commodity taxation has been suggested as a means of meeting the situation, and
Whereas, the drastic fall in price levels and the consequent increase in the purchasing value of money has seriously affected the producer and business man, while being of corresponding benefit to those whose incomes, derived from certain classes of bonds, mortgages, etc, are still undiminished, if not increased.
Therefore, be it resolved, that, in the opinion of this house, the government should take into consideration a substantial increase in the income tax.


Edward Joseph Garland: In view of the statement just made by the hon. member for Mackenzie (Mr. Campbell), I sincerely trust the Minister of Finance (Mr. Rhodes) will accept my apology for what he considered was, although it was not intended to be, a vaudeville performance.


Edgar Nelson Rhodes: Before you put the subamendment, Mr. Speaker, may I say to my hon. friend from Bow River (Mr. Garland) that I did take exception to his remarks and to the fact that he was apparently deriving some pleasure from bear-baiting me, as it were, in circumstances which must have been clear to him. I could not without an act of discourtesy to one who sits near to him direct my attention to the hon. gentleman, and I thought this must have been obvious to him, for usually he grasps a situation quite readily. In view of his remarks I am only too happy now to accept his statement and to assure him that he will find me at all times anxious to deal courteously not only with him but with every other hon. member of this house.
Federal Taxation-Mr. Rhodes


Edward Joseph Garland: I- have always found the hon. gentleman most courteous in the past, but it was impossible for me to determine the character of the conversation or negotiations between the hon. member for Mackenzie and himself.


Edgar Nelson Rhodes: Now that I am on my
feet I may say to my hon. friend that I must take exception to the attitude he assumed in his argument in discussing the question before the house. The hon. gentleman would leave the impression that in virtue of this resolution and the discussion this afternoon we are determining the question as to what shall be the income tax in Canada. That would be the impression he would leave; and a reading of his remarks on the hustings would clearly indicate that to be the case. Then he takes it upon himself to suggest that the government is resisting the idea of increasing the taxation of income. Furthermore, he attributed personal motives as well. He clearly left the impression that the Minister of Finance was a man of substantial income; ergo he would object at once to any increased taxation. Well, I may say that I am very much in the position of an individual down south. A wealthy northerner coming down the gangplank of a Mississippi river steamboat asked him whether he could change ten dollars, and he replied, "No, sir, I can't; but I thank you for the compliment just the same." My hon. friend from Bow River may be pleased to call me a wealthy person, but I assure him I must take his word for it. As a matter of fact, my hon. friend knows full well that there is a method as well as a time and a place for dealing with taxation, and it is not incumbent upon the Minister of Finance nor upon the government of the day when individuals, as they -have every right to do, bring forward a resolution dealing with taxation, thereupon to make a statement with respect to the subject. My hon. friend can be quite free in his arguments, but it is another matter entirely with one who holds a responsible post in government. As I say, there is a constitutional method of dealing with these matters.
Let me say that notwithstanding the sarcasm of certain of my hon. friend's remarks, to-day, we believe that any proposal having to do with taxation should be based upon the principle that those who best can pay should be called upon to pay the most. That is equitable taxation. I thought I made it quite clear in my original remarks upon the main motion that we were prepared to consider seriously an increased income tax, -but I took exception to the resolution because of the 
form in which it was drafted. The amendment moved by the hon. member for Vancouver Centre (Mr. Mackenzie) was entirely acceptable to me and to the government. I do not raise the question whether or not this subamendment is in order; in any case if I did so the hon. member for Bow River (Mr. Garland) would no doubt say immediately I was actuated by some ulterior motive.


Edward Joseph Garland: No.


Edgar Nelson Rhodes: In the sense that I have indicated, the amendment moved by the hon. member for Mackenzie (Mr. Campbell) is entirely acceptable to me.
Mr. JEAN-FRANCO IS POULIOT (Temis-couata): Mr. Speaker, I take this opportunity to refer to the necessity of an amendment to the Bank Act to cover reports to be made by the different banks to the Minister of Finance (Mr. Rhodes). We do not know how many people would be affected by a resolution similar to the one before the house. The banks now send monthly reports to the Department of Finance stating the amount of current and savings deposits on hand, but those reports do not give the amounts of the different deposits in each bank in each province. It might be agreeable to the minister to amend the Bank Act later on to provide that twice a year the banks shall report to the department indicating the amount of savings and current accounts for each province, and also the number of accounts under $500 and the number over $500. With this information we would know exactly how many people have substantial bank accounts. Because of the good will which has been shown in the house, I will not insist further upon this point.


Ian Alistair Mackenzie: Mr. Speaker, I have just one or two observations to make in regard to this resolution. I understand there is now before the house an amendment and a subamendment.


Pierre Édouard Blondin: Do I understand the hon. members for Acadia (Mr. Gardiner) and for Comox-Albemi (Mr. Neill) to have withdrawn their amendments? The subamendment as now proposed is not an amendment to the amendment, it is an amendment to the main motion.


Robert Gardiner: I have great pleasure in withdrawing my amendment in order that the hon. member for Mackenzie (Mr. Campbell) may move his amendment in the regular manner
Amendment (Mr. Gardiner) withdrawn.

Banking-Mr. Coote


Alan Webster Neill: I have no pleasure in withdrawing mine, but I will do so.
Amendment (Mr, Neill) withdrawn.


Pierre Édouard Blondin: The question now is on the amendment of the hon. member for Mackenzie (Mr. Campbell).


Ian Alistair Mackenzie: Mr. Speaker, I have just a word or two to say with regard to the amendment now before the house. I am in entire sympathy with the hon. member for Comox-Alberni (Mr. Neill) with regard to the amendment which he has just dropped.
I understand that an announcement was made the other day by the Prime Minister (Mr. Bennett) with reference to increased taxation along certain lines, but it must be understood that our support of this resolution is not to be taken as an indication that we will not vigorously protest against the necessity for increased taxation. We might find occasion to criticize very strenuously the necessity of such increases as might be made,in the income tax. I desire to make it clear at this stage that although we support the general principle of the amendment moved by the hon. member for Mackenzie, we reserve to ourselves the fullest right of discussion in regard not only to the general principle of increased taxation but also to the particular proposals which may come down in connection with income or other taxation.
Amendment (Mr. Campbell) agreed to.
Motion (Mr. Lucas), as amended, agreed to.



BANKING, CURRENCY AND CREDIT ISSUE AND REDEMPTION OF DOMINION NOTES WITHOUT RELATION TO GOLD RESERVE- PROPOSED REFERENCE TO COMMITTEE

Mr. G. G. COOTE (Maoleod) moved:: That, in the opinion of this house, the standing committee on banking and commerce be instructed to inquire into the question of banking, currency and credit in Canada, and without restricting the generality of the foregoing that they especially inquire into and report on the advisability of amending the Dominion Notes Act so as to eliminate the provision for redemption of dominion notes in gold and to provide for the issuing of dominion notes without relation to gold reserve.
He said:	Mr. Speaker, reduced to its
simplest terms this resolution asks for an investigation into the whole question of money, and I am sure the subject is of sufficient importance to justify the most thorough inquiry. Under our present economic system, money is the most important thing in life;
man must have money for his three primary requirements of food, shelter and clothing. Money means the chance to live. I think this fact is well illustrated by a story which appeared about a year ago in the Ottawa Citizen. A man had been held up on the streets of the city by a thug who pointed a revolver at his victim and said: "Hand over your money or I will blow out your brains!" The poor victim, without any hesitation, replied: "Go ahead and blow them out; I can live in Ottawa without brains but I cannot live here without money." I am sure the majority of hon. members will agree that his last statement at any rate is true and the same applies to any other part of Canada.
The amount of money which we control determines our standard of living, not only in the material sense but also in a social and intellectual way. Money is so important that the lives of ninety-five per cent of the people are vitally affected by what those in control of finance do to money or credit. If we are to have any chance of getting out of this depression this year, if we are to have an opportunity to get around that comer for which we are all looking, it will depend upon someone doing something to our money system. The providing of money for the carrying on of trade and commerce is one of the primary duties devolving upon the government of any sovereign state. Under our constitution this duty falls upon the federal parliament.
Parliament in its wisdom or unwisdom has passed the Currency Act which fixes the denomination and metal content of our coins. This act makes the dollar the standard unit of our currency and fixes the gold content of that dollar at 23.2 grains of pure gold. Parliament passed also the Dominion Notes Act, which provides for the issuing of paper money, known as dominion notes, against a certain gold reserve. It makes dominion notes legal tender in Canada except at offices of the Receiver General and provides for the redemption of those notes in gold upon presentation at offices of the Assistant Receivers General in Canada.
We have also the Finance Act under which dominion notes are issued to the chartered banks of Canada against the deposit of collateral security.
We have the Bank Act which authorizes the issuing of bank notes, that is paper money, to the extent of the paid-up capital of the banks, with certain excess issues in certain months of the year. It also provides that the banks may issue further notes against deposits in the
Banking-Mr. Coote

central gold reserves. The banks are also authorized under this law to make loans and to receive deposits.
Under this system authorized by Canadian law we had in this country under date of August 31, 1931-I am quoting approximate figures:
Gold held by the government.... $ 74 000,000 Gold and other coins held by banks 64,000,000 Gold held in central gold reserves. 13,000,000
Total	$151,000,000
That is the amount held in gold and subsidiary coins. We also had issued and in circulation in Canada at that date:
Dominion notes	 $141,000,000
Bank notes	 141,000,000
Then we had:
Bank deposits	$2,030,000,000
That makes a total, roughly speaking, of $2,300,000,000, all of which under our law would be redeemable in gold. May I point out that bank notes and bank deposits totalling over $2,100,000,000 are redeemable in legal tender, which would be dominion notes, and dominion notes outstanding at that time amounted to only $141,000,000. Dominion notes are redeemable in gold, but gold amounted to only seven per cent of the total money outstanding in Canada on that date, and in the term "money" I include only what we generally call cash, that is, coins and paper money and deposits in the banks.
Any unusual happening in the world may cause a demand among noteholders or holders of deposits in our banks for gold. If that demand is met and the gold paid out, the result is to deplete our gold reserve, and in that way restrict the issue of dominion notes. Dominion notes under our law are based upon gold and dominion notes are the basis for bank credit. Therefore, when the issue of dominion notes is restricted, it follows that the credit which can be extended in Canada is likewise restricted. The amount of credit outstanding in any country at any time is the main governing factor in determining price levels. When credit is restricted, prices fall; purchasing power is cut; business is curtailed; unemployment is created, and the whole vicious spiral of deflation is put under way. That is what has actually happened and that is the situation which we are facing in Canada to-day. Of course it first happened in some other countries of the world, but because of the gold standard Canada was compelled to follow the same policy as the countries which started this deflation.

I might point out here that to-day private citizens are being urged by bankers to pay their debts and the bankers are urging all governments in Canada to balance their budgets. They can do that only if they can get their hands on more money. The bankers do not seem to realize that under our present system the way in which the great bulk of our money gets into circulation is through the issue of bank loans. Wlien those loans are not issued, there is not sufficient money in circulation on which people can get their hands to pay their debts. If people cannot secure money to pay their debts and buy goods, governments are not going to be able to balance their budgets. In proof of the statement which I have just made, that it was the restriction of credit which caused the world depression, I should like to quote from one who, I think, might be regarded as an authority. I refer to Mr. R. S. Noble of the Royal Bank of Canada, who, speaking at last year's meeting of the Canadian Political Science Association, said:
In my judgment the main factor in bringing about and continuing the present world-wide depression has been the disastrous fall in the commodity price level and that this has been brought about not by over-production-
I am glad he said that.

tariffs, war debts, stock market collapse or any of the usual causes assigned but by a thoroughly stupid bank policy with France and the United States as the principal villains in the piece.
If a stupid bank policy was responsible for the world depression, we cannot get out of this world depression until we get an intelligent bank policy. May I point out again that because of our adherence to the gold standard, this thoroughly stupid bank policy which caused the world depression, caused the depression in Canada to be on a par with that in most of the other countries. Perhaps I might quote the opinion of Professor Gustav Cassel, one of Europe's outstanding economists, who said:
It can never be denied that the defects of the monetary policy of the United States are chiefly responsible for the present crisis in the world's economy.
What was this Stupid bank policy referred to by Mr. Noble? I have not time to go into the subject at any length, but I should like to point out again that under the gold standard, gold is the basis for credit, and on one dollar's worth of gold, from fifteen dollars to twenty dollars' worth of credit is created. The figures which I have quoted for Canada prove that.
The central banks of France and the United States, according to many authorities, have

Banking-Mr. Coote
hoarded between them nearly one-third of the world's monetary gold reserves. That amount of gold has been placed in their vaults; it has not been allowed to be used as the basis for the issue of currency, and consequently the world's credit has been restricted to the extent of many billions of dollars. When you restrict world credit to such an extent, you must upset prices and all the contractual obligations of the world which are expressed in terms of money. It is therefore no wonder that to-day the world is faced with the great problem of reparations and war debts. Debts which have become impossible of payment largely because of the manipulation of our monetary system.


Richard Bedford Bennett: Is there any shortage of credit in Canada?


George Gibson Coote: I really do not know how
to answer that question. I know that due to low price levels people are not able to get the credit they ordinarily could. The situation in the world to-day so far as gold and gold standard countries are concerned, might be likened to a game of marbles. Supposing a number of boys are playing marbles and two of them corner all the marbles. The rest of the boys have to quit playing or go and play some other game. To-day countries other than the United States and France should in their own interests play some other game than that of the gold standard. I may have said this before, but if so I want to repeat it: the amount of credit money in circulation largely determines the price of commodities and the world to-day is suffering from this depression because of the contraction of credit due to the hoarding of gold. I note that recently Mr. Hoover, President of the United States, is credited with saying:
Credit is the blood stream of our economic life. Restriction or destruction of credit cripples the revival and expansion of agriculture, industry, commerce and employment.
The paper 'from which this is quoted, the Ottawa Citizen, says;
To-day business is bad because of lack of purchasing power among consumers.
The great question facing Canada at this time is what can be done to restore that purchasing power. May I point out that the industrial system produces for profit, not for use, and a falling price level destroys the motive which makes the system function. The production of real wealth is curtailed because we cannot distribute the production among our people, and the reason we cannot distribute it is primarily because we have not enough money in circulation. I remember a year ago the statement was made that in
China millions of people were starving because China had no transportation system which would move food from the coast to the interior where the famine conditions existed. But we have not that excuse in Canada. , We have one of the finest transportation systems in the world and yet to-day some of our people, if they are not actually starving, are not getting enough to eat. We have the food and we have the railways to transport it; the only thing we lack is sufficient money in the hands of consumers.
I agree with what the Right Hon. Arthur Meighen said last year, speaking before the Canadian Bankers' Association at the Royal Y'ork Hotel in Toronto, and I am glad that he made this statement at that particular meeting. He said:
If people were in a position to exchange what they have too much of for what somebody else has too much of, we would see that there is not too much of anything. The trouble is that they are not in a position so to exchange. Were the facilities of exchange adequate, were the world's monetary system adequate to demands for exchange, then the three per cent increase in the world's products from year to year would mean a three per cent elevation in the standard of living each year for the masses of mankind.
I freely admit, Mr. Speaker, that this is a world situation. But we cannot permanently excuse ourselves by using that as an alibi. We are following practically the same policies as those other countries which we hold responsible for this depression, and how is the world ever going to get out of the depression if every country continues to do as we are doing-sitting with folded hands waiting for Providence to get us out? I suggest that we could take some definite action in Canada, and because I believe that our adherence to the gold standard has made the situation very much worse for Canada, one of the questions I should like the banking committee to inquire carefully into is whether we should any longer endeavour to adhere to the gold standard, and if so, why we should adhere to it. That is a subject that should be thoroughly investigated.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.


George Gibson Coote: Mr. Speaker, When the house rose at six o'clock I was discussing the question of the gold standard and stated that because of our adherence to that standard Canada was suffering unduly from the world
Banking-Mr. Coote

depression. In support of my statement I should just like to quote this passage from the monthly letter of the Royal bank for June, 1931:
It will be obvious that for countries operating on a gold basis the responsibility of the price level lies almost altogether with the central monetary authorities of the United States, Great Britain and France, which hold about 75 per cent of the monetary gold stocks of the world and influence the bulk of the liquid capital. At the present time, all other countries must conform to the composite policy of these three outstanding financial powers or temporarily abandon the gold standard, as has recently been done by Australia and two or three South American countries.
Since that was written Great Britain has been forced to abandon the gold standard. I think the same is true of Canada; that is, we have abandoned it so far as redemption of our notes in gold is concerned, although we have not yet taken legal steps to cancel our obligation to do so under the law.
Some people, of course, will ask: If the gold standard is to be abandoned what is to be the basis of our currency? Perhaps I could not do better than quote from an issue of Toronto Saturday Night of about the time Great Britain did abandon the gold standard. On that occasion this journal stated:
Ihe real basis of currency has always been the resources and the industry of the people in the countries which issued it. This is markedly true of Canada, which as Hon. E. A. Dunlop, provincial treasurer of Ontario, has aptly pointed out, has never been actually on a gold basis except for ipternatioual payments. Times like these demand realities, not myths, and consequently the suspension of the gold standard may be viewed as a hopeful event.
Under the circumstances, Mr. Speaker, I think the committee on banking and commerce might very well be empowered to inquire into the advantages and disadvantages of the gold standard. After all, the gold standard is simply a monetary policy. We should inquire whether it is the best policy for Canada, or whether it should be abandoned and a better policy adopted. I will admit that it has some advantages. It does lend us an air of respectability; and stable exchange rates are very beneficial for those having to meet commitments in the United States. But the disadvantages of the gold standard I am sure more than outweigh its advantages. It limits the amount of credit in Canada by the amount of gold in the treasury. It puts the price level in Canada at the mercy of foreign banks. Canada is a debtor country and if we are to remain on the gold standard we must be prepared to sacrifice internal stability of prices, wages, employment, and our whole standard of living. For what? For the sake of exchange rate stability.

Surely that is too great a price for us to pay. It is no use saying we cannot get a better system. I think a better system must be found or the whole capitalistic system is bound to collapse. It is to those who are interested in the preservation of the present system that I am appealing to-night.


Edward James Young: Would my hon. friend mind explaining what he means by "the whole capitalistic system collapsing"?


George Gibson Coote: I have not time because I
am limited to forty minutes. I should like the committee on banking and commerce to be authorized to inquire into the effect of our adherence to the gold standard on our primary industries. What is the effect?


Mr. FRASER (Cariboo):: What effect would the going off the gold standard have on the amount of money coming into this country to finance the development of gold mines?


George Gibson Coote: I will leave my hon. friend
to speak on that. At the moment I want to direct the attention of the house to the effect of our adherence to the gold standard on agriculture. The leader of the opposition in South Africa recently stated that the adherence by his country to the gold standard was crucifying agriculture. Our attempt to adhere to the gold standard, is, I think, crucifying agriculture in Canada. I am not able to devote very much time to this particular phase of the subject, but I do want to point out that at the present time the price of wheat, cattle and hogs in Canada is dependent upon the price which we receive for these commodities when exported. The bulk of our wheat is sold for pounds sterling. We translate the British pound, according to to-day's quotations, into $3.93 Canadian money. If our currency were at par with Britain's-and I think that is where it should be if it is to be at par with anything-the pound would represent $4.87 of our money. In other words, we are losing 94 cents on every pound sterling that we receive from the sale of our products in Great Britain. I should like again to remind the house that the prices we receive for the products we export-grain, cattle, hogs -set the prices of all those products when they are sold in Canada.
May I also point out that we are competing with the Argentine and Australia in most of these products? The farmer in the Argentine at the present time can translate the British pound sterling into the equivalent of $5.40 of our money; in Australia the farmer can translate the pound sterling into the equivalent of $5.80 of our money. I should like

Banking-Mr. Coote
to know how long the Canadian farmer is going to be able to compete with the farmers of the Argentine and Australia under those conditions? At the present time if our currency were at par with Britain's the price for the average steer sold in Canada would be increased by more than $10; the price of wheat would easily be increased by 15 cents a bushel. I have in my hand a page from the Commercial Intelligence Journal of September 26 last, containing a report from our trade commissioner in Australia. This as before Great Britain went off the gold standard. He says:
The exchange premium in Australia gives wheat growers an apparent gain of about 6i pence (13 cents) per bushel on all wheat exported.
That knocks our five cent bonus into a cocked hat.


Edward James Young: Is that apparent?


George Gibson Coote: It is quite apparent to me, whether it is to the hon. gentleman or not.


Agnes Campbell Macphail: He cannot see over the tariff walls.


George Gibson Coote: The gold standard in Canada as part of our money policy is fixed first of all by the Currency Act which sets the number of grains of gold in our dollar, and further by the Dominion Notes Act. Subsection 3 of section 4 of the act provides for redemption of these notes in gold on presentation at any office established for that purpose. It is for that reason that I mention specifically in my resolution the Dominion Notes Act. I should like the committee on banking and commerce to be authorized to inquire into and report to this house as to the advisability of repealing or suspending the operation of subsection 3 of section 4 so that we should no longer be compelled to redeem our notes in gold. As a matter of fact the assistant receivers general in Canada are not to-day redeeming our notes in gold on demand. I have talked to different people who hhve endeavoured to get gold in exchange for notes and have been refused. The law still stands, and at the present time so far as I am aware-I speak subject to correction-we are evading the law in refusing to meet the requirement I have referred to. I should like the banking and commerce committee to be authorized to report on that particular matter-whether we should continue ostensibly to carry on under the gold standard and yet actually evade the act; or whether we would not be in a much better position if we simply repealed this subsection. Subsection 5 of the Dominion Notes Act fixes the gold reserve against which dominion notes shall be issued. I think in line with the report of the Macmillan committee there is no necessity for gold or other metallic reserve for our national currency, and that this section of the act might very well be repealed, so that the Finance minister might be in a position to use the gold to meet some of our foreign liabilities if he so desires.
I might point out to the house that the issue of dominion notes without gold reserve might be largely increased. If our issue of fiduciary notes were at the same ratio as recommended for England by the Macmillan committee, on our present gold reserve we could have issued dominion notes to the amount of $500,000,000 instead of $144,000,000 as at present. I think if this question were properly understood by the public generally the issue of a larger amount of dominion notes and their circulation in Canada would add to the stability of our system. I cannot see any reason why our gold should be tied up in a vault somewhere under the east block. I do not believe it is doing any good there to-day. I know there are certain people who refer to any money not based on gold as unsound money. The Minister of Trade and Commerce (Mr. Stevens) in his remarks last week, used the term "sound money" and by most people that phrase is understood to mean money based on gold. I should like to point out that if Canada had remained on the gold standard, or what is called sound money, in 1914 it would have lost us the war. We abandoned it then in a hurry, on half a day's notice, but we cannot abandon it now to cure unemployment.	To-day I think Canada is
engaged in a war against poverty, and it is just as important that we should abandon gold now as we did in 1914. If we are to stick to that kind of sound money I am afraid we may lose the war in which we are now engaged.
I think the words "sound money" are much misunderstood.	Right Hon. Reginald Mc-
Kenna, speaking at the annual meeting of the Midland bank a few days ago, had this to say with reference to sound money:
A sound unit of currency would always be of the same value measured in the aggregate of the things on which our money is spent.
That is what sound money ought to be, money with a stable measuring value. That is one of the principal purposes for which we use money. Mr. McKenna goes on to say that gold has never provided that, and then he states:
Viewed in that light, could any standard have failed more signally than has the gold standard.
Banking

Mr. Coote

He says he does not see any reason to doubt our being able to keep the purchasing power of money stable with what he terms a managed currency. I am sorry I have not the time to quote Mr. McKenna at greater length; to those interested I would recommend his speech, which appears in the Manchester Guardian of January 30. However, he does say:
The art of monetary management will have to l>e relied on more and more to obviate such catastrophes in economic life as we are witnessing to-day. We must not delude ourselves once again into thinking that if we return to gold all will be well. Renewed indulgence in that idea would be fatal.
I commend those words to the government and to every hjn. member of this house. Right along that same line, with regard to the question of managed currency I should like to quote Sir William Beveridge, director of the London School of Economics, who may be considered an authority on this subject. He said:
Liability to booms and slumps of production is bound up with capitalism, with making not for use but for profit, which depend on prices as prices depend on credit. Success or failure in controlling credit may thus prove to be the acid test of the capitalistic system.
I think Sir William's words are well worth the attention of the government and of the house.
I should like this committee to be authorized and instructed to inquire into this question: Can interest on the federal, provincial, municipal and railway bonded debts, totalling over five and a half billion dollars, together with corporation debts, real estate mortgages, bank loans and so on, be paid at existing price levels? If not, how can commodity prices be restored to the levels of 1925 or 1926? I should like the committee to inquire as to whether any action can be taken through the money system to make this payment possible. Let me quote from an article appearing in the Wall Street Journal under the signature of Thomas Woodlock, a regular contributor to that journal, on this very point of commodity prices. The article carries this heading:
Commodity Price Level Must Rise or Debts Will Be Sacrificed
I regret that I have not time to read the whole article, because I think it is splendid. The writer says:
It so happens that the world now finds itself with a volume of existing debt far beyond anything ever before existing in economic history, this because it gets its living by a system which basis upon credit-debt-as its very foundation. It is the pressure of this debt which is everywhere stirring an agitation for a change in the money units which measure the debts. What we are witnessing is an acute phase in the

process outlined by Mr. Feaveryear, and the heart of our present problem is to prevent this process from destroying the credit structure which furnishes the foundation of the world's economy. It is perfectly evident that the structure can be preserved only at the price of considerable sacrifice by the creditor class for it is surely historically true that loans which do not "produce" the means for this repayment are in the long run not repaid. Borrower may be slave to lender as the phrase goes but only in a limited sense; a truer phrase is that which says that blood can not be had from a stone.
On all sides are heard proposals for a change in the "gold standard" of the United States. Some are for plain issues of "non-interest bearing treasury notes" which, of course, are to be "unlimited legal tender for all purposes." Others are for	"bimetallism"-silver-and
others for some kind of "inflation" by means of large government bond issues with rediscount privileges for bills secured thereby. The instinctive revolt against the gold unit is widespread and is at bottom the direct result of the pressure of debt. One thing is becoming clear; that is that either the commodity price level must in the next few years rise to relieve the debtor or the creditor will have to write off a good part if not the whole of the debt. And, if commodities will not rise to the money unit, the money unit is quite likely to come down to the commodities. This is the fundamental significance of the departures which have already been made from the gold standard.
Coming from the Wall Street Journal, Mr. Speaker, I think a statement like that should not be ignored by members of this house. Then I should like to quote very briefly from a speech made by Right Hon. Winston Churchill, former chancellor of the exchequer and the man who put England back on the gold standard in 1925. Speaking before the Economic Club of New York at the Hotel Astor, he said in part:
As to the solution of the economic crisis, Mr. Churchill said: "In my opinion, it would be sufficient at this stage if two or three of the principal governments of the world were to proclaim their intention of revaluatir.g commodities and services upon, let us say. the 1927 or 1928 level; and then if sufficient financial experts w'ere selected and told to devise steps by which this should be done, and the form of international currency that would be required to keep a stable standard of value hereafter, I do not think you would be setting them an impossible task. I expect they would find that there were several ways of accomplishing this purpose once it was clearly defined and authoritatively set forth.
"I would like to see the governments of United States and Great Britain, through their agents, the federal reserve and the Bank of England, come to the definite conclusion that commodities must be revaluated up to the 1927 or 1928 level, and that hereafter sufficient currency must be available to provide a stable measure of price."
Surely it is not difficult to deduce from that statement that Mr. Churchill believes the adoption of a proper monetary policy will

Banking-Mr. Coote
bring commodities back to the price levels of 1927 and 1928, and until the commodity price level is brought back to that point existing debts in Canada cannot be paid, with interest at current rates.
In the few minutes left to me I should like to point to what is happening in the United States. Recently at Washington two measures were adopted, the one providing for the creation of the reconstruction finance corporation, and the other the so-called Glass bill, widening the note issue privilege of the federal reserve banks. In regard to these measures the Financial Post contains an article headed:
U.S. Embarks on Inflation to Save Banks
I know there is a good deal of objection throughout the country to the use of the word "inflation" or to the process of inflation. It is more proper. to say anti-deflation or, as some writers now say, reflation. But call it what you like-inflation, anti-deflation or reflation-anyone who to-day refuses to use some such measures to put more credit in circulation and increase prices is as foolish as the man who refuses to put air in a flat tire for fear he may blow up the tire. Anyone who is driving a car with a flat tire will stop at the first service station and put in some air, even if it is not free. I remember hearing of a Scotchman who, the first time he saw the sign "free air" did use so much air that he blew out the tire. It is possible to blow up a monetary system with inflation, as was done in Germany years ago, but that is not what is proposed in the United States to-day nor is it what I am proposing in Canada. I simply advocate putting out sufficient credit in Canada to raise commodity price levels, and that is as sensible as putting air in a flat tire to keep up the proper pressure. The man who puts air into a tire uses a gauge and when he has just enough air he stops. Currency, I am quite satisfied, can be managed so as to put out, in Canada or in any other country where it is adopted, the proper amount required. I do not think there is any insuperable difficulty about that.
In my opinion there is more than sufficient reason for asking for this investigation. It seems to me that whatever other steps may be taken to lift us out of the present depression, monetary reform of some kind is absolutely essential. I should like to see the committee make a thorough and exhaustive inquiry into these matters such as was made by the Macmillan committee in England. If the committee did nothing but make a study of the Macmillan report they might suggest to
the house some measures that would be helpful. I had thought of asking that there be given to our banking committee a reference similar to the one given to the Macmillan committee in England, but I have been told that the committee in England found themselves limited by their reference. This is the reference which was made to that committee:
To inquire into banking, finance and credit, paying regard to the factors, both internal and international, which govern their operation, and to make recommendations calculated to enable these agencies to promote the development of trade and commerce and the employment of labour.
I consider that a splendid reference, but I should like to see the reference to our committee, if one is granted, made wide enough that they will not feel hampered in their investigation. If the committee considered they had not time to go as thoroughly into the question as they would like fco, they might suggest to the government the appointment of a commission along lines similar to the Macmillan committee. There are, however, two or three specific questions which I would suggest for consideration by the committee in addition to what has already been indicated.
First of all I would suggest this question: How can the purchasing power of the community be kept up to the point where we can consume the surpluses which our great industrial machine can turn out, so that we should not be faced, as we are at the present time, with poverty in the midst of plenty. I should like the committee to inquire carefully into the gold standard. As I suggested before, I should like an inquiry to be made particularly as to its effect on the basic industries of Canada-agriculture, mining, lumbering, fishing and other industries-and as to its effect also on employment. I believe that the return to the gold standard by Great Britain in 1925 did increase unemployment, and if that result followed in England would not a return to the gold standard increase unemployment here? I would finally suggest to the committee this question: If credit is the life blood of industry, why should the amount of credit existing in Canada depend on the amount of gold stored in the treasury vaults and which is never intended for circulation?
In short, I should like the committee to be asked to report to the house regarding changes Which might be made in the monetary system so as to enable us better to distribute among our people the goods which we in Canada are so well equipped to produce.

642	COMMONS
Banking-Mr. Mackenzie (Vancouver)


Ian Alistair Mackenzie: 
Richard Bedford Bennett: No.


Ian Alistair Mackenzie: That was my impression of the remarks of the right hon. gentleman. Great Britain's trade policy had nothing whatever to do with her abandonment of the gold standard. Anyone who has studied the international byplay which has taken place in the financial world from 1927 to 1931 will know that a great European nation deliberately resorted to a carefully buttressed financial armament in order to obtain political domination of Europe. The boundaries of several states in Europe have been fixed by the financial policy of that great country. At the present time this country has two delegates attending the disarmament conference in Geneva and in the most friendly way I suggest to the administration that something more important is before the world to-day than the reducing of the number of ships of war, the reducing of standing armies and~t!ie reducing of the number of aeroplanes, submarines and the equipment and munitions of war; the greatest necessity of the world to-day is a comprehensive policy of international financial disarmament. I should like to see the Canadian delegates fighting to that end so that in the development of our national policies we shall not be compelled to suffer too much from these international factors which are at the present time directly affecting our Canadian national life.
A short time ago I had the temerity to stand in my place in this house and to advocate a qualified moratorium in Canada on
644	COMMONS
Banking-Mr. Mackenzie (Vancouver)
capital accounts. This afternoon the Prime Minister asked an hon. gentleman to my left if there was any shortage of credit to-day. To that question, my answer would be this: I think that every single individual to-day, at least within my experience, is suffering from a most distinct and emphatic shortage of credit. Every municipality throughout Canada and throughout the west in particular is being throttled by the restriction of credit. The four great provinces in western Canada have been so reduced to financial extremities that they have had to come to the Prime Minister and ask to be allowed to depend upon the weight and security of the Canadian treasury before they could undertake the ordinary processes of financing. I hope it is not true, and I hope it will never be true that this great Canadian nation will suffer from a restriction of credit.
I agree in the main with the observations of the hon. member for Macleod (Mr. Coote). I know that to-day business after business and industry after industry in my own province of British Columbia is being crushed out of existence because of the policies adopted by our Canadian bankers in refusing them any ordinary or generous extension of credit. When I say that I repeat what I said a year ago, that we should be proud of the record of our banks during the great crisis through which we are passing. However, I know industry is being forced out of existence and there should be some great liquidation of the frozen assets of our nation. As President Hoover has said, we must thaw out the frozen confidence of our nation. This has been partly accomplished in the United States by the creation of a $2,000,000,000 fund, known as the reconstruction finance corporation, of which my hon. friend does not approve. Apart from agreeing with the hon. member for Weyburn (Mr. Young) in his contention that the high tariff barriers should be knocked down, I contend that one of the great necessities at the present time of the Canadian people is a real system of controlled inflation in regard to our currency and monetary system. The other day someone said something about a managed currency. In my opinion Canada has the best machinery in the world for a managed currency. Under the provisions of the Finance Act of 1914 and the act of 1923 there is vested in the Minister of Finance and his treasury officials sufficient power to enact to-morrow a policy of managed currency or controlled inflation without any alteration in the legislation except the repeal asked for by the hon. member for Macleod.
Let us consider what the Finance Act was responsible for during the great war. Let us 
consider what happened when in 1917 the Imperial government asked Sir Robert Borden for a loan of $50,000,000 to help them out in their struggle in those strenuous days. What happened? Overnight almost, a policy of controlled inflation under the system asked for was put into force and $50,000,000 were sent to England to help them over there. Canada did magnificent service at that time by suspending the redemption of dominion notes in gold.
Personally I agree we need in Canada more credit; we want to put an end to credit restriction; we want more confidence among the people; we want the banks, the money lenders in this country, to have less say in monetary and fiscal policies and have them laid down by the house and directed by the parliament of Canada through the government. The more we reduce the dual capacity of our Canadian banks, in the first place as money lenders and in the second place as dictators of Canadian financial policy, the better it will be for the Canadian people.
In conclusion I wish to say this: we have had in Canadian history several successions of great issues. In the first place we had provincial issues in the different provinces. Then we had the great battle for responsible government. Then we had the great debate entered into by the fathers of confederation. Then we had a fiscal policy which particularly since 1878 has divided the two main parties throughout the Dominion of Canada. Then unfortunately we had in our history some racial and religious issues which divided these two parties. Then we had a great issue that arose during the great conflict of 1914-18. But never in Canada have conditions of an economic depression forced a recognition of the necessity of all parties, regardless of previous principles or political affiliations, studying carefully the financial system and monetary method of our land. This is not a normal depression; this reminds me of some of the great European cataclysms of the past -for instance the fall of the Roman Empire, the renaissance in Europe, and the social, political and industrial upheavals in England and France in the eighteenth and nineteenth centuries. Speaking for myself I say that the policy of the Liberal party at this time in Canada should be to look to the left, to look to the interests of the consuming masses of our people and not to be afraid to change any laws which are built up on class lines. The solution for the present depression will be found in fearlessly developing that policy which will be in the interest of the consuming masses throughout our Canadian land.

Banking-Mr. Bennett


Richard Bedford Bennett: Mr. Speaker, because I have had the responsibility, particularly during the last few months and until a few weeks ago, of administering the Finance Act, I shall make, without further delay, the observations that I desire to make to this chamber.
I have followed with some interest the remarks of the hon. member for Vancouver Centre (Mr. Mackenzie), and his references to the technical side of the economics of the gold standard are worthy of a great occasion. But we are dealing with practical circumstances and facts. Unfortunately his knowledge of the issues of dominion notes is hardly accurate, as I shall presently point out. As for the suggestions made by the hon. member for Macleod (Mr. Coote), I think I shall be able to show to the chamber that if they were adopted it would mean the ruination of this country at this time.
In the first place, may I merely amplify very briefly some of the dbservations made by the hon. gentleman who has just taken his seat. Why is gold used as a standard at all? That seems to be the first question that might reasonably be asked. The answer is fairly clear. First, it is rare; second, it is convenient, and third, it has, by reason of those circumstances if you will, and others, a value that is uniform throughout the world. Hence it was, as the hon. gentleman has pointed out, that it became the standard for values. It was worth just as much in Australia or Hongkong or London as it was in Paris or Washington or Ottawa. It had a fixed value that did not fluctuate with changing conditions. Therefore, for these and many other reasons to which on this occasion time will not permit me to refer, gold became a standard for values and we refer to it as the rare metal, the metal of value, and in other terms of that kind. We in this country, prior to and since confederation, have treated gold as a standard for values of our monetary system. I shall not do more than refer to the statute that is the law at the present time. That statute, with which I trust most hon. members are familiar, requires that the issue of dominion notes up to $50,000,000 shall be supported by a coverage of 25 per cent of gold. That is, when the Dominion of Canada emits $50,000,000 of its legal tender or promises to pay, on demand, there lies in yonder treasury $12,500,000 in gold, that being the ratio between the issue of paper and gold which we have by our statute provided. We have also provided that for any sum beyond $50,000,000 we shall have one dollar in gold for every dollar so issued. We also provide that ten per cent of all the deposits in the
Post Office Savings bank shall be covered by gold.
May I point out to the house that the hon. gentleman was slightly in error in connection with the present issue of dominion notes. If hon. members will turn to page 2188 of the Canada Gazette and look at the circulation and specie return for the 31st day of January, 1932, they will [DOT] find that we have altered slightly the form of the return as it used to be made in years gone by, believing it to be desirable that any person who wished to do so might by looking at that return ascertain exactly what the gold coverage of this country was with respect to our issued notes. First, under chapter four, 1915, there was an issue of $26,000,000. The hon. gentleman who has just taken his seat suggested that possibly $10,000,000 has been retired. I point out to him that the whole 826,000,000 is still outstanding. Then under the Finance Act of 1927, chapter seventy, there was an issue of $45,000,000. That represents the notes issued by the Dominion of Canada under the statute of 1915 and under the Finance Act, now being chapter seventy of the Revised Statutes of Canada for 1927, amounting to a total of $71,000,000. Then there has also been issued $99,382,805.69 in dominion notes, covered as to $50,000,000 by 25 per cent of gold and as to the balance dollar for dollar. Those three items-the $26,000,000 issued and still outstanding in its entirety, the $45,000,000 also issued and still outstanding in its entirety, and the issue of $99,382,805.69, make a total of $170,382,805.69. May I point out to the hon. member for Macleod that we still have outstanding at this hour over $71,000,000 of notes which are not covered by gold in any way, shape or form. So what he asks for has already been done to the extent of $71,000,000.
But further with respect to the $99,382,805.69 of dominion notes outstanding, it is only a matter of computation that it requires $61,882,805.69 worth of gold to cover them; that is, 25 per cent up to $50,000,000 plus dollar for dollar for the balance of $49,382,805.69, making a total of $61,882,805.69 which we have in our treasury to cover, may I point out to the hon. member who has just taken his seat (Mr. Mackenzie) not the $170,000,000 but only the $99,382,805.69 issue of dominion notes. That is provided for by the Dominion Notes Act. The result is that at the end of the month we had nearly $5,000,000 of gold beyond what was required. That is (a) ten per cent to take care of the post office savings bank deposits; (b) $61,882,805.69 to take care of the dominion notes outstanding under the provisions of the statute, by which 25 per cent.
Banking-Mr. Bennett

in connection with the fleet. You will all recall that immediately there came from Holland and the other continental countries vast sums of British securities. These were thrown upon the market on Friday afternoon and all Saturday morning for any price they would fetch. Securities wrere sold for fifty cents on the dollar, or even less than that. As soon as they were sold the seller demanded gold, and although the Bank of England stopped payment on Saturday noon-it was announced to the world on Sunday

the fact is that approximately ten million pounds in gold were taken from the bank Friday afternoon and Saturday morning. The result was the bank could no longer sustain the demand made for gold; the free market had disappeared; it could no longer meet the demands for gold in exchange for paper. That being so, late Saturday night the bank concluded to go off the gold basis and the Chancellor of the Exchequer made the announcement which appeared in the papers oa the succeeding day.
Now, look at what we had to do. It affords me an opportunity to tell this house, because the wisdom of what we did do has been questioned. The message to us was in cipher. It was decoded late Sunday night. It was impossible in the very nature of things to gather our colleagues about us. A decision had to be taken. What were we going to do? What would you say about your country under similar circumstances? Well, the statement I made, as you recall, was perhaps in fifteen words; I said it was for the people of Great Britain to determine what they would do but we would continue to meet our obligations in gold where we had promised to pay in gold. We had to do that or our credit was gone. We were deprived of the market for our securities. England being no longer in a position to meet any requests we might make for assistance, having failed to maintain her position as a free gold market despite the advances made by France and oy the United States in the form of gold credits, we were thrown upon one market and one market only-the market of New York. And not only that. Upon what we said that night depended the credit of this country. Let us have no misunderstanding about it. The international bankers of that city knew far better than some of the members of this house the terms of our Finance Act, our Currency Act, our Dominion Notes Act, our Bank Act. It is not necessary for me to do more than make that statement. They were aware therefore that technically since 1929 the country had been off the gold standard 
as the hon. gentleman has defined it, but we were still working under the provisions of the Currency Act which provided gold coverage in the terms enacted for our dominion note issue. I said we proposed to meet our obligations in the terms of our promises, and we have done so. The only reason we assisted the provinces was to enable them to meet their obligations in the terms of their promises; that is all. Of course it does not follow that this means there is any difficulty in the situation of the provinces; it does not mean that they have become bankrupt. It only means this, that for the purpose of meeting obligations for which they were not able to supply gold at the time, we had to assume the responsibility of helping them, and we have advanced money for that purpose. That is the position in connection with the application of the gold standard to our country.
The modern tendency is to believe that forty per cent is a sufficient average metallic coverage for bills. That is, instead of 25 per cent up to $50,000,000, and thereafter dollar for dollar, the modern thought is that if we have 40 per cent coverage for all our issues we will be safe. That is the generally accepted rule to-day, and you will observe that on the last day of January the total outstanding was $170,000,000. Forty per cent of that makes a total of $68,000,000, and you will observe that while we did not have that $68,000,000, nevertheless our coverage of gold so nearly approximated it that the credit of this country has steadily improved. I say frankly that but for Great Britain going off the gold standard, and but for the depreciation of the pound and the difficulties the pound has experienced, the dollar of this country would be worth par or practically par in New York. About that there need be practically no difficulty. That is the reason why this government has laboured day after day and week after week, first to create and then to maintain a favourable trade balance; because we could not face the possibility of having to pay in the only medium that would be accepted universally, gold, an adverse balance which a year ago, Mr. Speaker, was $103,000,000. We have converted that into a favourable balance where the gold due to us is between $10,000,000 and $15,000,000.
I do not ask you, sir, or this house to treat that as a great tribute to a government, because the Canadian people have done it. They have had to undergo many difficulties and many privations, and they have made many sacrifices to do so. It has inconvenienced many great merchants, but in the long

Banking-Mr. Bennett
run I am in the judgment of the house and of those who have given thought and consideration to the matter when I say that I believe if we had done aught other than we did we would have failed in our duty to this country at this time. I believe that will be the judgment of those who have given much consideration to the question. It may interest some of my hon. friends opposite, who should take an equal pride with us in the matter, to know that there are economists who say that the greatest single achievement that has been brought about by any country in the world since the depression has been that of ten million people in Canada, who have converted an adverse trade balance of $103,000,000 into a favourable balance.
Now we get down to the question of credit. I wonder if any man in this house will say there is a lack of credit facilities in this country at the moment, having regard to the security that is available for the credit asked. I have discussed the matter with men who have asked the banks to lend-what? It is not their money; for remember that the banks have no money of their own; their capital and reserves are locked up not only in buildings and facilities but in reserves of cash, and the money they loan belongs to the small and big people of this country who have their deposits in the banks. In nine cases out of ten my observation has been that when I have pinned down the applicant who complained, with this question, "Would you lend your money on that risk," in most cases, sir, he has said to me, "No." You go into the bank and ask for $1,000-of whose money? It is $1,000 of your neighbour's deposits, but you ask to borrow that $1,000 of your neighbour's deposits, and when the banker asks what security you can give, you say, "Well, I am going out on a farm. I have not got one yet, but I expect that I will be able to get a soldier settlement farm on reasonable terms; I am going to work it, and they will help me with respect to a crop." Do you think you would want your money lent on that security, if it was on deposit? Do you think that is a risk that would enable you to draw your money out of the bank when you write your cheque and present it? What is the reason that in the United States four thousand banks have failed in the last two years? It is because their assets were in securities that were not convertible into cash so that the cheques of their depositors could be met.
The business of banking is what? It is a simple thing; it is the maintenance of an equilibrium between demand deposits and demand loans and between time deposits and
time loans, so that you or I, drawing a cheque against that bank, may be certain that the bank will be able to pay what we call cash for it, notes, over the counter when the cheque is presented. In other words if my deposit has been put into a frozen credit that cannot be realized upon, the bank is insolvent, and that was what happened in the United States. That is the reason why this vast fund has been created in that country, at the instance of the president, for the purpose of enabling an organization to take up these securities that were not otherwise salable at the moment. When I say, sir, that the banking system of this country has been the sheet anchor of Canada in this period of depression,
I but state a commonplace. There is not one of us who, however small or large may be his deposit in a bank, cannot with certainty draw his cheque upon that fund to-day and know that it will be paid. The business of the Department of Finance has been to watch, to scrutinize and to care for the whole financial structure so that there should not at any one time be any such loaning of demand deposits upon time loans that when a cheque was drawn it could not be paid.
Now, sir, in the light of those facts is there a single member of this house who would say we should substitute, for a system that maintains a coverage of nearly 40 cents on the dollar for all our legal tender outstanding, a system under which there is no coverage at all? Where would your credit be? I put it to you, sir:	Where would your credit be?
That is the history of what has transpired. I could develop it further; I may have to do so before the session ends, but this affords a very reasonable opportunity to say to this house what I have said. The Bank Act will be up for revision next year, and there necessarily must be dealt with two or three large problems touching the whole banking structure of this country. One of them was alluded to both by the hon. member for Macleod and by the hon. member for Vancouver Centre, namely a central bank. While our Finance Act enables the banks to come to the treasury and obtain legal tender, on depositing bonds of this country or of the provinces, or other prime securities, it will be observed that there is no coverage for these legal tenders thus emitted, and it follows that the question whether a central bank might not offer rediscount privileges and opportunities somewhat larger than those provided by the Bank Act is a matter well worthy of debate, especially in view of the fact that we have beside us the greatest credit organizations in the world. It might be possible to make a closer
Banking-Mr. Bennett

association with them by reason of the fact that you would substitute for a government organization a central bank organization which would not be the government itself but really an arm of government.
I want this house to understand that I am not expressing the view that a central bank is desirable. I am pointing out that the question is well worthy of consideration, that all has not been said about it that will be said, and all that can be said with respect to the question cannot be said upon the one side.
Under these circumstances, without labouring this matter unduly, for I have trespassed too long upon the time of the house already, I would say to my hon. friend from Maoleod that the Macmillan report was mot prepared in a day, nor was it prepared by any organization that might in any sense be compared with the committee on banking and commerce. I happened by accident to have a very brief discussion with the chairman of that committee while the report was still in preparation, and if you knew, sir, the amount of effort and toil and labour that was put into 'the preparation of that report, the number of people whose opinions were received, discussed and analyzed, you would realize 'how futile-I use the word not offensively-it would be to expect that from that committee would emerge a solution of this problem which we desire.
The opinions of individuals in their own country are of tremendous value. The opinion of a Canadian dealing with Canadian problems, knowing our nearness to the great republic to the south and our dependence, in a sense, for fresh capital, from the standpoint of the sale of securities, upon some country other than our own, when it gets beyond a certain limit.-all these are factors that must be considered and must influence the mind and judgment of the men who are to deal with them.
I therefore suggest to the house that the closest study be given by each individual member to all the problems that are connected with currency and credit, and with the allied and kindred matters that affect the financial structure of this dominion. If I thought for a single moment that to add, beyond $71,000,000 erf the present outstanding, unsecured ,paper money of this country, another twenty-five, or thirty or forty millions of dollars, would cure unemployment, would lift the depression and would end all our troubles, I would have no more hesitancy in asking the house for it than I have in asking the house to pass any estimate that is sub-
mitited to it. And there is not a member on either side of the house whio would hesitate for a single moment so to do. But in the end one has to give to these problems the best judgment one has, and at a moment such as this, when we have institutions that have stood the shock and stress and strain of the most difficult period in our history, financially and otherwise; when we have institutions that have thus sustained these shocks with credit alike to the Canadian, people and to the institutions themselves, difficult though it may be a-t times bo understand why we should not at once change these things, the answer is that there is no assurance in anything that has been said or any suggestion that has been offered, that to substitute the bald credit of the Canadian people for a credit that is sustained at the moment by $70,000,000 of gold coverage for the notes that have been emitted by the country is an experiment which this government dare not sanction. Moreover, if its credit abroad is to be considered, if our reputation for meeting our obligations is to be considered, does anyone for a moment suggest 'that we could substitute the notes of the Dominion of Canada-thousand dollar notes and others-to pay bills in New York? Does anyone suggest that?


George Gibson Coote: No one has suggested it that I have heard.


Richard Bedford Bennett: The suggestion means
that or it means nothing. It can be of no value unless it means that, because there is $71,000,000 of inflated currency, using this language not properly nor technically, $71,000,000 of uncovered currency in this country at the moment, and we know the circumstances under which it was issued. For that reason and for many more reasons that might be given to the house, without going into a long and elaborate explanation of all the circumstances that have influenced the government with respect to each matter, we have been compelled to take decisions. And one of the decisions we have taken is that it is neither meet nor proper nor in the interests of this dominion that at this time this question should be thrown into the melting pot by a committee, not of experts, men trained for the purpose of considering them, but by a committee selected from the house of members, eminent in their own respective spheres, but, as the hon. member for Vancouver Centre has just said, untrained to deal with these problems. The proper time and place will be when the next revision of the Bank Act comes up, when opportunity will be afforded before a committee, select or otherwise as may be deter-

Banking-Mr. Pouliot
mined, to deal with the whole problem of the credit and financial structure of the dominion.
Mr. JEAN-FRANCOIS POULIOT (Temis-couata): I do not wish to interrupt the Prime Minister (Mr. Bennett) in his very interesting speech, but there are many anomalies in regard to the question of our currency and the gold reserve which I think should be explained. France, for instance, has a surplus of gold, and yet the franc has been stabilized at around 4 cents instead of 20 cents, which was the standard value. Again, England at the present time is receiving monthly about as much gold from India as is produced in the whole world during the same period, and at the same time the pound sterling is considerably below par.
There is one suggestion I would make to the Minister of Finance (Mr. Rhodes). Reading over the report of the Department of Finance I was quite surprised to see that more than one-half of the assets of each bank in Canada is stagnant in immovable property. This explains the lack of circulation or the stagnation of credit. Will it be possible for the Minister of Finance to take that fact into consideration in order to facilitate the circulation of money by controlling to some extent the construction of bank buildings?


William Irvine: If the resolution introduced by the hon. member for Macleod (Mr. Coote) had produced nothing further than the speech of the hon. member for Vancouver Centre (Mr. Mackenzie) and the speech we have just heard from the Prime Minister (Mr. Bennett) it would have been well worth while. From different points of view, the presentation^ by each of these hon. gentlemen was certainly admirable, and their speeches will be instructive to those who are interested in the question.
The Prime Minister showed in his most able speech that he is better acquainted with theories than he would have us believe, and certainly he has all the practical knowledge which a man in his position could possess. Nevertheless, I wish frankly to take issue with the right hon. gentleman on some of the things he said. Though perhaps I have less practical knowledge than he has of the question under discussion, I represent another point of view, and inasmuch as there are several points of view possible I suggest that any view is certainly something which is well to the point and should be discussed.
The resolution which has been presented is similar to the one which passed the house in
1923, I believe. Unfortunately, however, the investigation that took place at that time was of no avail; the information which was collected by that committee was quietly buried, and all the expense involved in the study of the question was practically lost, except perhaps that the members of the committee had an opportunity to go exhaustively into the question. As has been stated by other speakers, this resolution asks that an inquiry be taken into the question of banking, currency and credit in Canada and also that the committee consider the advisability of amending the Dominion Notes Act to eliminate the provision for the redemption in gold of dominion notes.
The Prime Minister dealt extensively with the latter part of the resolution, namely, the danger to this country if we were to abandon the gold basis. The Prime Minister pointed out why gold was first selected as a basis for currency and credit. One of the reasons given was because it was rare. I must agree with that, but I answer that it is too rare. With all due respect to the difficulties with which I know the Prime Minister and the Minister of Finance (Mr. Rhodes) are faced, I contend that the thing is so rare as to be dangerous both to Canada and to all other countries.
The next reason given was that it was convenient. My reply to that is that it is not convenient enough most times, while it is too convenient on some occasions; it is too convenient at the present time for the well-being of Great Britain-it was removed just when she needed it most. The greatest difficulty with gold is that at the time we require it most, it is not there. It is too convenient in so far as its ability to be moved by others is concerned.	_
I disagree with the Prime Minister in his statement that gold is necessary as a standard. Gold never really has been a standard, nor do I expect it ever will be. Let us look at the absurdity of it. According to the statutory provisions referred to by the Prime Minister, for the first $50,000,000 of notes issued by the dominion we must have twenty-five per cent in gold; for all above that we must have dollar for dollar in gold. Let us apply that principle to other standards. Let us take the standard by which we measure energy, the unit of horsepower. Let us suppose parliament passes an act this year whereby we must develop no more horse-power from our water resources or our coal than we can provide living horses. Would anyone say that that was an intelligent thing to do? Yet we are asked to have a unit of value, we are told that we can have only as many units of value in circulation as
Banking-Mr. Irvine

we have gold dollars hidden away in some vault. I would not mind that if we had the same power to create gold as we have to raise horses, but we have not. The amount of gold we may have depends upon many factors beyond our control, and this makes it almost absurd to speak about the thing at all. As a standard of value it has never been adequate, and the requirements in respect to its being a standard are positively absurd. We do not require a horse for every horse-power of energy developed in the country, and we should not be required to have a gold dollar for every unit of value issued by the state to carry on its ordinary business.
The Prime Minister pointed out that there are $71,000,000 of notes outstanding to-day against which there is no gold. We know that those $71,000,000 of notes are as well backed as any note backed with gold. Canada does not have to limit her backing to one commodity; all commodities required by mankind have a value and behind that $71,000,000 is not only the wealth of Canada and what they may produce but also the good faith of the Canadian people, which is even of greater importance.
I understand the Prime Minister to point out-he will correct me if I am wrong-that we have coming due in the United States approximately one million dollars per day.


Richard Bedford Bennett: Outside of Canada.


William Irvine: It is an unfortunate fact
that we have borrowed too much outside of Canada. Of course, that cannot be charged to this government or to any particular government, but we must deal with the facts. What do we get from the United States or any country when we borrow money? Do they give us gold? No. Do they give us their bank notes or their state notes? No, they do not. When we borrow from any country we get merely a line of credit, which we had before we went to borrow. There is no reason why any undertaking, industrial, private or public, could not be financed by credit issued in Canada direct without having to go to New T ork or other parts of the world for it. The unfortunate plight in which Canada finds herself to-day has been caused by her borrowing so much, in terms of gold, from other nations. With the present restriction on gold she now finds herself called upon to meet those obligations in gold. This is a situation which we should seek to remedy; we should borrow at least within the British Empire, or, preferably from ourselves.
The Prime Minister stated that if the section of the act dealing with the redemption in 
gold of dominion notes were repealed our dollar would drop to possibly twenty-five cents. I submit that the Prime Minister did not sufficiently amplify that statement. As he has said, we already have outstanding $71,000,000 of notes for which there is no gold backing, and the dollar has not dropped to twenty-five cents. Why then could we not issue some more without seriously reducing the purchasing power of the dollar? I suggest that if such issue were not sufficient to inflate the currency, values would not be affected at all. And what is inflation? There can be no inflation in any country as long as there is not more money in circulation than there are goods upon the market to be purchased by it. No one will say that there is not a good deal of room in Canada for more money to be circulating than is circulating at the present moment. Why not issue the proper amount, and not so much that all value is lost?
Strangely enough, the further we go off the gold basis the more gold will be secured. How did France get all the gold she has? She got it by stabilizing her franc off the gold basis and thus created abroad a tremendous demand for her own goods. Her export trade became so great that she did not require to take goods in exchange and demanded gold, the result being that she pulled the world's gold into her vaults. The same thing would apply to Canada. If we were a little further off the gold standard than we are at present our export trade to the United States would be greatly stimulated. We could take payment in gold for the resulting favourable trade balance and before long we would have more gold in this country than we can hope to have by maintaining the gold standard.
I do not intend to follow this matter any further in its technical possibilities than is absolutely necessary to indicate ithe points in the Prime Minister's speech with which I disagree. I come now to the next point raised by the Prime Minister in respect to that portion of the re-solution which refers to credit. He asked: Is there a lack -of -credit facilities in Canada? I reply, most -certainly not. Our credit facilities are admirable, -perhaps equal to if not better than those to be found in any other country. The next question propounded by the Prime Minister was: Is -there any lack of credit security? Again I answer.
I do not -think there is. He then asked: Is there any lack of credit being issued? He answered this question himself in the negative. He held, as I -believe all bankers will hold with him, that for every well-secured proposition for credit put up to the banks they are ready to give credit. I believe that is -true,

Banking-Mr. Irvine
but these are not the questions we want to ask in connection with the proposed inquiry. Let me state the question which I believe we must ask and which is more important in connection with the matter immediately before the house .than the ones which the Prime Minister propounded. It is this: Were price levels lowered in Canada as a result of credit contraction, or was credit contracted as a result of the lowering of price levels? That is the question which has to be settled. At the present time price levels are so low that the returns on many investments will be very doubtful, and perhaps no amount of security would be considered adequate to cover a loan under present conditions. If a man is engaged in the manufacture of boots, where the price level is so low and business so poor, no matter how good his factory may be, he may have difficulty in securing credit. The same applies to agriculture; the same applies to any industry in Canada. Supposing any hon. member to-day had $1,000,000 that he wanted to place: where would he invest it? Would he invest it in railways? Not in their present condition. Would he invest it in agriculture, either in this or in any other country. No. Would he invest it in .coal mining? No. Where would he find a place to invest that $1,000,000 in the hope of having a reasonable return upon his investment?


Agnes Campbell Macphail: In government bonds.


William Irvine: Yes, government bonds
would be the only thing left in this country or in the United States in which it would be considered safe at this time to make an investment of that sort. The question we want to ask is: How did that situation arise? Did price levels drop so as to discourage investment and to impair credits in that regard because credits were first contracted by the banks, or is the reverse the case? That is a question that is surely worth while investigating. I do not think it would be difficult to discover the truth of the matter were we to go about it as investigators. I imagine that the really accurate figures of price levels in Canada month by month over the past few years would indicate to us where the price level began to drop sharply, and the banking records would indicate very clearly when credits began to be contracted. If by a comparison of the two, it should turn out that banking credits began to be contracted before prices began to fall, we would be right in assuming that the present depression came about largely through the action of the banks in the first instance. That is the question to be settled, and I do not see how it can be
settled except through such an investigation as has been suggested by the hon. member for Macleod.
I think the investigation is very necessary also because of its educational value not only to the house but to the country No one will deny that the question of finance is more in the public mind to-day than it has ever been before in our history, and no one will deny that there are few subjects upon which there is more abysmal ignorance generally than there is on that question. So, if for no other reason than that we might bring a more accurate knowledge of the subject within the range of the general public, it might be well worth while to have an investigation of this sort. Further, I think we ought to have an investigation because of the fact that next year the Bank Act will be brought up for its decennial revision. It is too late to start to think about that when we are busy revising the act; the time to get the information which should guide us in the revision of the act is now, a year ahead. I recall the last revision of that act. We came here to tackle the revision of a very long and complicated piece of legal machinery. A large proportion of the members of the banking committee are at all times neither lawyers nor bankers, and if they are to do justice to their position they have to wade their way through every part of that statute and try to understand it. If as a parliament we are going to do justice to that act, we must get information beforehand. The proposed inquiry would be of assistance in preparing parliament for its task of revising the bank act next year.
I think there is a great deal of force in the statement of both the hon. member for Vancouver Centre and of the Prime Minister that the banking committee is perhaps not the best kind of committee to investigate a subject of this nature. The banking committee for one thing is too large and cumbersome and the time at its disposal will be much too short to make the investigation that will be necessary. But just because it is true that the banking committee is not the most fitting body to investigate finance, that is no reason why we should drop the investigation entirely. Therefore, in spite of the more or less definite attitude of the Prime Minister, I hope he will reconsider the possibility of having an investigation. The question is not whether we want to go off the gold basis; the question as I see it is this: have credits in Canada, by adherence to the gold standard or basis, been so limited in volume as to have done violence to business and industry? Another question which deals directly with credit is this: Were
Banking-Mr. Irvine

credits contracted in Canada iby the banks prior to the drop in the price level, or did the price level drop for some other reasons, with the result that the banks contracted their credit? The settlement of that question would be of great advantage in forming a policy. How can that knowledge be obtained without adequate inquiry?
In conclusion, may I suggest that with a greater knowledge than we now have of the subject, and if there is a definite relation between the volume of credit issued at any given time and the price level, it might be possible in future so to draft our Bank Act as to maintain hereafter some control of the volume of credit, thereby controlling price levels and also preventing a recurrence of a period of depression such as we are passing through at the moment. Therefore with all these considerations I submit that we would be well advised to cariy on the investigation proposed. If the banking committee is not the best equipped body to do so, let us find another committee, a special one or even a commission. The only objection I have to a commission is that commissions of that sort are composed, usually of bankers, and they always find that we have the best banking system in the world; that the gold basis is inevitable and that no other policy need be considered. That is the unfortunate thing about commissions on financial matters. Such results as I have stated have been the history of commissions in other countries, and I fear we would obtain similar results here if we were to follow a similar course. But even at 'he risk of that, I would be more in favour sf having a royal commission investigate this natter than of having nobody investigate it. May we not hope that the government will consider amending the resolution, if they so desire, so that it may go to some committee which will be competent to investigate a question of such importance to the people of Canada.


Henry Elvins Spencer: Mr. Speaker, I feel it is a great privilege to be able to take part in a debate of such importance, one on which so many very able speeches have been made. The field has been covered pretty fully. There are, however, a few points that I might touch upon which might be fresh.
First of all I will deal with the first part of the resolution which asks for an investigation into the question of banking, currency and credit. The second part has already been fairly well covered by other hon. members.
'Mr. Irvine.]
I am in favour of this investigation for the simple reason that when in 1923 an investigation was obtained, just before the Bank Act was revised, the excuse made when we asked for certain changes in the Bank Act was that there was not time then to go into the matter. But if an investigation were made this year we would be able to study the information obtained and thus be in a better position to make changes in the Bank Act a year hence. Nine years ago the then president of the Canadian Bankers' Association made the extraordinary statement that nearly all the changes that had been suggested and eventually incorporated in the Bank Act had been put forward by the bankers themselves. When one appreciates that the Bank Act is, or at all events should be, a bulwark to stand in support of the rights of the people against the private banking institutions, it is indeed surprising that such a statement could be made. But it was simply because the public generally left this subject severely alone, with the result that those most directly concerned with the Bank Act, the bankers themselves, took good care to change the act as they saw fit.
It may be just as well to briefly review how a bank is brought into operation. It is still a question whether it is wise for those who are applying for a bank charter to be compelled to subscribe $500,000 capital, of which $250,000 must be paid up. Is that sum too large or not large enough? The question might also be raised with regard to the privilege that is given to banks when they get their charter, to issue an amount of currency equal to their paid up capital. That is a free issue; it is doubling their capital practically at the cost of printing. The question might also be raised with regard to the five per cent of their paid up capital which is retained by the Finance department for the note circulation redemption fund, and on which three per cent is allowed by the government of Canada. One might also very well ask for further information with regard to this fund.


Mr. CAYLEY:: Does the hon. member say that the banks are permitted to issue currency for one-half of the'ir paid up capital?


Henry Elvins Spencer: To an amount equal to
their paid up capital.


Thomas Merritt Cayley: Who holds the securities?


Henry Elvins Spencer: There is no security. It is a privilege that is given to the banks when they get their charter. They are allowed to issue in currency an amount equal to their paid up capital.


Thomas Merritt Cayley: And give no security?

Banking-Mr. Spencer


Henry Elvins Spencer: agency through which they could use their credit. Every savings bank deposit we took in we had to reloan, and we therefore made less profit on it, because we lost the interest we paid to the depositor. That is how the business is carried on, and that is why in good times or in times of war when we have to extend the medium of exchange, a great deal of new money goes into circulation.
As to inflation and deflation, these subjects have been handled so well by other speakers tfeat I will not attempt to go over the same ground.


Edward James Young: What money did you lend
in those cases?


Henry Elvins Spencer: Money is a credit created by collateral and drawable by cheque. If the hon. member would give this subject the consideration it deserves, which I am sure some day he will

and I am confident he will make a very good student when he does-he will know that money is like a concertina, it can be extended or contracted at will by those who control credit. Banking to-day is largely a bookkeeping system, and the sooner we realize that the better it will be for everybody.


Thomas Merritt Cayley: If the collateral you took became frozen, as has happened in the United States, how would you manage?


Henry Elvins Spencer: That is where the skill of the banker comes in; he should not take any frozen securities. I want to point out that although the Dominion Notes Act allows us to issue notes up to $50,000,000 with only 25 per cent backing in gold, above which amount we are supposed to hold a dollar in gold for every paper dollar issued, the act might just as well be repealed, for under the Finance Act we can and do issue dominion notes to an unlimited amount to the various banks that bring securities to the treasury board to be discounted. These dominion notes are also payable in gold, but there is no gold behind them. Therefore if we issued under the Dominion Notes Act fifty million dollars worth of notes with 25 per cent gold behind them and under the Finance Act another fifty million dollars worth of dominion notes to the banks against the securities they brought to the treasury board,, we would have one hundred million dollars of dominion notes out with only 12J per cent gold' backing. It will be seen that the Finance Act at once undoes what was intended to ibe guarded against by the Dominion Notes Act. Not that I am critical of the Finance Act; I think it is one of the best acts ever put on the statute book.
IMr. Spencer.]
If we had an investigation as suggested by this resolution the committee might go into the question of interlocking directorates. For instance, it may not be generally known that Sir Herbert Holt of the Royal Bank is a director of upwards of one hundred and thirty-five corporations. Is it likely that a director of various corporations in different lines of business, who has a great deal to say with regard to the functions of a particular bank, is going to encourage the starting up of another business competitive with his own? Again it might be asked, is it in the interests of western Canada that the headquarters of all the chartered banks should be either in Toronto or Montreal?
The Prime Minister's statement with regard to the payment of gold interested me. He said: We made a promise that we would pay in gold and we have kept that promise. That might have been done in New York, but it certainly has not been done in Canada. Not that I am worrying about it, because I take the stand that it is not necessary to have gold behind dominion notes for internal circulation. Thekte Mr. J. G. Saunders, Deputy Minister of Finance, wrote me a letter with regard to the gold basis, in which he said:
The gold basis, so far as Canada is concerned, would require-
First; that the banks should redeem their note issues in gold when required;
I hardly agree with him there, except that I would say that the notes of the chartered banks are payable in dominion notes, and dominion notes in turn are payable in gold.
Second; that gold could be exported and imported at will; and
Third; that Dominion notes would be convertible into gold when required at the various offices of the assistant receivers general.
To-day none of these things can be done and therefore, accepting those views, we are not on the gold basis. I should like to place on record one or two statements made by Mr. McKenna, chairman of the Midland bank, in his report to the shareholders of that bank the other day. He said:
The time has gone by for the childlike belief that as long as a country is on a gold standard all is well.
Again he said:
The world crisis is due in part to the inefficient working of our monetary machinery.
Referring to England going back on the gold standard in 1925, of which hon. members will remember he was very critical, he said:
For upwards of six years our monetary authorities fought a losing battle on ill-chosen ground.

Finally I will quote:
"Monetary policy has a powerful and a direct influence on the prosperity of each one of us, and if it is misdirected no one escapes.
Because I believe in the statements made by this eminent banker, and because I am entirely in sympathy with the arguments put forward by the hon. member for Macleod and the other hon. members who followed him on this side, I am in favour of the resolution now before the house, from which I hope it will receive sympathetic consideration.


Milton Neil Campbell: Mr. Speaker, the financial policy of this and all outstanding countries of the world is not of recent growth; it is something that has grown up and developed over a long period of years, and it is too much to expect that it will be changed in a short time. However, a great deal of attention, time and study is being devoted to the subject to-day, and I should like to see every member of the house take the advice given by the Prime Minister (Mr. Bennett) and study this question, take it up seriously and try to secure all possible information upon the subject before the revision of the Bank Act next year.
Until very recently the men who questioned the orthodox system were generally looked upon as theorists, faddists or radicals with no practical experience, who were developing certain theories of their own. However, within the last two years particularly many outstanding and powerful bankers, big business men and statesmen, men whose word and authority cannot be questioned, have been asking serious questions about the banking system, inquiring whether or not that system might be modified to better serve the needs of the human family. Therefore I propose, Mr. Speaker, in the quotations I am going to place on Hansard tonight, to confine myself to the orthodox class rather than to university professors or students, or others who might be looked upon as theorists.
The question as to what is behind our dollar bill, the paper dollar, has figured very prominently in this debate, and on several occasions it has been pointed out that the ability to deliver gold, or something like that, is after all the only thing that makes the dollar bill worth anything. Let me say that the ability to deliver goods or something of value is the only thing that creates any value or any confidence in the dollar bill. It is not necessary that gold be delivered. Any citizen of Canada, securing a piece of paper, a dollar bill or a ten dollar bill, will set its value at what he can secure for that bill at the store or some other place. If he can secure certain 41761-42
Banking-Mr. Campbell
goods or services for it he is not going to inquire very deeply into the question of whether or not be can get gold. The main thing is the ability to deliver goods or services which is behind the issue of that piece of paper.
The question then arises as to what is the gold standard. Many refer to it as something that is fixed and determined, something that cannot vary from one day to the other. As a matter of fact it is as variable as the seasons. The gold standard is an ever-shifting, ever-changing thing. Some years ago the gold standard was whatever the Bank of England determined it should be. England was the great banker of the world, and what she said the gold standard should be was the gold standard. To-day the position has shifted and the United States has become the banker of the world; whatever the United States says constitutes the gold standard is the gold standard to-day. Not more than twenty-four or thirty months ago the gold standard of the United States meant that behind every paper dollar in circulation there was 38 cents or 40 cents in gold. To-day it means that there is 80 cents behind every paper dollar, so the gold standard has changed to that extent. It is as though a man contracted to deliver a certain amount of wheat, we will say, on the basis of four pecks to the bushel, but when he delivered the wheat he found that the standard had been changed to eight pecks to the bushel, and he was compelled to deliver twice the quantity for which he contracted originally.
I quite appreciate the position of the Prime Minister and the government in respect to a departure from the gold standard. The fact that we have tremendous obligations maturing regularly in the United States has imposed a terrible hardship not only on the federal government but on our provincial and municipal governments as well, because of the fact that we have to pay a great deal more than the value of our Canadian dollar. That is one of the difficulties with which we are faced today, but as the hon. member for Wetaskiwin (Mr. Irvine) pointed out, there is a moral in that situation, and perhaps in future we should try to do less borrowing in the United States and more at home. When we turn over a bond to a Canadian citizen we simply agree to repay in the currency of Canada whatever that may be, whether or not it is on the gold basis, so maturing bonds held in Canada do not impose on us any such obligation as is imposed by bonds maturing in the United States.
Recently the United States embarked on another policy, which I think in time will

Banking-Mr. Campbell

bring the gold basis back to the old standard so that there will not be more than 40 cents or 45 cents, or perhaps only 35 cents, behind each paper dollar. That is a policy of tremendous inflation, and I predict that before very long our dollar will be back at par in New York, not because we have done anything, not because there is any more gold behind our dollar, but because the United States dollar will have been devaluated and because more paper money will have been issued against the amount of gold in store.
In dealing with this question some time ago the Minister of Trade and Commerce (Mr. Stevens) pointed out very clearly how utterly impossible it was for the "debtor nations to pay their obligations to the United States in gold. He pointed out that the whole world production of gold,- if it were in the hands of those nations and used entirely to pay off debts to the United States, would not be sufficient to meet those obligations. I wish to quote now from an article that appeared in the Wall Street Journal, written by Mr. Thomas F. Woodlock. It is reproduced in the Financial Times of Montreal. One could hardly find two more orthodox sources than the Wall Street Journal and the Financial Times of Montreal, and yet this article seriously questions the efficacy of the gold standard and of the present banking system, and asks some grave questions as to modifications in that system. The writer points out first that in connection with the gold standard there are three main rules that should be adhered to. In the first place he says that gold should function primarily as a central bank reserve, and its only other function should be its occasional use in settling international balances. Secondly, and this is very important, he says that the creditor country should follow a liberal tariff policy. It seems to me that the great depression through which the world is passing to-day is due to the fact that the United States, when she became the great banker of the world, the great creditor nation, did not follow the traditional policy that a creditor nation should adopt. For generations, as long as England was the great banker of the world, she was prepared to accept her dividends, her annual payment, in goods, and so long as she did that trade flowed naturally through the channels of the world. When, however, the United States became the great banker she either was not prepared to do this or she did not understand the rules of the game and therefore raised tremendous tariff barriers against her debtors. She said, in effect, to those countries that owed her money, "We will not take

goods." As a consequence these countries shipped all the gold they could get until today there is an impasse; and until the United States changes her policy in this regard she certainly will be in no position to collect debts. That is pointed out clearly in the Wall Street Journal. This writer quotes an author by the name of "Peregrinus," who was writing in the London Times. He points out, as the Minister of Trade and Commerce told us some time ago, that the whole world production of gold outside the United States is not sufficient to meet the obligations, and that something must be done. He pointed out that if France and the United States, the two creditor countries, continued to observe the policy already described, then in his opinion there was only one course for the debtor nations to follow and that was to depart from the gold standard and get along as best they could without it. He then deals with the question of managed currency, one that has come up quite frequently in debates in this house but with which at the moment I have no time to deal. This writer points out that it is quite possible and feasible for those countries that are forced to go off the gold standard to arrange a managed currency in order to maintain a stable price level in their own domain, and they could then ship their reserves of gold to the United States and France in settlement of debts so far as they could. He also states, and this is important, that the moment these other nations went off the gold basis and the United States and France were left on the gold basis, the gold itself would immediately drop in value; its only value then would be for the purpose of filling teeth and making jewellery. It might therefore be an easy matter ultimately for these countries to settle their debts. He goes on to say that after all, the way things are going at the present time, these reparations and debts will not be paid at all. that the depression will continue until that fact is recognized and admitted all round, and that the spirit in which the admission is made will be of great consequence to the peace of the world during the next few years.
The question of a managed currency-and that is the only alternative to the gold standard-is one that was dealt with a few years ago by Maynard; Keynes, recognized as one of the outstanding authorities of the world. As I understand the theory of managed currency, it is that those who have the responsibility of managing it should take a certain index price. Say there are one hundred different commodities-wheat, copper, coffee, butter, hogs and so forth-and that the index

Banking-Mr. Campbell
price is established at 175. Now, the men managing that would have to watch the index carefully. At the end of a certain period if they found that the price 'had dropped, that is that commodity prices had gone down, they would realize that one of two things had happened; either that the volume of business had increased, in which event there would not be sufficient money properly to handle the situation, or that the circulating medium, the amount in circulation, had decreased and' was forcing prices down. In that case they would be faced with the responsibility of putting more money in circulation. On the other hand, if -prices had advanced, their duty would be to restrict money. The banks would be forced to call in loans and that would have a stabilizing effect, forcing prices back to their proper level. That is the theory of managed currency put forward by this writer and at the present time it is being endorsed by outstanding bankers as well as by men prominent in political and industrial life.
May I again refer to the article in the Financial Times of October 3, 1930. The very heading of -this article is significant:
Bankers favour abandonment of gold standard.
This appears in the Financial Times of Montreal. I have not the -time to quote from this as extensively as I should like to, but I will deal with it briefly. The statement is -made:
The downward trend of commodity prices has reached the stage where the efficacy of the gold standard is being seriously questioned by economists.
Further on it says:
It seems reasonable to assume that if central banks throughout the world insist upon maintaining their present standards of gold reserves, the phenomena of declining price levels over a considerable period of time may be observed.
And again:
The corrective for the monetary situation of sharply falling commodity prices is an easy money policy. An intelligent control of the value of gold is regarded as essential to improve economic conditions.
It goes on to point out the direct relationship between the amount of money in circulation and the commodity price levels. It shows clearly that if the amount of money is restricted prices will drop, and if the amount of money is increased prices will rise. The great problem we are facing in this house, the subject which is most discussed throughout the country, is unemployment. Now for thousands of years, for countless ages, one of the great aims and objects of the human race has been to have more leisure for study and medi-41761-m
tation, more time to enjoy oneself; and that very urge in the human heart has brought about the development of the machine. The machine in turn has displaced labour, giving mankind the very thing that has been asked for throughout the ages. It has given the human race more leisure. And that really is what unemployment is. I hold that the term unemployment is a misnomer; there should be no such word in our vocabulary as unemployment. Perhaps I cannot boil down into one word the idea it conveys, but I should call it an improper distribution of goods and services. People are not unemployed because of scarcity, for, as many have pointed out, this is an age of plenty. Never before in the history of the race was there as much food and clothing, as much in the way of service, transportation, electrical power and so on, for the good of the human race. Yet in the midst of all this plenty there is poverty. What we require more than anything else is a stabilization of prices, and it is borne out by many distinguished bankers that this is dependent almost entirely on the amount of money in circulation.
I come back to the Financial Times, of October 16, 1931. Prominently displaj^ed on the front page is an article by H. S. Denny, a consulting engineer of Toronto. I quote:
The granaries of the world are bursting with corn, and warehouses are choked with goods, yet hungry hordes are steadily increasing in numbers. They stand waiting in despair until the capitalistic Lords of Creation, under the guise of a benevolent solicitude, find some profitable method of bringing the producer and consumer together again.
The familiar picture of children flattening their faces against the plate glass of a candy shop display, mouths watering and suffering from an almost intolerable desire, is, in some respect, a small scale illustration of the world condition to-day. A few pennies-helter-skelter into the shop, money paid over, candies received, jaws vigorously working, happy children and consummation of trade.
Then rather significantly the writer says "but they have to have the pennies." The article continues:
The bankers of the grim poker game called "life" have decreed that chips shall be excbang-able only for the commodity called "gold," and with scrupulous care and unscrupulous methods, have taken infinite pains to corral all but an insignificant percentage of that metal in their own vaults. There is no escape from the game. All human beings must play-there is no choice -be the stakes large or small, and willy-nilly the player must provide himself with chips or starve.
I direct the attention of the house to the fact that this article does not appear in a radical paper; it appeared in the Financial Times of Montreal.
Banking-Mr. Campbell

In connection with over-production, of which we hear so much to-day, I should like to refer the house to a pamphlet which has been published by Sir Henry Strakosch, G.B.E., a distinguished financier and economist of Great Britain. He lays down the general principle that there never has been over production, it is under consumption. After giving some figures of his own he bolsters up his argument by quoting Mr. Carl Snyder, the statistician of the federal reserve bank of New York. Again I would direct the attention of the house to the fact that this is not from a radical source, it is from an extremely orthodox source. Sir Henry points out that Mr. Snyder contends that during the past fifty years production has been increasing in the United States at the rate of about four per cent per annum compounded annually, while world production during the same period increased at the rate of three per cent, the world population increasing only by one per cent. That is, the production of the world on a per capita basis has doubled in fifty years. He goes on to point out that in the same period the consumptive ability of the human race has doubled. We are using radios and motor cars, we are wearing more clothes, eating better food and living in more comfortable houses than we were many years ago. Mr. Snyder has pointed out that this is capable of infinite expansion. Sir Henry asserts that the amount of money in circulation determines whether goods shall be consumed or shall pile up in the warehouses to create this thing we call overproduction. To quote directly from his pamphlet, he says:
A symmetrical increase of production of this kind in effect raises the standard of life of the people, and that, it is almost unnecessary to say, is capable of practically infinite expansion. No disturbance in the exchange of the greater output of commodities need, or does, arise in these circumstances, provided there are available media of exchange in the form of money of all kinds to an amount that corresponds to the increased volume of exchanges that this greater production necessitates. If it is available the general level of commodity prices will remain stable. It is only when the available amount of money is either less or more than is needed to effect these exchanges that the general level of commodity prices will fall or rise as the case may be.
I again quote from another extremely orthodox source, the representative of the great Mussolini. A despatch from Paris dated November 26 in connection with the opening of the disarmament conference, quotes Senator Boriello of Italy, as follows:
It is insufficient to disarm the military forces of the world. We must disarm the international bankers. We must have tariff disarmament fust as we have reduction of weapons.

It is my conviction that there will never be a permanent improvement in conditions until the outstanding nations of the world agree on some monetary policy, whether or not there is gold behind it, to provide elasticity sufficient to meet the growing needs and changing conditions. Of course, Canada cannot control world conditions but she can do her share to set her house in order, she can reorganize her monetary system to an extent to prevent any sudden drastic upsetting of the commodity level; she can provide sufficient safeguard to prevent the sudden and violent deflations of currency which have occurred during the past few years. I refer again to the Financial Times, the issue of January 16, 1931. The article from which I intend to quote refers to the now famous speech of Mr. C. E. Neill, vice-president of the Royal bank, and to the remarks of Sir Herbert Holt made on the same occasion. These remarks startled the whole banking fraternity because they questioned the orthodox system. The editorial reads:
A bank president who speaks with the voice of assets totalling nearly nine hundred millions of dollars (after a year of deflation) is entitled to speak with authority.
The article states that a remarkable change has been taking place in the opinion of leading bankers as to the necessity of a rigid adherence to the gold standard. In referring directly to Mr. Neill's remarks, the editorial says:
But he made it very clear that the standard could only be adhered to if a much greater degree of wisdom were shown in the international management of the gold supply than has been in evidence since 1918. Perhaps the most significant sentences in his whole speech were those in which he stated that if the principal central banks of the world had decided, upon the collapse of the stock market boom, that drastic contraction of currency and credit were not to be permitted, they could have effectually prevented the fall in the price level; after which he went on to say that "the countries with fiat currencies, such as Argentina, Uruguay and Spain, are not suffering anything like as acutely as the gold countries."
I have many other quotations which I would like to make from the Financial Times, but I see that the clock is moving rapidly towards eleven o'clock and I will have to cut them short.
I should like to refer briefly to an article which appeared in the Financial Times of September 26, 1930. This article comes from New York and in dealing with the gold standard it refers to the figures of Sir Henry Strakosch, already quoted. It refers also to Sir Josiah Stamp, a gentleman not unknown in

Banking-Mr. McIntosh
Canada. Sir Josiah is quoted as asserting that the menace arising from the inefficient use of gold "is the worst danger that eight years ago any of us could have feared, and finding us drifting still further into economic disaster." The article continues:
Sir Josiah Stamp appears to agree with Sir Henry in scouting the convention that the severe decline in commodity price levels in the last fifteen months is due to overproduction brought about by rationalization and mechanization. Sir Henry argues that since the rise in the volume of production had been in progress for the last half century while the level of prices had risen steadily up to the war, there should have been no price break in 1929, provided the available money increased in proportion to production.
Again may I quote from another editorial in the Financial Times of October 24, 1930. In part, it says:
A few days ago the Manchester Board of Trade addressed an extended argument in the nature of a petition to Premier MacDonald of Great Britain, calling attention to the fact that our volume of world business was increasing and our gold supply decreasing, and arguing that this would result in a fall of prices and an ever-increasing depression. The report of the gold delegation of the League of Rations recently was to the same effect. It stated plainly that the world was facing a "gold shortage."
In conclusion I wish just to refer to a very interesting article in Saturday Night of February 6, 1932. This is by Doctor Donald M. Marvin, economist of the Royal Bank of Canada. I have not time to put on record the quotations that I should like to give, but I suggest that ihon. members who wish to acquaint themselves with the intricacies of this question, should read this article, coming as it does from a representative of one of our outstanding Canadian banks. This man disposes of the bogey of over-production. He refers to the Malthusian theory of population, that is that the human race must Starve or be killed off because we cannot produce food rapidly enough to take care of the increasing population. He says that to-day the problem has developed from the opposite angle. He goes on:
As far as present day society is concerned, neither the picture of severe deficit nor of unlimited surplus is descriptive. . . . Basically speaking, there is no general overproduction within the confines of civilized society.
He goes on to point out that it will be necessary before long for those countries hoarding gold to turn it to use, that is to issue more paper against it or else the gold itself will become of nlo value. This is exactly what is happening in the United States to-day. The United States has found that the sterilization of the gold there may mean that the gold itself will ultimately lose its value, and to-day they are issuing huge amounts of credit against it. Doctor Marvin further points out that present conditions forcing, as they are, other nations off the gold standard, are going to compel these nations to work out a managed currency. I have not time to elaborate the point, but this is the economist of the Royal Bank of Canada laying down quite clearly the idea that a managed currency without gold is not only possible but very probable in the near future.
I would say again that I hope all members in the house will take the Prime Minister's advice and devote some time and attention to the study of this all-important question before a revision of the Bank Act comes up again next year.
Mr. CAMERON R. McINTOSH: (North Battleford): Mr. Speaker, I did not intend until this afternoon to speak on this question, but during the last few days we have had quite a discussion on the currency, banking and credit problem, and as a member from Saskatchewan and western Canada I thought I had better say a few words on the matter. I listened with a great deal of attention this evening to the Prime Minister (Mr. Bennett) discussing this very important problem of Canadian banking and credit and I am free to say that I think he made one of the best speeches that I have listened to in the house so far as he is concerned.


Mr. MORAND:: Why the qualification?


Mr. McINTOSH:: Because I did not intend for a minute to say it signalized a clean sweep, but I want to be fair about the matter, and after abstracting from it any politics that hon. gentlemen opposite might have thought entered therein, make a candid admission that he gave a really fine exposition of the subject under review this evening. I do not think it does any harm to make an admission of that kind in the house in a matter of such moment. From the standpoint of quantity there was not too much to it, and from the standpoint of quality and volubility it was a fair sample of what one might expect from the opposite side of the house. There should be a good deal of credit coming to the Prime Minister for standing on the financial bridge of the ship of state and directing Canada during the last few months in such a way that the credit of the provinces has been taken care of and the credit of the dominion by his firm stand maintained in the markets of the world.
But I am free to say that I disagree with the Prime Minister when he intimates, as I think
Banking-Mr. McIntosh

the hon. member for Wetaskiwin (Mr. Irvine) also did in the house last week, a doubt- mark you, Mr. Speaker-that on both sides of the house that we had that ability, that financial training, that would make it safe for a banking and commerce committee appointed from the 245 members of this national commons to investigate the question of banking, credit and currency of Canada. I am afraid I must disagree with any member who takes that stand. I am one of those who believe that not always does every member stand up and discuss a question when it comes before the commons, whether he is well posted on it or not. One cannot tell by the number of members who discuss a question as to the developed ability of the house on it. That is a certainty.


Jean-François Pouliot: The hon. member is making the Prime Minister's speech.


Cameron Ross McIntosh: No, I am not. I am making my own speech. I believe we have in the house dozens of members who, on the spur of the moment and without any preparation by going through scrapbooks, newspaper clippings and files of the last five or six years, can make an intelligent speech on the question of banking and finance. That is my conviction.
I want to go a little further. I believe if that be the case-and I do not think it can be disputed-when the revision of the Bank Act comes up next year, we ought to have one of the strongest possible committees appointed from this chamber and, if it is necessary to nationalize that committee, let us do so. But let us get busy and make a thorough preparation for that investigation into the banking, currency and credit of Canada which must be made next year before we can say whether this or that part of the Bank Act must or must not be amended. We want to be sure of our ground, and for this purpose we must begin to make preparations now. I do not know what is in the Prime Minister's mind; I do not know whether or not he intends to leave this revision of the Bank Act until the next session without in the meantime making any preparation by way of the appointment of a national committee which might ultimately cooperate with a special committee of the house. If h.e does, then I am a little doubtful as to the report of that committee. But if so the committee should be appointed early in the session and given instructions as to what to do, I believe the ability that could be secured on that committee would measure up well to its responsibilities and a report would be turned in of which the House of Commons and Canada would not need to be ashamed. It is a question largely of time, not ability.	'

Further, may I say I heard the Minister of Trade and Commerce (Mr. Stevens) trace the history of money in a word, telling us how society has revolved around the dollar bill or the various kinds of money preceding it throughout the centuries and how as a result we have been brought out of the realm of savagery and barbarism into the definite stages of civilization through which we have been passing during the last few centuries. That is an interesting evolution and I listened with rapt attention to the hon. gentleman while he unfolded the tale. He gave an excellent analysis of the question. Then I listened to the hon. member for Vancouver Centre (Mr. Mackenzie) who, as one of the members of the official opposition, analysed the banking, credit and currency problem very carefully and successfully, and indeed, put the matter before the people of Canada so squarely as to state in definite and clear language where the Liberal party stands in respect to it, not only on the prairies and British Columbia but right across the whole dominion.
I think the Prime Minister made a very important point when he said that every member of this house should give this matter individual attention during the next year. I believe that every member has been giving it a fair amount of study, but when we consider what we have to do next year in revising the Bank Act, I think every member should give the question more attention than ever. As one of our great scientists has said, I believe there is no question which the human mind can ask to which it cannot in time give an answer. Every question, therefore, that we can ask about this problem we can surely answer if we will but patiently analyze the facts and dig up the answer. By getting a satisfactory answer in regard to this intricate question the development of society, the adjustment of agriculture and industry, and the building up of Canada as a whole will follow more naturally as fitting results.
Although the question of banking and currency and credit is undoubtedly a big one, one of the great questions before Canada and the empire and the whole world, I am not going to admit that it is the biggest question. I do not believe that it is. I believe that international debts and reparations are big problems, and that disarmament is another big problem. These are two of the big problems before the world, international debts and reparations, and disarmament. After those two I would place equally in importance, or even beyond them, the tearing down of extreme tariffs right around the world. These problems, three in

Banking-Mr. Coote
number, are equally as big as, if not bigger, than the question of banking and currency. They all go together, and we have to fight them in a block, and by fighting them in a block we can gradually overcome each one of them, and thereby strengthen the financial fabric of Canada and the empire of which we form a conspicuous part.
In conclusion, may I say that apart from the discussions that have taken place in the house, the big objective before us is what are we going to do at the Imperial conference?
I am very glad that this problem is to come before the conference, but I do not think that that is all that we ought to do about it.
I believe that the question should not only come before the conference, but be exhaustively analyzed there and the people of Canada be given the facts. We want the people educated along the line of this resolution. But beyond the analysis at the Imperial conference, and beyond the investigation we must have in this house in 1933, when the Bank Act is revised, there is no question that there should be individual preparation on the part of hon. members, so that everyone will know where he stands on it, thus doing his part to educate the people of his constituency so that we shall be able to bring united pressure to bear on this problem and the questions connected with it-international debts and reparations, disarmament and high tariffs-so that in the very near future these problems will have to fall down before the intelligence, the courage and the ability of those who are out to make Canada a bigger and better dominion and a more conspicuous self-governing unit in the British commonwealth of nations.


George Gibson Coote: It is quite obvious, Mr. Speaker, that in the short time at my disposal I cannot refer to all the statements and points of interest which have been brought out in this debate. I would, however, like to refer to the suggestion made by the Prime Minister (Mr. Bennett) that somebody had inferred that if we only got away from the gold standard it would bring in the millennium in Canada. May I say very emphatically that I do not believe that anyone ever suggested such a thing, but undoubtedly there are a lot of people in Canada who do expect the Prime Minister to bring in the millennium, and I am quite sure that so long as we remain on the gold standard he will not be able to do so.
I would also like to refer to the statement made by the Prime Minister that there was no shortage of credit facilities in Canada. I think I am stating the case fairly when I say that there is no credit in Canada for agriculture, Canada's greatest industry, and I do not see how that industry is going to continue to function unless credit for it is forthcoming. There is certainly credit for governments in Canada, but at what a cost? Recently two of our provinces floated loans to secure moneys for which they are paying six and a half per cent interest. If the interest on these loans is to be paid, it must be paid out of production. As Sir Thomas White, Canada's war-time finance minister said, speaking of Canada's victory loans:	If
the interest was ever to be paid it would be from the top six inches of Canada's soil. With the present prices for agricultural products, lumber products and mining products, how is the interest on these loans at six and a half per cent ever going to be paid? It is absolutely impossible. We are heading for a port which we shall not be able to reach so far as the paying of six and a half per cent on these loans is concerned.
The Prime Minister, either very carefully or accidentally, avoided one of the points raised in the resolution before the house. It asks the banking committee to inquire into the advisability of amending the Dominion Notes Act with a view to eliminating the provision for the redemption of dominion notes in gold. The Prime Minister dwelt at great length upon the fact that we should meet our foreign obligations in gold; that is, bonds maturing in foreign countries. No one to-night, so far as I know, has challenged that position. But under the Dominion Notes Act, Mr. Speaker, the dominion notes are redeemable in gold. Subsection three of section four of the Dominion Notes Act provides:
Dominion notes shall be redeemable in gold on presentation at branch offices established, or at banks with which arrangements are made for the redemption thereof as hereinafter provided.
Section nine provides for the establishment of these agencies. But, Mr. Speaker, the redemption of notes in gold is not taking place at these offices.


Richard Bedford Bennett: Wherever requested the
gold is available, but it is not permitted to be exported.


[Stage Direction]
At eleven o'clock the house adjourned without question put, pursuant to standing order.
[Stage Direction]
Civil Service
[Stage Direction]
Tuesday, March 1, 1932