Mr. SPEAKER:: I have the honour to inform the bouse that the clerk of the house has received from the chief electoral officer certificate of the election and return of the following member, viz.:
Of Georges Henri Heon, Esquire, for the electoral district of Argenteuil.



VACANCY

Walter Edward Foster: I have the honour to inform the house that I have received a communication from two members notifying me that the following vacancy has occurred in the representation, viz.:
Of Peter Sinclair, Esquire, member for the electoral district of Queens, Prince Edward Island, by decease.
I accordingly issued my warrant to the chief electoral officer to make out a new writ of election for the said electoral district.



STANDING COMMITTEES


Right Hon. W. L. MACKENZIE KING (Prime Minister) moved:: That the name of Mr. Mulock be substituted for that of Mr. Chevrier on the standing committee on railways, canals and telegraph lines.
That the name of Mr. Chevrier be substituted for that of Mr. Mulock on the standing committee on miscellaneous private bills.


[Stage Direction]
Motions agreed to.

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

Questions

Mr. CHURCH:: 1.	How long was the postmastership of Beaverton vacant, and when was it filled?
2.	What is the name of the new appointee, and what was his previous occupation?
3.	Was he formerly employed by the Post Office Department, and, if so, where?
4.	Did he resign during the war? If so, why, and to enter what calling?
5.	How many applications were received; (a) how many were from returned soldiers, and (b) how many from civilians?
6.	After the war, did not the successful applicant go back to the Post Office Department? If so, from what situation of employment?
7.	Was a returned soldier given this appointment? If not, for what reason?


Mr. RINFRET:: 1.	Postmaster died on 12th April, 1937. Vacancy was permanently filled on the 21st February, 1938.
2.	Donald Clark Calder, assistant postmaster at Beaverton.
3.	According to his own statement Mr. Calder was assistant in the Beaverton post office twelve years. Was also a clerk at Walkerville post office for three years, and at Lindsay post office for ten months.
4.	No information. The department keeps
no	record	of	employees	of	revenue	postmasters.
5.	Seven: (a) six; (b) one.
6.	No information. The department keeps
no	record	of	employees	of	revenue	postmasters.
7.	No. As a result of the competitive examination on January 21, 1938, it was found that none of the returned soldiers had secured the necessary pass marks, and consequently were not deemed qualified to fill the position.


ASSISTANCE TO FISHERMEN OF MARITIME PROVINCES
Mr. BROOKS:: 1.	What amounts of money were paid each month by the federal government in bonus or other assistance to the fishermen of the maritime provinces for the year 1937?
2.	What amounts by provinces and districts?


Mr. MICHAUD:: 1.	Contributions to provincial funds from which aid was given by the provinces concerned in establishing or better establishing fishermen and groups of fishermen in the industry:
Prince
Loans	Nova Scotia Edward Island New Brunswick
January, 1937	
$ 8,512 75	$ 3,186 54	....February....'	
9,573	93	672	50	....March	
1,307	19	3,672	50	....April	
22,799 72	3,502 37	818,180 49May	
6,282 87	....	....June	....	____July	
10,784 09	....	....August	
16,477	61	10,125	41	....September	
3.266 94	___ __________October	
3,484	73	3,007	37	....November	
6,872	80	11,532	50	....December	
7,430 36	6,707 63	____896,792 99	842,406 82	818,180 49
Note:-No information as to districts.
2.	Statement of fishing bounty payments made in the maritime provinces for 1936-37:
Province and county	Total amount
Nova Scotia-
Annapolis	 8 1,458 00
Antigonish	
2,052	10Cape Breton	
7,288	70Cumberland	
13	40Digby	
4,201	80Guysboro	
7,011	60Halifax	
9,426	90Inverness	
3,556	50Province and county	Total amount
Nova Scotia-Concluded
Kings	
713	70Lunenburg	
16,468	10Pictou	
271	10Queens	
2,793	80Richmond	
4,047	30Shelburne	
11,060	40Victoria	
3,507	90Yarmouth	
3,477	80
8 77,349 10
Questions

2.	Statement of fishing bounty payments made in the maritime provinces for 1936-37: -Concluded
New Brunswick-
Charlotte	
2,002	20Gloucester	
15,215	65Kent	
2,813	00Northumberland	
325	60Restigouche	
44	90Saint John	
106	90

Prince Edward Island-
Kings	
1,567	50Prince	
8,360	00Queens	
3,567	45

Grand total	 $111,352 30
Note: Pishing bounty claims for one year are paid as early in the following one as it is feasible to deal with all such claims. Payments are usually made not later than the month of March.


SUBSIDIES AND GRANTS TO THE PUBLIC COLD STORAGE WAREHOUSES
Mr. DESLAURIERS:: 1.	What sums has the dominion government allotted to the different provinces for refrigerating plants for the years from 1934 to 1938?
2.	Has the province of Quebec made application for such subsidies?


Mr. RINFRET:: 1.	The dominion government has not allotted sums of money to the different provinces but the Department of Agriculture has paid the following amounts as part payments on subsidies and as grants, to individual firms towards the construction and equipment of public cold storage warehouses.
Province
Prince Edward Island
Nova Scotia	
Quebec	
Ontario	
British Columbia.. .
Fiscal years ending March 31
1934-35	1935-36	1936-37	1937 to Feb. 28,1938....	$ 641 59	$ 611 88	$ 8,182 95$11,230 02	6,708 29	8,172 25	4,557 261,235 00	160 00	23,100 00	65,194 04	39,086 25	20,784 80	10,314 4820,845 18	36,035 06	52,541 62	46,786 382.	No application received from government of province of Quebec but applications received from individual firms in the province.


WEIGHTS AND QUANTITIES-TESTS AND PROSECUTIONS
Mr. DOUGLAS (Weybum):: 1.	How many items of purchase were made
by the weights and measures service to test for accuracy of delivered quantities during the fiscal year 1936-37 and the present fiscal year up to and including December 31, 1937, on the following commodities:	(a) groceries; (T>)
meats; (c) bread; (d) gasoline; (e) motor oil; (f) coal?
2.	What was the number of prosecutions arising out of these inspections for offences under section 63 of the Weights and Measures Act during the fiscal year 1936-37 and the present fiscal year up to and including December 31, 1937, on the following commodities: (a) groceries; (b) meats; (c) bread; (d) gasoline; (e) motor oil; (f) coal?


Mr. EULER:: 1.	Apr. 1,	Apr. 1,(a) Items	1936 to Mar. 31, 1937 9,616	1937 to Dec. 31, 1937 4,175(b) Items	3,835	1,974(c) Items	4	-(d) Items	-	-(e) Items	-	-(f) Items	7	-2. (a) Prosecutions	81	68(b) Prosecutions	75	48(a & b) Prosecutions..	29	23(c) Prosecutions	-	-(d) Prosecutions	-	-(e) Prosecutions	-	-(f) Prosecutions	-	-
Questions


HEAVY DUTY SCALES
Mr. DOUGLAS (Weyburn):: 1.	How many heavy duty scales have had their capacity reduced for safe use by trucks: (a) grain scales; (b) other scales?
2.	How many heavy duty scales, if any, have
had their weighing capacity increased:	(a)
grain scales; (b) other scales?
3.	If the weighing capacity of heavy duty scales has been increased, what was the reason for this action?


Mr. EULER:: 1.	(a) No statistical information; (b) Six in Ottawa, no statistical information.
2.	(a) and (ib) no statistical information.
3.	To make possible the weighing of a small percentage of heavy trucks: to avoid undue cost and obstruction to the transport and marketing of goods, and because of the impossibility, both financially and mechanically, of replacing all the weighing machines involved regardless of conditions and a time factor.


IMMIGRATION, 1926-37
Mr. DENIS:: How many immigrants entered Canada in each year from 1926 to date?


Mr. CRERAR:: Calendar years: 1926, 135,982; 1927, 158,886; 1928, 166,783; 1929. 164,993; 1930, 104.806; 1931, 27,530; 1932, 20,591; 1933, 14,382; 1934, 12,476; 1935, 11,277; 1936, 11,643; 1937, 15,101.


RENFREW, ONT., POST OFFICE
Mr. WERMENLINGER:: 1.	How much money was spent on work recently done on the post office in the town of Renfrew ?
2.	Who was the inspector appointed by the Department of Public Works?
3.	Upon whose recommendation was he appointed ?
4.	What was the amount of his salary?
5.	What is his nationality?
6.	Is he a Canadian citizen?
7.	Does he owe allegiance to the United States?


Mr. CARDIN:: 1.	$16,069.86.
2.	T. G. Devine.
3.	Chief architect, Department of Public W orks.
4.	$125 a month.
5.	Canadian.
6.	Yes.
7.	No.


IMPORTS FROM JAPAN
Mr. LENNARD:: What was the value of the imports into Canada from Japan for the years 1935, 1936 and 1937, respectively?


Mr. EULER:: 1935, $3,565,026; 1936, $4,296,558; 1937, $5,874,940.


SHIPMENT OF CHAIRS CLEARED AT WINNIPEG- BASIS OF DUTY AND SALES TAX
[Stage Direction]
Mr. MAYBANIv:
1.	Was a shipment of eleven boxes of chairs cleared at the port of Winnipeg on April 24, 1937, having a value for duty purposes of $233, and being an exportation to Canada direct from the United States?
2.	If so, what was the value for duty purposes of said shipment?
3.	What was the amount of duty payable on said shipment?
4.	What was the total laid down cost of such goods in Winnipeg after the sales tax was applied?
5.	Was the sales tax levied upon the cost plus duty plus excise tax, or only upon the cost plus duty?
6.	How much was the sales tax?
Mr. ILSLEY:: With regard to this question, Mr. Speaker, it is contrary to the established practice of the Department of National Revenue to give information which would disclose particulars of either single or total importations by individual importers.


Walter Edward Foster: Dropped.


JAPANESE IMMIGRATION-BOARD OF REVIEW
Mr. STIRLING:: 1.	How many deportations of Japanese for illegal entry occurred in each year since 1930?
2.	When will the board of review, referred to by the Prime Minister on page 1131 of Hansard, commence its operation?
3.	How is the board constituted?
4.	Will public advertisement be made when the board is prepared to receive information?


Mr. MACKENZIE KING:: 1.	1930, 4; 1931, 7; 1932, 59; 1933, 26; 1934, 17; 1935, 10; 1936, 13; 1937, 9.
2.	The board of review will meet for organization in Vancouver on the 21st March.
3.	The board of review will be composed of the following members of the government service: Dr. H. L. Keenleyside of the Department of External Affairs, Ottawa, chairman; Mr. F. W. Taylor, district superintendent of immigration, Vancouver; Inspector G. W. Fish, Royal Canadian Mounted Police, Vancouver.
4.	Yes.
Motions jor Papers


QUESTION PASSED AS ORDER FOR RETURN
Mr. DOUGLAS (Weybum):: 1.	What was the total amount of Government purchased coal by or on behalf of the Department of National Defence for the fiscal years commencing April 1, 1930, to date?
2.	What were, (a) the names of the firms supplying this coal; (6) the amount of coal supplied by each firm; (c) the price per ton, and the amount paid to each firm?
3.	Were these purchases made by tender or otherwise?
4.	What was the type of coal so purchased, and the country of origin?
5.	Where coal was purchased under tender, what were the terms of the tenders for each period ?
6.	Has any official of the Department of National Defence refused to supply tender forms to any coal dealer in connection with the nurchase of coal during the period from April 1, 1930, to date?
7.	If so, what coal dealer was refused, and what were the reasons for the refusal?


MOTIONS FOR PAPERS
Mr. HYNDMAN (for Mr. Brooks):: For a copy of all payrolls in connection with work done on the breakwater at Port Morien, Cape Breton South, Nova Scotia, during the year 1937.


ST. CATHARINES, ONT., CUSTOMS EXCISE CLERK
Frank Exton Lennard: For a copy of all correspondence, telegrams, petitions and other documents in the possession of the Department of National Revenue, with respect to the appointment of a customs Excise clerk at St. Catharines on August 9, 1937.
oka Indian Reservation


Frank Exton Lennard: For a copy of all papers, communications, reports and other documents received by, or sent from the Department of Indian Affairs during the year 1937 from or to any persons in connection with the Indian reservation situated at Oka, Quebec.


QUEBEC, DISTRICT EXHIBITIONS
Mr. ROBERGE:: For a copy of all correspondence, letters, telegrams and other documents exchanged between the dominion Department of Agriculture and the provincial Department of Agriculture of Quebec, from November 1, 1937, to date, relating to negotiations between the dominion government and the government of the said province, in connection with district (junior) exhibitions to be held in that province in 1938.


CORRESPONDENCE IN POWELL-UNWIN CASE
Mr. HANSELL:: For a copy of all letters, telegrams and other communications exchanged between the Prime Minister and Major C. H. Douglas with respect to the Powell-Unwin case.



BUSINESS OF THE HOUSE


William Lyon Mackenzie King: That on and after Wednesday the 23rd March to the end of the session, government notices of motions and government orders shall have precedence on Wednesdays over all business except introduction of bills, questions by members and notices of motions for the production of papers.


Mr. A. W. NEILL (Comox-Alberni):: Mr. Speaker, I think this motion is debatable; I also think it is out of order. I also think it is unjust, but of course that is a matter of opinion. Taking the point that it is out of order, the house is governed by certain rules known as standing orders, arrived at by consultation in committee of the whole house, to which we adhere very strictly. Standing order 15 is one of the most important of these. I see that it was first introduced in 1867 and has stood the test of four separate revisions since then. That order prescribes the procedure of the house, and on Wednesdays it says the order shall be as follows: Questions, notices of motions, public bills and orders, government notices of motions and government orders. It does not forbid government orders; it only gives the other business precedence. Now we come along with this resolution which says we are not going to follow that procedure on Wednesdays, and we say nothing whatever about standing order 15. I submit that we ought to repeal or suspend it, or do something about it; otherwise we shall have two conflicting procedures, so to speak. As a precedent I might cite the situation which often arises in this house, when the chairman of a committee moves for the printing of a report, or evidence, or something like that. He always says, " standing order 64 notwithstanding." That has been omitted in this case, though of course that could be remedied on a later occasion.
With regard to the unfairness of the thing I would make this comment. There are sixteen resolutions on the order paper which as yet have not been heard even once. My resolution happens to be the third on the list. It will not be reached the day after to-morrow, so it will never be reached at all. I lodged that resolution with the clerk about a month before the house met, which seemed not an unreasonable time. Other members coming along later waited, as was their privilege, until the house met before presenting their resolutions, which by this motion are prevented from being heard. I submit that they should

Business oj the House
be given at least one opportunity to present their views. I agree with what was said the other day by, I think, the hon. member for South York (Mr. Lawson) who suggested that all resolutions on the order paper before a certain date should be heard, or alternatively I would suggest that Wednesdays always be left open for private members. We are supposed to be governed by democracy, and democracy is the expression of the wishes of the people by their elected representatives. While we may not like some of the resolutions -I wholly disagree with some of them- nevertheless I feel like fighting in order that they shall be heard, because in that is involved the right of free speech. If people are not allowed to relate their views, how are the government and the house going to be informed of their wishes? This takes away from private members their rights under the rules to which we all agreed, without saying anything about standing order 15, as I have already suggested. It is taking a little bit more away from our democratic rights. It may not be a very important thing; if none of these resolutions are heard I do not suppose the country will suffer very materially, but there is a danger involved. If this or any government-I am not singling out this government particularly-can come along and simply pass by a majority vote, not by unanimous consent, a resolution of this kind, it is possible to conceive of a government passing a resolution to the effect that members of the opposition should be heard for only five minutes, or only on Fridays, or something like that. There is a danger in that situation against which we should guard. We had better stop the leak in the embankment before it becomes overwhelming.
It has been suggested that this is necessary in order to save time, but I do not agree with that. Right towards the end of the session, when we were extremely busy, I have seen the house adjourn at six o'clock because it happened to suit the convenience of a certain group who wanted to go to a certain dinner, or something of that kind. I have even known the house to adjourn in order to listen to election results. I am not particularly asking the government to allow one more Wednesday in order that I might have my resolution discussed. I am trying to stress the point that here are sixteen members who have put resolutions on the order paper and, because of our peculiar rules, or because the government cuts off the rules, they are not going to be heard. The big parties wonder why the groups in the comer are increasing in volume and number at every election. Per-51952-82
haps it is because people are getting suspicious. They do not see anything done, and they begin to think that democracy has been a failure. It is not that democracy has been a failure; it is that democracy has not been accorded the justice to which she is entitled.
I submit the motion is out of order on the one technical point to which I have alluded, namely standing order 15, and on the wider and bigger point of order, which is not founded on any rule, but on the fact that it is desirable in the name of democracy that resolutions by private members should have an opportunity to be heard during the session.


William Lyon Mackenzie King: Mr. Speaker, the hon.
member for Comox-Alberni (Mr. Neill) knows, as do other hon. members, that a few weeks after parliament has been in session it is usual for the government to take Mondays and Wednesdays for its business, and that the method which has been adopted in that connection has been that of giving forty-eight hours' notice on the votes and proceedings. When the motion comes before it, the house may either give its unanimous consent or vote upon the motion.
This year in asking the right to take Wednesdays for government business the government is proceeding in the same way as have previous governments and the present one on all former occasions.
As to the suggestion that the motion is out of order may I say to the hon. member that the house has, at all times, control of its own business and may, by unanimous consent, or upon motion after forty-eight hours' notice, make such alterations in the order of business as it deems advisable.
Forty-eight hours' notice has been given. Notice was given on Friday last, and appeared in the votes and proceedings for that day. In the regular course the motion appears on the order paper to-day. No exception therefore can be taken on the score of the rules not having been complied with.


Alan Webster Neill: What about the standing order?


William Lyon Mackenzie King: Exception may be made to a standing order, where it relates to the business of the house, and where the consent of the house is given either unanimously or, if necessary, by vote. The hon. member knows that this is a procedure which has been followed every year he has been in the house. I may say to my hon. friend, what may be a matter of surprise to him, namely that I believe this year the government has

Business of the House

been more generous in the number of days it has accorded to private members than has been the case in almost any year he has been in the house-and he has been here a long time.
The second point raised by the hon. member is that it is not democratic to permit the government to take from private members' days to carry on its business. He has said that in a democracy the elected representatives of the people are sent here to carry on the business of government. I take no exception to that statement, but I would add that the government represents the elected representatives of the people who have been entrusted with the business of government. If, after the people select a government to carry on the business of the country, we were to adopt a rule whereby the time of parliament would be taken up by private members who may not support the administration and who wish to discuss a number of questions of less importance than those the government may wish to present, we would not have democratic representation in the true sense of the word.
The hon. member has said it is necessary to give time for the debate of private motions, so that members may ventilate their views in connection with other matters. May I point out to him that there are many opportunities for ventilating views. When the house is moved into supply it is possible for hon. members to present their views on any question. Again, there is scarcely a subject touched upon in any private member's resolution which would not, at some time, come up for discussion in the committee of supply.
The hon. member has said that there are sixteen more private members' resolutions on the order paper, and that before taking an extra day for government business we ought to run through the list. If that reasoning were to apply, there is no reason why 360 resolutions might not be placed on the order paper, in the names of private members, should there be a desire to block the government in expediting its business.
Far from seeking in any way to limit hon. members in their customary rights, the government has proceeded in precisely the opposite way. We did not give notice for government business to take precedence on Mondays and Wednesdays- until after a larger number of those days had been accorded hon. members than has been the case at any time since 1930. That is the condition, apart from the time taken up in the discussion of the debate on the address.
If the present motion is adopted, seven Wednesdays will have elapsed before any Wednesday will have been taken away from private members. Of those seven Wednesdays, five

will actually have been used as private members' days. The house will notice that in my motion I have not suggested that government notices of motion and government orders should take precedence "on and after Wednesday the 16th March," which would be Wednesday next. I have purposely worded the motion so that it would apply a week hence. I might have done as has been done in previous years, namely insert the date of the 16th March, and then, as a result of a question such as that raised by the hon. members, have conceded an extra week. However, I thought it better to make it apparent at once that we were not seeking to take next Wednesday, but were prepared to give that additional day to private members, thereby making a total of seven Wednesdays since the opening of the session.
May I give the hon. member the figures respecting the Wednesdays which have been
taken since 1932. They are as follows:
Number of Wednesdays elapsed between opening and date on which
Session of	Wednesdays taken away
as private members' day
1932	 i
1932-33	 3
1934		 6
1935		 5
1936		 3
1937		 6
1938		 7
The same situation applies with respect to Mondays, as the following figures will show: Number of Mondays Session of	actually available as
private members' days
1932	 5
1932-33	 i
1934		 4
1935		 3
1936		 4
1937		 2
1938		 4
Those are the Mondays which were actually available, apart from the time occupied in the discussion of the debate on the address. Therefore I say that instead of an exception being taken to the request which has been made by the government, in their own interests as well as that of the government, hon. members should be prepared to accept the motion.
We have not been able to proceed as rapidly as we would have liked to with government business. There are many important measures which have to be discussed during the course of the session. I suspect as we get along in the session hon. members will be more anxious to conclude the business of the house than to continue its sittings on into

Canadian Wheat Board
the summer, if not into the autumn. The object of the motion is to try to get on with government business, and it is not in any way to take from hon. members any right or privilege they enjoy as members of the house.


Right Hon. R. B. BENNETT (Leader of the Opposition):: Mr. Speaker, I think the hon. member overlooked paragraph 130, to which the Prime Minister (Mr. Mackenzie King) referred. But it must never be forgotten that this chamber has complete control of its own procedure. The rule is that if we desire by a majority to change any order, be it standing or otherwise, we may do so. The government must determine its action in the light of its appreciation of the attitude of the members toward the action proposed to be taken. Personally I do not think there is any good reason why we should take more Wednesdays this year than any other year. We have taken as many Wednesdays this year as we have in previous years-more, in fact; and we have taken as many Mondays and Thursdays. I see no reason why the motion should not pass in the terms of the rules.


[Stage Direction]
Motion agreed to.


[Stage Direction]
On the orders of the day:
William Daum Euler: On March 3 last the leader of the opposition (Mr. Bennett) requested that there should be deposited with the clerk of sessional papers the weekly auditors' report of the operations of the wheat board. These reports have now been received from October 12, 1935, to February 24, 1938, and will be so deposited to-day. As each report is received from week to week it also will be deposited. Perhaps I should say that the time might conceivably arise when it would no longer be advisable to follow this practice.


Richard Bedford Bennett: We have an absolute right to see these, and that is why the provision was placed in the bill. I thank the minister for offering this opportunity to inspect the reports without having to move for a lengthy return. I think the fact that he has been able to get copies of the documents in question and deposit them with the clerk of sessional papers will expedite business generally.
51952-82J



NIAGARA PENINSULA RIFLE RANGES

[Stage Direction]
On the orders of the day:
Frank Exton Lennard: I should like to ask the Minister of National Defence (Mr. Mackenzie) what group of properties were recommended by Mr. Ellis Corman as the site he most favoured for the rifle ranges that are to be constructed on the Niagara peninsula.


Hon. IAN MACKENZIE (Minister of National Defence):: I am informed that the gentleman referred to was not engaged by the department in connection with choosing this site. I understand that several sites were inspected and the department itself selected the one deemed to be the best from the point of location, economy and suitability. If I can find any further information, I shall be glad to give it to my hon. friend.



ABSENT CABINET MINISTERS

[Stage Direction]
On the orders of the day:
Richard Bedford Bennett: The safety of two of our members is a matter of very grave concern to many members of this house. Their devotion to duty has been such that one of them has been compelled to investigate the air mail route in western Canada while the other has had to observe the terrible inroads of drought and other evils that have overtaken western Canada. I have been asked to inquire as to their safety in this great devotion to public duty that has involved the risk of their welfare and possibly their lives.


William Lyon Mackenzie King: The last word the government received is that they are perfectly safe.



RADIO BROADCASTING


[Stage Direction]
On the orders of the day:
Mr. JOSEPH NEEDHAM (The Battle-fords) :: I should like to direct to the attention of the responsible minister a telegram which I received a few minutes ago from Wilkie, Saskatchewan. This telegram has reference to radio reception, or shall I say the lack of radio reception, in that vicinity. It reads:
Radio reception here terrible. CFQC Saskatoon entirely shut out by stations KOA and XER. Will you use your influence to have wave-length changed so that situation will be remedied. Surely something can be done to overcome this interference.
F. R. Beggs,
Mayor,
E. H. Dulmage,
President of Board of Trade.
1292	COMMONS
Use of Canada's Financial Resources
I should like assurance that this condition will be remedied.


William Lyon Mackenzie King: The Minister of Transport (Mr. Howe) is not in [DOT]his seat at the moment, but I shall see that my hon. friend's question is (brought to his attention.

use of Canada's financial resources for



ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE

[Stage Direction]
The house resumed from Tuesday, March 8, consideration of the motion of Mr. Dunning for committee of supply, and the amendment thereto of Mr. Blackmore.
Mr. W. A. TUCKER (Rosthem):: Mr. Speaker, at the outset I did not intend to take part in this debate, but in view of the remarks of the Minister of Finance (Mr. Dunning), if I did not some hon. members might think that the minister's very able speech had convinced me that I was wrong. On the contrary I am still unrepentant and unconvinced in connection with the suggestion I made during the debate on the motion for an address in reply to the speech from the throne, and I desire to give a few of the reasons why. I cannot go into these at length, as the minister did, because my time is limited. On another occasion the house was most indulgent with me and permitted me to exceed my time, but I do not want to presume on that indulgence.
I am sorry the minister is unavoidably away from the house to-day because I am quite sure I shall not be doing the justice to the subject I would do if he were here to ask the questions he usually asks and make the statements he usually makes to put me right when he thinks I am wrong. I was certainly pleased that the Minister of Finance undertook to deal with the suggestion I made. Although he did not agree with it, I feel it was a distinct step forward when he took it up at all. In the short time I have been following the speeches in this house I have come to the conclusion that when things are brought up first they are generally ignored as being beneath any notice. Then if they are brought up often enough, eventually some notice is paid to them and the first thing we know the suggestion has been enacted into law. I feel that my suggestion has reached the second stage, and I have high hopes that something will be done. For example, when the suggestion was first made that we should have a central bank it was not received with any great favour, but in time it came to be adopted by this house. Even the right hon. leader

of the opposition (Mr. Bennett) had decided that a central bank would be an improvement over our present system. I have no doubt that everyone now agrees that the central banking system as we have set it up is a great improvement over what we had before. Some of our great leaders of public finance disagreed very strongly with the proposal for the setting up of a central bank, but it seems that as a general rule the things they oppose strongly are ultimately carried out to the great advantage of the people. I suggest that when some of our great leaders of public finance strongly oppose some of these ideas we should cast our minds back and see how often they have been wrong before. I would remind the house of the tremendous effort that was made to keep on the gold standard. In England, for example, the high priests of finance and the chancellor of the exchequer were all agreed that every effort should be made to keep England on the gold standard. But England went off the gold standard and immediately began to make a recovery to prosperity that has been nothing short of remarkable.
I do not suggest that the Minister of Finance and the government can learn anything from a humble member from the western prairies, but whether they learn or not, I am glad to have the opportunity of placing my views < before an indulgent group of fellow members of this house. My suggestion is that the national credit should be used for national development purposes. I am quite satisfied that the very able speech of the Minister of Finance has not entirely disposed of that suggestion. The banking system of this country monetizes the credit of the country and we are asked to pay them a heavy tribute because of that duty which they perform. I am satisfied that it will take more than one speech by any member in this house to right that wrong, and it will take a good many hours of thought to realize how it may be fully remedied.
I should like first of all, Mr. Speaker, to make my position plain so far as the motion of want of confidence is concerned. I do not propose to vote in favour of the want of confidence motion. I have never concealed the fact that I should like to see a great deal more done by the government than has been done to date in the way of tariff reductions. Farm implements, for example, which are part of the raw material of the farmer, I should like to see placed on the free list. As to textiles, I should like to see a really substantial reduction made in the tariff on the goods that enter into the manufacture of clothing, especially in these hard times when many of our people are having so much difficulty in

Use of Canada's Financial Resources
getting along. I certainly would like to have seen the tariff left as it was on furniture instead of the action being taken that was taken last session. If in reducing our tariffs we can obtain from the United States a quid pro quo, by way of reduction in the customs tariffs on Canadian goods imported into that country, so much the better, and I hope this government in its negotiations with the United States will be ready to go far enough in reducing the tariff to enable us to gain a real entry for our goods into their markets, increasing, on the one hand, the purchasing power, particularly of our primary industries and so their ability to buy goods in this country, and also reducing the cost of living to our people, who are having such a hard job getting along. I am satisfied that this government intends to go as far as it can in negotiating such a treaty; and if I should vote lack of confidence in this government I would be voting against their carrying on a work which I think is all-important to this country and should go forward. I would also be voting in favour of an alternative government which was not prepared to go even the small distance that was gone at the time the Canada-United States trade agreement was signed. So I could have little hope of any such government going the distance necessary in a new agreement to cure unemployment and the other ills from which we are suffering. I have no hesitation in saying that I owe it to my constituents and the future of this country that I should vote confidence in this administration, even though it has not gone as far as I should like in regard to the tariff.
I could say the same thing with regard to the control of credit. I have never made any secret of the fact, and I do not suppose I would be expected to, that I should like to have seen the Bank of Canada taken under one hundred per cent public ownership as well as control. The suggestion was made, and I still do not think it is sound, that private finance should have representation on the board of directors of the Bank of Canada. Tremendous power has been placed in the hands of the Bank of Canada. By increasing the cash base and thereby increasing the credit extended by the commercial banks of the country the Bank of Canada can cause, as it were, a rise in the general level of prices. Representatives of private finance on the board would know of such a decision, and since they would be elected by private interests, they would think it wise and proper to report to them the making of such a decision. If they hope to be reelected, they know they must serve those interests. When the members of this house are not told what
the intention of the Bank of Canada is from time to time with regard to expanding or contracting the credit base, thus raising or lowering the level of prices and thereby making it either wise to invest, or wise to liquidate securities, I say it is not fair that representatives of private interests should have the opportunity of getting that knowledge. In my opinion there should not be a single representative of private interests on the directorate of the Bank of Canada.
But this government at least went the distance of taking over control of the Bank of Canada, and I supported it in so doing. I have never thought, indeed it is unwise to think, that in a country as broad as this, with so many varied and conflicting interests, any one group or province can have its own way; and if a government is proceeding in the general direction in which we would like to see it proceed I think we should give it our support, reserving the right to suggest that it should go further.
There is another matter in respect of which I feel I can support this present administration without any hesitation. On June 1, 1936, I spoke in this house very strongly in favour of an easy money policy. I sought at that time to cite the opinions of many prominent men all over the world in favour of an easy money policy, broadening the credit base, thereby stimulating the issue of credit and raising the general price level, thus decreasing the burden of public indebtedness and generally putting primary industries in a better position. My study, such as I have been able to make, of the policies of the Bank of Canada, confirmed by what the Minister of Finance said the other night, definitely indicates that the policy of the Bank of Canada for the last two years has been, and their present policy is, one of easy money. I think by so doing they have operated to raise the general level of prices, to improve the position of private industries, and to lighten the burden of debt. I am glad they have done it, and I commend the government because it has upheld them in so doing. The government by its trade policy has caused the value of our exportable surplus of goods to rise materially, and by its monetary policy-taking over control of the Bank of Canada, expanding the credit base, and raising the general level of prices-it has made a great contribution to the recovery that is going on in this country.
Somebody may ask ms: Well, what is your position? As I said at the outset, I still believe -and possibly it is no credit to myself, and may suggest that my mind is not open to persuasion-in monetary reform. I have listened to everybody who held what might be called to-day the orthodox view, although it was
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not the orthodox view five years ago; and the only difference that I can see between the orthodox view to-day and the view taken by people like myself is that we want to go a little further. I do not accept the suggestion that has been made that we have already gone a certain distance and that it would be disastrous to go any further.
What I have in mind and what I suggest is a short range policy and a long range policy. The short range policy would be to issue sufficient currency to put the unemployed to work on a national development program until our long range policy has put them to work in the ranks of industry. That is all I intended to suggest in the speech I made in the debate on the address. This suggestion was not intended to be a definite long range policy, but I know, and I think that every member of the house will agree, that there are in this country to-day young men now reaching thirty years and over, who have never yet been able to find work, who have been out of work ever since they have been able to look for a job, and until our long range policies have time to absorb all the unemployed into industries where they can earn their own living, this government should definitely look after them, should do something in the way of national development work to give such people a job. It should be done not by imposing a further burden on industry but as a responsibility of the country by the use of national credit. In their ranks there are young men who actually enlisted, went overseas and risked their lives for this country without any thought of reward. They came back thinking that a grateful country would see to it that they were at least given a chance to earn.a living, and I submit to you, Mr. Speaker, that it ill behooves members of parliament, who have been very fortunate, to sit back and say we are going to follow steadfastly our present policy without modification, even if it means that those out of work may be out of work another three years or longer. We should take a much more sympathetic attitude towards these young men. We owe a great deal to them. They were all ready if necessary to make the sacrifice of their lives for this country.
Then there is of course a long range policy in regard to monetary matters which I suggest. I shall not have time to go into it at length this afternoon; I have referred to it before. It is a policy either of setting up a separate branch of the Bank of Canada, of splitting that bank in two, as the Bank of England is split into two, or of setting up a separate institution, a national bank which will

monetize the credit of our governmental institutions at cost and avoid the burden of interest on public debt which is weighing down the people of Canada and preventing us from doing the things we should do for those for whom something should be done.
I wish first of all to deal very shortly with the long range policy of the government. As I understand it, there are still 132,000 employable unemployed receiving public aid in the dominion. Our long range policy is, I believe, absorbing the unemployed. If we in western Canada have a crop; if we make a proper treaty with the United States which sufficiently opens up the channels of trade with that country; if we continue the policy of the present administration and further lower tariff barriers in respect of other countries, these unemployed in my opinion will be absorbed into industry within the next eighteen months. But in the meantime, if we have the situation so well in hand, and if we need roads, for example, so badly, can we not safely get busy on a program for that purpose and look after these people?
Here I might say a word for the national park in my own province. People who have been through the Prince Albert national park know that it has one of the finest golf links in Canada, and splendid fishing, swimming and boating facilities. Two hours after you arrive there you can be at a lake where, probably, for days at a time you will not meet anybody; certainly in that park you can get solitude away from all the troubles of civilization. I have been told by persons who have visited all the national parks in Canada that ours has more recreative facilities than any other in the dominion. But what is the situation? One must travel over more than three hundred miles of dusty gravelled road in proceeding from the international boundary to that park. Time and again when people in the United States have been attracted, by the good publicity work done in advertising our national parks, as far as the boundaries of Canada, they have found this terribly dusty gravelled road ahead of them and have turned back. They are doing that by the hundreds. I submit that a policy which would look after our unemployed until they are absorbed into industry, and would hard-surface that road so that we would get thousands of United States visitors to the park where now we are getting only hundreds, would be good business, and is something to which this house and this government should give attention.
There is also the matter of irrigation. I do not know to what extent we can go into that, but I suggest that some of this money might

Use of Canada's Financial Resources
be used for irrigation work, and if by this means homes were provided out west for several thousands of Canadians, homes would be made also for several thousands required to service their needs in other parts of the country, and anything which serves to increase the population of Canada is really worth while in the world troubled as this is troubled, and where it might be said by land-hungry powers that we are not making use of the resources with which Providence has endowed us.
I wish to deal shortly with some of the objections of the Minister of Finance to my suggestion. The minister stated in his speech the other evening something which I understood had been denied by most people in this house up until the time the Minister of Finance stated it. I may be wrong about that, but I am going to read the statement and then I will comment upon it. He said:
As we have seen, the Canadian chartered banks as a group think it expedient to maintain an average reserve of ten per cent, and consequently if, as a result of the purchase of ten million dollars' worth of securities by the central bank, the reserve of the chartered banks has been increased by ten million dollars, the chartered banks will seek to expand their assets and deposits by approximately one hundred million dollars.
I can remember when the suggestion that the banks loaned out ten dollars for every dollar of cash by which they increased their cash reserves was treated with a great deal of derision. The question was asked, how can anybody lend ten dollars if he has only a dollar? And I can remember it seemed to be assumed that that settled the whole matter. I should like to read what was said in this house, which indicates perhaps that. If I am wrong, I am in the judgment of the house in this respect. In the first speech which I had the privilege of making in this chamber, at page 349 of Hansard, volume 1, 1936, I said:
I find by this Macmillan report, Mr. Speaker, that in July, 1933, the average daily borrowings of the banks under the Finance Act was $48,552,000. What does that mean? It simply means that, under the Finance Act, if the Bank of Montreal or any other bank had one million dollars' worth of government bonds which were paying at that time in the neighbourhood of 5i per cent, they could go to the Minister of Finance and get one million dollars' worth of new money for which they paid at that time 2J per cent. They get that new money against the credit of this country; then on the basis of established banking practice they are able to buy nine million dollars' worth of government bonds. Let us trace what happens. The bank pays 24 per cent on one million dollars, but, mark you, it is drawing
5J per cent on ten million dollars' worth of bonds. And they call that w-ise public financing! There is no doubt about it at all; it is right here in this Macmillan report.
The minister is reported to have said:
No, it just isn't so.
Now at that time it was quite all wrong to say that a bank could take a million dollars, borrow a million dollars' worth of new currency under the Finance Act from the Minister of Finance, and thereby increase cash reserves and then buy another nine million dollars' worth of government bonds. That is just what I was suggesting at that time. Of course in order to do that the banks have to pay interest to their depositors on the money that is redeposited. But the bare fact remains that it is apparently now admitted that the banks do increase their loans or their purchases of investments-one or the other-to the extent of ten dollars for every dollar increase in their cash reserve.


Richard Bedford Bennett: On the assumption that the whole sum is deposited back in the chartered banks.


Walter Adam Tucker: Yes. Well, practically the * whole sum is. The entire argument of the Minister of Finance is based on that, because he said that if we increased the cash reserve by $350,000,000 it would find its way back into the hands of the banks and increase bank loans, bank investments and bank deposits by $3,500,000,000. That was the point made by the Minister of Finance. I will continue to read his speech from where I left off:
Thus it is that the security purchases by the Bank of Canada tend to expand bank deposits in the country by approximately ten times the amount of the transaction.
You may ask just how the chartered banks will expand their assets and deposits as a result of open market operations by the Bank of Canada. If the chartered banks can find good borrowers they will tend to increase their ordinary commercial loans, and by so doing increase their deposit liabilities by a similar amount. Otherwise they may buy investment securities-
And that is what they have been doing for the past three or four years.
-which will usually earn them a considerably lower rate, or they may expand partly in one way and partly in the other. Either move will increase the aggregate of deposits of the banking system as a whole.
I am purposely labouring that point because, when the time comes that something is accepted which formerly was apparently not accepted, it is wise to signalize the event and call people's attention to it to prevent the ground from having to be gone over again. If it is true that the banks can and do sell government bonds to provide cash to increase
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their cash reserves, and that they can and do thereupon make loans or advances to the extent of $10 for every dollar of increased cash resources they get, it is wise that we should know that and cease to contradict the statement that it is so. Now, this is known as monetizing the credit of the country. In that connection I should like to mention one significant fact. Before our present banking system and the system of using cheques on deposits for doing the business of the country came into effect, every dollar's worth of business was done with money issued by the government of the country. To-day, as the Minister of Finance said, ninety to ninety-five per cent of the business of the country is done by cheques on deposits in the banks. And the Minister of Finance pointed out that those deposits in the banks are the result of providing the banks with the necessary cash basis to make the loans or buy the bonds to create the deposits. Therefore we have the situation that the financial interests of the country create ninety to ninety-five per cent of the circulating and purchasing media of this country. We have departed from the old plan that the state itself should create this purchasing medium. What I am suggesting is that we should gradually but as rapidly as we safely can return to the system by which the state has control of and issues and creates the circulating media of the country. What is happening to-day? Has there ever been a time when this country was plunging into debt at the rate it is to-day?


Richard Bedford Bennett: Hear, hear.


Walter Adam Tucker: I mean by that during the past ten years.


Mr. MacNICOL:: No, the hon. member means during the last two years.


Walter Adam Tucker: No, I heard the leader of the opposition (Mr. Bennett) say "hear, hear." I did not want to leave him out of the picture. During the fiscal year 1936-37 the average rate of interest paid, by the dominion government, including the interest on short term debentures, was 3-745 per cent, almost three and three-quarters per cent. And the annual interest charge in 1936-37 was $136,278,193. Just to give an example of what is happening in this matter, I should like to indicate what we have paid in the way of interest on the public debt, and how it has grown, in the last eighteen years.
I hold in my hand a very informative pamphlet, which I suppose is familiar to every hon. member, entitled Dominion Public Finance, issued under the authority of the Minister of Trade and Commerce (Mr. Euler) and printed by the king's printer. At page

33 it gives a table of the public debt of Canada and interest payments thereon since July 1, 1867. I am not going back to 1867 but I think everyone here is interested in seeing what has been happening in connection with the public debt at least in recent years. I find that in 1919, after the war was over, the public debt of this country was $2,676,635,725. From then until 1936 we paid interest on that debt to the amount of $2,294,751,878. Remember that the total debt in 1919 was $2,676,000,000-


Ian Alistair Mackenzie: May I tell my hon. friend that the amount of interest paid up to the present is $2,545,000,000.


Walter Adam Tucker: Well, I wanted to be sure not to overstate by using the figures I find in this pamphlet. I find that the debt had increased by 1936 to $3,431,944,027. That is, after paying some $2,300,000,000 in interest on the public debt, that debt had increased in those eighteen years by over twenty-eight per cent. The development of this country had been hampered by high interest rates and the heavy taxation necessary to the payment of this large amount of interest; yet in 1936 the public debt was twenty-eight per cent higher than it had been eighteen years previously. And that is not due to the war; this is only our own federal national debt. The question is, can we go on paying over $2,300,000,000 in eighteen years and increasing the amount of the debt at the same time by twenty-eight per cent? There is no reason why it should not go on similarly in the future as in the past unless we change our system of public finance. We spent very little on national defence in that period. I am glad the Minister of Finance took the trouble to go into this matter because I am sure, now that he has taken it up, other hon. members will regard it as worthy of consideration and give it the attention it deserves.
I should like to remind the house what my actual proposal was. I quote:
I suggest that with that amount of gold we have the right to issue on a sound money basis $718,000,000 worth of currency fully secured on a twenty-five per cent basis. We have $157,000,000 worth issued, which would leave $560,000,000 that we could issue to put our young people to work. Does anybody suggest that that would not be sufficient to put them all to work?
I went on to say:
It may be suggested that this would mean inflation. My answer is that if there is any danger of inflation as a result of issuing what is required of that money you can take power to increase the reserves required to be kept by banks in the Bank of Canada. By law they are required to keep only five per cent. The central reserve system of the United States

Use of Canada's Financial Resources
requires banks to keep with the central reserve a reserve of twenty per cent. If the United States, with its vast wealth, has realized the need of doing something like this to prevent inflation when it increases its currency issue, Canada can do the same.
There was my definite proposal. I did not suggest that we should forthwith issue that much money; I said we should issue what was required of that much money. If the whole $560,000,000 was not required-and I do not think myself that anything like that sum would be required-then it would not be necessary to issue it.
There was a suggestion made that I was mistaken in my figures, that that amount could not be issued. It was said that by virtue of the Bank of Canada Act the bank had to have a reserve against its deposits from the chartered banks as well as against the notes issued, and I suggested that that obligation could be waived by order in council. Just to keep the record straight I should like to read the Bank of Canada Act in that regard (chapter 43, 1934):
26 (3) At the request in writing of the board, the governor in council may suspend the operation of this section in so far as it requires the hank to maintain a reserve of gold equal to an amount not less than twenty-five per centum of its notes and deposit liabilities. Such suspension shall be for such period not exceeding sixty days as may be specified by the governor in council, but on the further request in writing of the board may be extended from time to time for further periods not exceeding sixty days each, provided, however, that no such suspension shall continue for a period longer than one year without the sanction of parliament.
Under this provision, the government has it within its power to do the very thing I suggested. The central bank is not hampered by the requirement of keeping twenty-five per cent of its deposits from the chartered banks in the form of cash, because it can have that requirement suspended by order in council until parliament meets; and I suppose it could get parliament to ratify that suspension if it were in the public interest to do so.
The minister stated that, roughly, $210,000,000 could not be included because of the requirement of a twenty-five per cent coverage of gold in respect of deposits with the Bank of Canada by the chartered banks. Suppose it was not deemed wise to suspend that gold clause-and I do not necessarily suggest that it would be wise. Last year we produced S143,314,000 worth of gold. We could have used thirty-six per cent of that gold, and we would have looked after the objection raised by the minister; it would have covered those deposits quite easily, as
well as the issue proposed by myself, that is, assuming that it would take the whole $516,000,000 to put the unemployed to work. But I do not assume that at all. I submit that a very much smaller sum would look after the problem in this country, would take care of these people, would give the unemployed as well as the country generally real satisfaction, and we would get real value for our money. Of course if there is a desire to preserve the present system without any change whatever, and the government will look after these unemployed and provide us with our hard-surfaced roads, I will support them in that policy without any hesitation.
I do resent very much, however, when for example I go from Saskatchewan to visit friends on the Pacific coast, having to go to a foreign country in order to find a good road to get there. When I return home from this parliament I do resent having to go through the United States in order to get a good road back to western Canada. There should be a hard-surfaced trans-Canada road from Halifax to Vancouver, and there should be hard-surfaced roads into every national park in this country, in order to take advantage of the vast tourist trade we could tap by virtue of these roads.
I should like to briefly examine a further objection. I quote again:
An increase of say $350,000,000 in chartered bank holdings of Bank of Canada notes would increase their cash reserves from the present figure of about $250,000,000 to $600,000,000, and their cash ratio from about 10 per cent to roughly 21 per cent.
Then the minister went on to say:
If the banks use their increased cash in the normal way, as a basis for the extension of roughly ten times as much in loans to the public, or for the acquisition of ten times as much in investments, bank deposits would expand by approximately an equal amount until the cash ratio was brought down again to approximately ten per cent. This would mean an increase in bank deposits from the present level of about $2,387,000,000 to something like $6,000,000,000, or more than 2-6 times the level of December 31, 1929. Am I merely old fashioned or orthodox when I say that this would mean a colossal measure of inflation?
My answer to that is that there are only two ways in which the banks could increase their loans. Tthe first way would be by lending money to people who had good propositions to put before them, satisfying the banks that they had a chance to pay -back that money with interest; in other words good, feasible, commercial propositions. If there is that much business waiting to be done in this country; if we can expand our cash loans from two billion to six billion on a perfectly
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sound basis which would satisfy the banks, I submit it would be a good thing to do that. On the other hand they might purchase government investments. If they purchased investments that were already out and there was competition in those purchases, the cost would rise and the return would be driven down so that there would be definite limits in this regard, and I do not suppose that a great deal of harm could be done in that direction. But if they were lending money to governments on their bonds this dominion would control its borrowings; it would not need to borrow except to repay debts on which it is already paying exorbitant rates of interest. The municipalities and provinces would also have to borrow from the banks. As far as I can see, the banks would not lend money, even if they had the cash reserves, if it was not a safe proposition, in each and every case, so that there is not much danger of the inflation which is suggested by the minister.
I would make this suggestion, however. To make doubly sure, the government could take power to increase the reserves required to be maintained by the chartered banks with the Bank of Canada. Then if there was any tendency on the part of the banks unduly to inflate or expand their credit so as to cause an inflationary movement in this country which would not be in our best interests, we could go the banks and say, "If you do not stop this inflation we will exercise this right to increase the reserves you are required to maintain with the Bank of Canada."


Walter Edward Foster: Order. I am sorry, but the hon. gentleman has exhausted his time to speak.


Some hon. MEMBERS:: Go ahead.


Walter Adam Tucker: I certainly appreciate this indulgence; I had not intended to presume on the kindness of the house.


Walter Edward Foster: The hon. member may continue, with the unanimous consent of the house.


Some hon. MEMBERS:: Go ahead.


Walter Adam Tucker: If we had that additional power over the banks it would in effect double the control we have at present. We feel we have control over them to-day, but with that added power we could if we wished go to the banks and say, "We have issued $350,000,000 worth of new currency. If you make the slightest move to lend a single cent of that, we are going to clamp on the increased reserve rate," and I think that would be sufficient to make the banks back up.

Of course we have been increasing the cash reserves. I think the minister suggests that this would be taken advantage of to the fullest extent; that the banks would lend ten dollars for every dollar in the increased cash reserve. We control them in that regard now to prevent undue expansion. We could continue to do so.
I will anticipate a criticism which I would have liked to deal with later on. The suggestion is that if we increased the cash of this country, that would be returned to the banks and they would have to pay interest on that increase which, in effect, would be a tax on the banks. If it is a valid argument to say that the banks can increase their loans to the extent of ten times the increase in cash reserves, it is fair to say that they could, without difficulty and in a sound way, by finding sound borrowers, increase their loans to the extent of the amount only of that money that is returned to the banks. Probably, as the right hon. leader of the opposition says, it will not all be returned. Let us assume that $300,000,000 is returned. I submit that the banks could be permitted to re-lend not ten dollars for every dollar but one dollar for every dollar. On that money, for which it pays its depositors one and a half per cent, it would be paid six or seven per cent. There would be no real loss or tax on the banks in that transaction and no large inflation of credit with the disastrous effects mentioned by the minister.
So I submit, Mr. Speaker-and I will terminate my remarks at once-the suggestion that inflation would inevitably follow is not necessarily true. When you set up that tremendous inflation as an objection, you are assuming something that is not necessarily so. I submit that you could control it-prevent it. When you suggest that it would be unfair to the banks, my reply is that you should control it, to the extent that they should be permitted to lend only one dollar for every dollar returned to them, so that it would not cost them a cent.
These were the two main objections, as I saw them. There were others which I should have liked to meet. I do not want to presume any longer on the time of the house. I should have liked to deal also with my suggested long range policy of getting away from paying the banks a tribute for monetizing the credit of Canada, which to-day costs us three and three-quarters per cent, amounting to the sum I have already mentioned. If we had the use of that sum we would be able to do more for the people who need to have something done to help them in these difficult times.

Use oj Canada's Financial Resources


Mr. M. J. COLDWELL (Rosetown-Big-gar):: Mr. Speaker, first of all may I say the amendment would seem to declare that the government has failed to use the resources of this dominion as adequately as our people have a right to expect, for the provision of a satisfactory standard of living for the masses of the people. I believe that is an obvious statement of fact which the Minister of Finance (Mr. Dunning) in his very instructive address the other evening, did not destroy in any particular. I therefore propose, when the time comes, to vote for the amendment.
So far, however, the discussion has been centred only upon the monetary aspect, and hence has developed into an academic, and I think not very convincing, argument concerning finance and various types of credit. To my mind a discussion of this sort narrowed down to one particular point tends to confuse the issue which is really before us and which has been raised by the amendment, which states the government has neglected to use the resources of the country- not the financial system; not monetary matters, but the resources of the country, in the interests of the people.
In what do those resources consist?-surely in our natural resources, in our machinery of production, in our labour power, and so on. After all, the financial system is but a method of accountancy; it is but figures, as it were, entered into the ledgers of those who own the machines and the resources, and can therefore decide what human labour shall be utilized from time to time to operate our economic system.
In such a productive system the object of making and distributing goods is not their usability, unfortunately, but their salability at a profit. Hence within such an economic system abundance from time to time becomes a curse, and production is therefore artificially restricted; for only those things that are scarce can be sold at a good price and at a substantial profit. Selling, I repeat, not using, is the real object of our economic system; and within that system everything distributed, whether it be goods or money, must be sold at a profit, or production ceases.


Richard Bedford Bennett: Does not ability to sell depend upon ability to use?


Major James William Coldwell: Yes. The right hon. gentleman has said that ability to sell depends upon ability to use, and in that he is right. But may I say it depends more upon the ability to exchange or, in other words, to sell.
Only selfishness or stupidity would deny that there is something fundamentally wrong with a system which actually encourages scarcity and dreads abundance as a plague. My opinion is that, regardless of what we may think of social credit, its advocates have performed and are performing a service to our society by focusing attention upon this very problem. I believe, of course, that somewhere in the economic structure purchasing power has actually been issued against every item of production, but the trouble is that holders of potential purchasing power do not exercise it as such. They cannot use it for purchasing power, because they themselves have only certain limited human needs. Hence, to me the problem raised by the amendment is at once one of maldistribution and of increased consumption of consumable goods.
A few individuals have margins so far above their consumptive possibilities that they restrict the consumption of others at the other end of the scale. Last Tuesday, in discussing social credit, which applies also to what I am saying, the Minister of Finance (Mr. Dunning) said, as reported at page 1155 of Hansard:
The false premise to which I refer is that, as an inevitable result of the working of our present economic and financial system, there is a chronic shortage of purchasing power in the hands of consumers. This deficiency is supposed to arise from the fact that, of the costs incurred in the production of commodities for sale, only a part have involved the distribution of purchasing power to potential consumers.
Then he went on to refer to the Major Douglas A plus B theorem, with which I am not concerned. And then he added:
Now, the theory alleges that, as individuals who are the potential consumers always receive for their work in production less than the total cost of the products of industry, they never have enough purchasing power, enough money and credit with which to buy those products of industry.
I disagree with the statement that enough purchasing power is never distributed, but I would say the minister is quite wrong also in saying that sufficient purchasing power is placed in the hands of consumers, as consumers. The toll taken by monopolistic industries and individuals who produce for profit and who demand interest does not reappear in the purchase of consumption goods but goes into the savings, which, in turn, are used again for further exploitation of the producing masses. Herein, I believe, lies the chronic defect in the present economic system. The issue of more money will not rectify it. The very nature of the method of production and distribution, under the

Use oj Canada's Financial Resources
present system, demands that those who own the means of production retain the difference between all goods produced and the goods given to the worldng producers for their services and for their sustenance. That is the source of the accumulations of wealth with which we are confronted. It is the cause of depressions, as well as the cause of the lack of purchasing power in the masses. Figures representing these profits represent the amounts available for investment by the few who own and control the means of production. A few years ago they found profitable fields for investment of these enforced savings in industries within their own country, and afterwards abroad. To-day, as national self-sufficiency increases, overseas investments are becoming less. And so we find that government bonds are being purchased as an opportunity for investment.


Richard Bedford Bennett: Our investments abroad have increased.


Major James William Coldwell: Yes, but I am speaking generally of all investments of all nations of the world. It is not altogether true of our own country at this time. May I say to the Minister of Finance that when he speaks of a balanced budget-which is desirable-a balanced budget under these circumstances may actually restrict the places where this money may be invested, and the very people demanding a balanced budget may be those who will suffer from a lack of safe places in which to invest their money,-although in my opinion that might have under some circumstances the beneficial effect of forcing the cost of money down and diverting it into industrial channels. That might be at least a good temporary effect.


Mr. VIEN:: The hon. gentleman is in favour of a balanced budget, is he?


Major James William Coldwell: I believe every intelligent man believes that we ought to be able to balance our consumption with our production; that, of course, is the kind of balanced budget I would like to see in Canada. There is also a factor which those who look to foreign trade as a solution will have to face; for, as it diminishes, the home market will have to consume the products of industry -and I am speaking not of one country but of all countries. This means that the national income must become more widely distributed within the nation and we must look more and more to our home market and the purchasing power of our own people for a way out of some of our economic difficulties. If we fail to reach this conclusion by a process of reasoning, I believe we shall reach it through (Mr. Gold well.]
hard experience. Surely we have a picture of maldistribution in this country. Poverty is rampant, unemployment continues in the midst of vast resources, efficient machines and labour are idle and yet we have impressive bank balances. Monopolistic industry and wealth accumulation are actually increasing while relief costs mount. But the government does nothing to meet the situation, and that I think justifies the moving of the amendment.
We are sometimes told-indeed the Minister of Finance indicated it the other evening, that wealth in Canada is widely distributed. He stated proudly that there were over 4,000,000 savings bank accounts in Canada and 6,500,000 life insurance policies. However, I find upon examination that 92-5 per cent of the savings accounts average slightly over $100 while 1*2 per cent average $289,000. That is, one per cent of the depositors own over 35 per cent of the total savings deposits. The minister also mentioned life insurance. The president of the Metropolitan Life Insurance Company, speaking on January 1, 1937, had said this of North America that some twelve per cent of all policyholders had less than $300 protection; 45 per cent had less than $1,000 and 90 per cent had less than $3,000.
The Life Underwriters' Association of Canada put it a little differently when they said that out of every hundred young men starting life at age 25, by 65 years of age, 36 will have died, one will be wealthy, four will be well to do, five will be still working and 54 will be dependent, wholly or in part, on charity, children or friends.
In other words, only five per cent of those still living will have achieved economic security. Our income and wage returns tell much the same story. Of 2,713,000-I am using round figures-adult persons, excluding farmers-they should be excluded because in 1933 in the two provinces of Alberta and Saskatchewan, only 76 persons whose principal work was that of farming had sufficient income to be assessable for income tax-1.526,000 or 56-2 per cent received less than $1,000 ; 643,000 or 23-2 per cent received between $1,000 and $1,500 ; 448,000 or 16-5 per cent received between $1,500 and $3,000 ; 85,000 or 3-2 per cent received between $3,000 and $10,000 and 11,000 or 0'4 per cent received $10,000 or over. Those figures were for the year 1930.


Richard Bedford Bennett: There is $1,000 that is exempt.


Major James William Coldwell: These are people gainfully employed and all income is included. That was before the worst days of 1931, 1932 and 1933. It is useless to say, as is often said, that the standard of living is higher to-day than it was a century ago. It seems to me

Use of Canada's Financial Resources
that we should judge it, not by what it is but by what it might be. Unfortunately, scarcity seems to be the keynote of the present economic system. May I add that that is the objective of trusts, of cartels, of selling rings, of selling agreements, yes, even ultimately of tariffs. Because of this, from time to time cotton, coffee, grain, automobiles and so on have been destroyed in order to raise prices and restore profits. Last year our government rejoiced when the fire sale wheat policy got rid of what was called a surplus, but which should have been a reserve, a reserve of which we are sorely in need at the present time. Had all the people in the world who needed food received it, there would not have been a kernel of wheat left over at any time. The same is also true of industry and of industrial products. A survey in 1929, our boom year, of our potential production showed that our paper mills were running at only 80 per cent capacity, our oil refineries at 50 per cent, our flour mills at 53 per cent, our bakeries at 35 per cent and so on. In the light of the statistics that I have quoted this afternoon, can it be said that we as a parliament or as a government have provided adequately for the people? I think not.
The other evening the Minister of Finance emphasized the increase in deposits and currency, but let me remark that that is the natural result of the business upswing. The building boom in Great Britain has had repercussions in this country and the huge rearmament program has undoubtedly affected us to a remarkable degree. We can thus account for the upswing. But I say this to the gentlemen of the Liberal party: All this will pass, perhaps is passing, but what preparations has this government made for the Canadian people? It seems to me that that is the pressing question at the moment. Nothing has been done commensurate with the urgency of the situation, and the evils disclosed by the mass buying probe remain. Agriculture languishes before the demands of all kinds of well-organized industry. We have been told that the promised medicine from the Liberal free trade bottle cannot be administered, because it would destroy confederation. The Minister of Labour (Mr. Rogers) made this quite clear. The hon. member for Winnipeg South (Mr. Mutch) admitted it, and the hon. member for Melville (Mr. Motherwell) asked for the compensating adjustments that some of us have been advocating for a number of years. Private members on the Liberal side of the house confess their inability to secure the free trade for which they fought and about which they talked so much in western Canada over a long period of years.


James Lorimer Ilsley: Do not you think that is a misstatement?


Major James William Coldwell: I think it is a perfectly correct statement.


James Lorimer Ilsley: Is there not a difference
between free trade and freer trade?


Major James William Coldwell: I said "free trade."


James Lorimer Ilsley: You said both.


Richard Bedford Bennett: In 1896 Laurier said at Brandon that he wanted free trade as it then was in England.


Major James William Coldwell: Gentlemen who are today ministers of the crown and private members of the Liberal party certainly advocated not only a freer trade policy but what amounted to a free trade policy in their election speeches in western Canada. That being so, we ought to endeavour to understand and solve the internal problems of unemployment, agriculture, the depression and the poverty which surround us. It seems to me that these are the real problems raised by the amendment. The necessity for this can be seen from the fact that while we have hundreds of thousands on relief the gross dividends paid by corporations in 1937 surpassed the previous all-time record of 1930. In other words, the maldistribution of which I spoke is more obvious in 1937 than it was even in 1930. In our opinion, to rectify this serious cause of social unrest will require more than a change in monetary policy, although we regard monetary policy as one of the fundamentals of any policy.
Other fundamental requirements, if I may enumerate them briefly, are the operation in the public interest and on a national plan of mines and forests, water powers, monopolistic industries, together with effective social control of wages, hours of labour and the prices of farm products, guaranteeing to the farmer an adequate return for his labour, and so on, to ensure that we have purchasing power and the means of distributing goods within our own economy.
I would add this, that salvation in my opinion will not come miraculously or through any external commercial arrangements that we may .make, but must be worked out within our own economy, and there is no single or even speedy cure. The road must be carefully planned and followed towards social security and economic justice. It is sometimes argued, of course, that the planning of our economic security or of society generally would be difficult because we would not know what goods to produce. As to that, let me quote from a report of the National Survey
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of Potential Productive Capacity in the United States-the Hoover committee, as we sometimes call it, because it was appointed by President Hoover-which reported on January 1, 1934. This is what that committee, in some respects a very conservative one, said:
Strange as it may seem, it is easier to determine human needs than it is to determine the ability of society to extract raw materials. On the average, people of a given culture eat only so much food, wear out only so many clothes, live in only so many rooms. If "scarcity values" (of works of art, etc.) are excluded from consideration-and they naturally fall outside the scope of our study since our concern was with physical quantities-the amount of goods and services the population would like to consume can be calculated with an accuracy far greater than the accuracy with which we can determine the possible output of any industry.
Some will say that any kind of economic planning would lead to regimentation. To me economic security for all is the only road to real freedom and real democracy. That is why I advocate it. The present system regiments masses in poverty and in want because it places, as I said before, salability before necessity. It dooms the masses to scarcity and only enables those who own the productive resources to accumulate the profit on goods which they do not themselves produce. Only unorganized farmers, fishermen and other small individual producers are under economic compulsion to produce for less than the real costs of production. This problem the present government refuses to face; hence again I say the amendment is fully justified.
Where does the Liberal party stand in relation to this pressing problem? Before the election the present Minister of National Defence (Mr. Mackenzie), whom I am glad to see in his seat, and the member for Van-couver-Burrard (Mr. McGeer) told the people that the Liberal party stood for monetary reform, for those very monetary policies that were so vehemently denounced by the Minister of Finance the other evening. If I recollect, the Minister of National Defence was going to issue hundreds of millions of dollars, and I cannot tell what the member for Vancouver-Burrard was going to do. But I heard him speak, and I know he obtained thousands of votes in the province of Saskatchewan because of the very spectacular promises he made, ostensibly on behalf of the Liberal party. We said then that these gentlemen would never be permitted by the Liberal party to carry out the policy they advocated. But by these means, of course, they obtained thousands of votes. How can gentlemen rise on the Liberal side of the house and accuse

social crediters of getting votes by false pretences when that kind of thing was done so widely all across Canada by prominent members of their own party? Why are these members silent to-day, and why have they been silent these many months in this house? Surely as sincere men, and I believe they are, they must be disillusioned as thousands must be who voted Liberal. But unlike the rank and file they have a place here and can speak, and this is the time and the place to speak.
The hon. member for Rosthern (Mr. Tucker) did rise and express himself again this afternoon, although I noticed a somewhat different tone in his speech this afternoon from the tone he used in the first speech he made on this subject, and to which he referred this afternoon. But I am glad that he rose today and said some of the things he did, and may I say to the other gentlemen that I think honesty and sincerity of purpose demand that they too should follow his example and rise in their places and let the house and the country know exactly where they now stand in regard to the preelection promises which they made. Let us look at some of them.	.
We were to have a nationally owned central bank, issuing national credit and national currency to meet our national needs. And what have we got? We have a central bank that is neither publicly nor privately owned; it is a hybrid affair. Personally I believe that a central bank can best function when it is completely publicly owned, and I do not believe a compromise of that description is ever very satisfactory or very effective.
Then, large public works were to be undertaken. The hon. member for Rosthern this afternoon mentioned some of the public works that might be carried out. I am sure that we in this corner of the house would be very glad to support a program which would give us a decent highway all across Canada. But what happened to the public works? They have been either restricted or discontinued, and unemployment remains with us. Indeed to-day there are literally hundreds of thousands of people on relief, and in my opinion-I have said this before-the most pernicious form of dole is the dole that we today have in the Dominion of Canada. The member for Rosthern spoke of young men of thirty who had never worked. I have seen the effect upon such men in later life also, at forty or forty-five years of age, men who have not worked for five or more years; and I am going to tell you that even if these men get the opportunity again, they will be physically

Use of Canada's Financial Resources
unfitted to work. But they are never going to get the opportunity, exactly because of the conditions to which the member for Rosthern referred, namely, that thousands of young men of thirty and under are to-day seeking jobs, and because they are not married and therefore have no homes to maintain and are in the vigour of early manhood, they will be preferred for the jobs that are going.


Mr. WARREN:: Is not the unemployment situation in the west largely created by the lack of a crop?


Major James William Coldwell: The unemployment
figures for the month of January show that employment is actually down in the east, and surely that cannot be accounted for altogether by the drought in the west.


Mr. FURNISS:: It helps.


Major James William Coldwell: Of course the relief figures in western Canada are due in part to drought, but in the west, in these relief areas, there are roads which are a disgrace to Canada, roads which are impassable; yet no public works of that nature are undertaken.


Ralph Melville Warren: Is it not true that a great many of the unemployed in western Canada have drifted into Ontario during the past year and added perhaps to the unemployment in that province?


John Ritchie MacNicol: With the freer trade policy.


Major James William Coldwell: Well, until Ontario and British Columbia undertook to place barriers against the coming into their province of young men from western Canada, I, at least, thought this was a country where freedom of movement on the part of the people was guaranteed under the British North America Act. True, some young people have come into this province from the west.


Ralph Melville Warren: Many of them.


Major James William Coldwell: Some. I was going to add that the first attempts which were made at economic planning and direction have gone. For example, we have lost the wheat board; it has virtually gone; our grain reserves, as I called them earlier, have been dissipated too. And we are miles away from really lower tariffs-miles away. The textile and other great industries continue just as before. Nothing whatever has been done about it. No wonder that Liberal newspapers like the Saskatoon Star-Phoenix on March 4 publish articles from their parliamentary correspondent stating definitely that the big interests,
through the right wing of the Liberal party, are in complete control of that party and of Canada.


An hon. MEMBER:: That is not true.


Major James William Coldwell: That is not my statement. It is not the statement of an opposition newspaper. It is the statement of the official correspondent of the Saskatoon Star-Phoenix, one of the outstanding Liberal papers circulating in western Canada; the hon. member will find the article in the issue of March 4.


James Lorimer Ilsley: Why does the hon. gentleman say that nothing has been done in the way of lowering tariffs, in view of the new agreements with the United Kingdom and the United States?


Major James William Coldwell: The minister is usually very fair, and I respect him; but I did not say that nothing had been done.


James Lorimer Ilsley: Yes.


Major James William Coldwell: I said we are miles and miles away from low tariffs.


Mr. McLEAN (Melfort):: No-from lower tariffs.


Major James William Coldwell: Well, from lower tariffs. If, Mr. Speaker, hon. members regard as a low tariff a tariff which is 30, 35 and 40 or more per cent, I do not. And when I sat in this chamber last April and saw the Minister of Finance in this " lower tariff " government introduce a resolution increasing the tariff on furniture, increasing the already high tariffs on other commodities, then I realized that we were proceeding in exactly the opposite direction to the way in which the government said it was going, before it was elected.


James Lorimer Ilsley: What "other commodities''? There are no other commodities.


Malcolm McLean: What "other commodities "?


Major James William Coldwell: What about felt hood forms?


James Lorimer Ilsley: They were not increased.


Major James William Coldwell: I think the minister will find that they were.


James Lorimer Ilsley: They have not been increased at all.


Major James William Coldwell: I felt sure they were. The duty is very high. I suggest that this parliament is drifting, that the present government is giving no leadership in the solution of the economic problems that confront us. As I said once before, there are in all parts of this house-in the Liberal party, in the Conservative party, in the groups in this
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corner-men who are anxious to see something done and who desire to move in the direction of orderly progress, and we should forget sometimes our party divisions and even, some of us, our- pet theories-I admit that I have some. We could get together, it seems to me, a group in this house that could endeavour to give some progressive leadership at this particular time to the people of Canada. In my opinion this is necessary, because although we have seen a business up-swing, there are signs everywhere that within a measurable time we may face another " down-swing "- if I may put it that way.
So, Mr. Speaker, for the reasons I have given I intend to support the amendment of the hon. member for Lethbridge (Mr. Blackmore).


Mr. VICTOR QUELCH (Acadia):: I find myself in accord, generally speaking, with the statements of the hon. member for Rosthern (Mr. Tucker) and also, with one or two exceptions, of the hon. member for Rosetown-Biggar (Mr. Coldwell). I wish to deal chiefly with statements that were made in the earlier part of the debate and with one or two that were made prior to the debate.
I was much interested in some observations of the Minister of Labour (Mr. Rogers) and the Minister of Finance (Mr. Dunning) on the subject of relief, and I was somewhat disturbed when these ministers stated that in their opinion the only money that could be made available for relief was the money that the government could tax from the pockets of the people. It seems very strange that such statements should come from members of a government elected on a platform of monetary reform. It seems even stranger that the Minister of Labour should make the statement that if the federal government were to assume the responsibility for all relief it would be necessary to increase taxation against the incomes of the people in the lower brackets, and also perhaps to raise the sales tax, which falls heaviest upon the poorer classes of people. Perhaps it would have been a good thing if the Prime Minister (Mr. Mackenzie King) had taken one or two of these ministers with him on the election campaign, so that after he had soared high, wide and handsome in the realms of monetary reform it would have been possible for the Minister of Labour to get up and bring people back to earth by telling them that the only way the Liberal party could make money available to meet the domestic and social requirements of the people was by increasing taxation against the poorer classes. Had that statement been made during the elections I should not have been criticizing the government to-day. But not

only was that statement not made, but there echoed from one end of Canada to the other the Prime Minister's statements telling the people how currency and credit would be made available in terms of public need, showing how money would be available to meet the domestic and social requirements of the Canadian people.
The other day when the Minister of Finance was spealdng and praising the policy of the Bank of Canada, he said the bank had made money available for the industrial requirements of the people. But there was no word said as to "social" and "domestic" requirements, words that were spoken so freely in speeches prior to the election.
I listened with great interest to the essay read by the Minister of Finance, but it was largely spoiled for me owing to the fact that in the latter part of it there was a large number of misstatements of facts and a large number of false charges against ourselves that cannot be substantiated by the minister. With those statements I shall deal a little later.
The Minister of Finance criticized the hon. member for Lethbridge (Mr. Blackmore) because he quoted somewhat freely from certain authors who are not believers in social credit. The hon. member never at any time quoted those authors as supporters of social credit; he quoted them as supporting certain principles which are fundamentals of social credit. I would also point out that whenever the hon. member for Lethbridge quoted these gentlemen he named the author, the title of the book, and the page on which the quotations could be found. When the Minister of Finance attributed statements to Major Douglas and ourselves and other social crediters he did noi on a single occasion give the name of the book or the place where the quotations could be found. When the hon. member for Lethbridge challenged him and asked where the statements could be found, the Minister of Finance merely stated that he had read many books and these were his general impressions. I challenge the Minister of Finance to show where those statements can be found. I shall be referring to them later on.
Our motion points out that there is poverty in Canada and states that in our opinion the government is not taking the necessary steps to remove that poverty by adequately developing our natural resources. It is true that there has been a partial recovery in Canada, largely due to the fact that the world to-day is spending millions upon millions on armaments. In the debate on the address in reply to the speech from the throne I read from a letter of the Canadian Bank of Commerce which makes that very clear. In order to

Use of Canada's Financial Resources
obtain a proper perspective of conditions in Canada to-day I should like to draw a rough picture. On the one side we have a great productive plant working at only a small percentage of its capacity. We have abundant natural resources barely touched, tremendous sources of energy which can be developed, a large surplus of labour unemployed, and many who are working only part time. On the other side we see a sordid picture; a great army of people on the verge of starvation, about 900,000 on relief, and many thousands more whose standard of living is insufficient to provide the requirements of a healthy existence. Are not the people fully justified, then, in asking why in a Christian democracy it is not possible to employ that surplus labour in factories and industries that are working only part time, in order to produce from our wealth of natural resources goods which are so sorely needed by these starving masses? Is it a problem beyond the power of the government or of man to solve?
We have heard hon. members state that this condition of things is the fault of industry; they blame industry for not expanding. But how can industry expand when there is not a market for its goods? We have stressed time and again the reason why it cannot be done. We have shown why there is no effective market. The physical demand is there, but of what use is it unless it can be made effective?-and it can be made effective only by putting money in the pockets of those who need the goods. I have shown that it cannot be done unless you have a sufficient volume of capital production to pay out wages to restore the balance. I have pointed out that there must be a certain relationship between the production of consumption goods and of capital goods. I was therefore surprised when the Minister of Finance stated, as reported at page 1156 of Hansard:
Another error which the social erediters make is to overlook entirely the fact that consumers do not buy the whole product of industry. A very substantial proportion of the total product of industry consists of producers' or capital goods-machinery, tools, equipment, etc-which never come into the hands of consumers and which they never have to buy. The firms which are producing these capital goods pay wages, salaries and dividends which constitute purchasing power in the hands of consumers for the purchase of consumers' goods produced by other industries. It is therefore absurd to contend that sufficient money could be placed in the hands of consumers to enable them to purchase the entire produce of industry.
The Minister of Finance states that consumers are not required to pay for capital goods. Does he suggest that the owners of the factories of Canada to-day are philanthropists. allowing their factories to be used 51952-83
to produce goods without charging for the use of the factories? When goods are produced in a factory, included in the price of those goods will be a certain charge to cover the cost of equipping and maintaining the factory. Therefore unquestionably consumers not only pay for consumers' goods but also their share of the cost of depreciation of the plant that produced those goods.
I have spoken on this subject several times in the house, and every time I have referred to the fact that industry cannot create its own demand unless there is a sufficient volume of capital goods produced so that the salaries and wages paid in their production will be equal to the deficiency that exists as between the effective demand of the people and the total price of the goods available for distribution. I stressed that fact the first time I spoke and on other occasions since then, yet the minister says we have always ignored that point. I am not blaming the minister for not listening to or reading our speeches, I know he is a busy man, but I think he should be a little more accurate than to make such a sweeping statement.
So we have said it is necessary to issue additional money or purchasing power outside of the industrial system in order to make up this deficiency. When we make that statement, it is claimed that such action would cause inflation. What is inflation? The hon. member for Lethbridge dealt with this subject at some length, so I shall touch on it only briefly. Inflation to a very large extent depends on the relationship between the aggregate of prices of desired goods available for distribution and the total effective demand of the people. In other words, if the total price of desired goods available for distribution was $2,000 and the total effective demand of the people was S2,000, the two would balance and there would be stabilization. If, on the other hand, the effective demand was increased to $2,500 and there was no increase in production, unquestionably you would have inflation; the price of goods would rise to absorb that surplus money. But if when demand increased from S2,000 to $2,500 production were stepped up to the same amount you would again have stabilization. Carl Snyder, chief statistician of the federal reserve banks of America, has pointed out, by a series of charts showing the relationship between volume of credit and volume of production over a long period of time, that so long as the volume of credit parallels the volume of production there is no variation in the price level. In other words, by dividing your volume of credit by the volume of production you find the price level at


Mr. R. J. DEACHMAN (Huron North):: After listening to the social credit explanations I am not very much surprised that Mr. Aber-hart suggested the heed for calling in experts. At Cooking Lake last year he said:
The people need not bother how these aims (the aims of social credit) might be accomplished-leave that to the experts chosen to do it. Don't let details bother you, ask for results. For goodness sake don't get an inferiority complex. You cannot get anything if you don't think you can get it. How? That is something you don't need to bother about. You go ahead with your farm work.
But the thing that puzzled me this afternoon as I listened to these speeches was why it was necessary to go abroad for assistance when we have such experts in this house. My hon. friend has suggested that dividends can be paid; that there is a surplus from which production can be distributed, but I am rather curious and I should like to get the advice of these experts. I think it is more than probable that during the last two or three years consumption has actually exceeded production in Alberta. When we calculate consumption in that sense we must take into account depreciation in the value of equipment and machinery which has not been maintained during the depression. The whole province has allowed its equipment to run down and deteriorate. Perhaps we have an explanation for Mr. Aberhart not coming through with his dividends. Dividends would have to be paid out of surplus, and it may be that after examination by his experts it was found that there was no surplus to be distributed. If he had been compelled to attempt the task, the only thing he could have given was a dividend in reverse; that is, the people residing in that province would have had to contribute to the state instead of the state contributing something to them.
The essence of the story presented by the hon. member for Lethbridge (Mr. Blackmore), amounts to this:
We are producing goods but people cannot buy them. Why cannot people buy the goods produced and how can we manage so that the people will be enabled to buy?
The contention of my hon. friend is the basic contention of the party to which he belongs. I do not accept that statement in the form in which it is presented; yet I think as it stands it deserves careful analysis. There is something wrong with our method of distribution when we find ourselves in the difficulties that confront us to-day, but I cannot follow their argument. I hold in my hand a book. Let us assume that it cost me $2 when I bought it from the store. I gave the storekeeper S2 and that $2 means purchasing

power as far as he is concerned. He pays the wholesaler for the book; the wholesaler pays the publisher and the publisher distributes what he receives in the form of costs. Right back to the end of the line these costs are distributed.


Mr. PELLETIER:: Would you say that if
you bought the book at cost there would be a profit?


Robert John Deachman: The profit would go
back into purchasing power. Suppose the man from whom I purchased the book makes fifty cents, on it. He can turn around and buy something from me in exchange if I have something to sell. The cost is, beyond question, distributed. The Minister of Finance (Mr. Dunning) used boots as an example the other night. Take whichever example you choose; in no way has there been a loss of purchasing power. When you buy a product, you pay for it and when you pay for it, you pay something which is purchasing power. Let me put it to my hon. friend in this way. Go back to the old days of barter. Instead of paying for that book with a two dollar bill, I pay for it with two bushels of wheat. The two bushels of wheat would buy something else, would it not? I cannot understand how there can be any possibility of misunderstanding in a simple transaction like this. You cannot find out, at least I have never been able to find a social crediter who could explain where the missing item was or where it had gone to. Is it up their sleeves? To find it is like looking in a dark room for a black cat that is not there. There is no possibility of its being there.
There is another aspect that deserves serious consideration. I refer to the picture presented this afternoon by the hon. member for Rose-town-Biggar (Mr. Coldwell). The hon. member asserted that there was to-day a maldistribution of purchasing power in the Dominion of Canada and in practically every country of the world. I should like to give some facts which have been brought out by the Brookings Institution, which has been quoted quite often in the house. The findings of this institution are a direct challenge to the economic thought of the age. It is true the essential points are not new; they have been stated and restated in a hundred different forms; but Doctor Moulton has presented them in direct relationship to the needs of to-day. The figures given deal with the United States, but I shall give the Canadian figures later on. He said:
Families getting less than $1,250, in the average, saved nothing in 1929.

Use of Canada's Financial Resources
That is in the United States. I think that is a rational conclusion.
Out of $15,000,000,000 of individual savings $13,000,000,000 were made by ten per cent of the population in the higher income classes. As a greater proportion of families moved into these classes over a period of years, a greater proportion of money income was saved. Only part of this went to build new plant.
In the past when I heard that statement I would have answered: Well, what is the matter? I would have said that this saving goes into the banks, and the banks lend the money. I would have said it goes for the purchase of bonds, the bonds of manufacturing establishments, or railways, or whatever it might be, and that again would go back into producing more purchasing power and giving employment to people. But we have to consider these things in the light of conditions as they are to-day. When business is active and accumulated funds seek productive investment, that would be true. In the conditions which existed in 1929, that would be true. But for some reason to-day, under different conditions, that does not follow, and I am now going to give the house figures which show how much has drifted into the form of bonds held by the banks of Canada, and how much is not being used of the available credit which might be used in the Dominion of Canada.
What do we find? Current loans and discounts of banks in Canada stood at 81,343,000,000 for the year 1929. Business-was using the available credit at that time. The level was $731,000,000 on December 31, 1937, a decline of S600,000,000.


Richard Bedford Bennett: Is that the loans?


Robert John Deachman: It is current loans and discounts of all the chartered banks in the dominion.


Richard Bedford Bennett: It does not include demand loans?


Robert John Deachman: No, nor call loans. On the other hand, federal, provincial and municipal bonds, representing bank loans to governments and provinces, because a bond is after all a note, and investments in other securities, amounted to approximately $500,000,000 in 1929, and stood on December 31, 1937, at $1,500,000,000. What is the significance of these facts? We are not using our available credit for production. Savings are going into bonds and securities. Money is seeking a safe harbour. It is seeking a safe harbour because of fear, because of the situation which exists in the world to-day; and of course, being faithful to the cause I
represent, I must contend that it is in part due to mistakes of government, perhaps even in part of this government.
I have here the report of income tax collections for 1936. It shows that 199,102 people paid income tax. In 1931 the total number of people gainfully employed was 3.927,230. Assuming that the number gainfully employed was the same in 1936 as in 1931- and the difference would not be large-we have 3,728,128 who came below the income tax levels. Of those who paid income tax 175,492 were in the bracket of $5,000 or less, and contributed a total of $4,204,731. The remaining 23,610 paid more than $28,000,000. When you pay your income tax, and your income is ten or twenty or fifty thousand dollars, I venture to suggest that in the great majority of cases it goes back not into consumer goods but into investments, into bonds or savings. While it might in normal times, or would in normal times, be employed in the production of capital goods it does not now go back into the production of capital goods because money is invested in capital goods for the production of consumer goods, and if there is no demand for consumer goods then money will not flow in capital production.
In Canada our population is more largely rural than in the United States. There is practically no saving so far as the farmers are concerned, so that we would have a larger number of people with small incomes on which they were incapable of saving in the normal course of events, and the savings which have been accumulated have been accumulated largely among the more favoured class.


Richard Bedford Bennett: Of course, the one
thousand dollar income people are not included.


Robert John Deachman: Yes, I recognize that. We have now this situation. There is unquestionably at the present time (1) maldistribution of income; (2) wealth, savings, credit power concentrated in the hands of relatively few; (3) a decline in the use of credit for industry. The capital goods market is at a low level.
In essence, therefore, we have a situation which is almost unique in Canadian history. The market for capital goods is not sufficient to absorb our excess production. There was a net capital export from the Dominion of Canada during the past year: that is, we bought back some of our production from abroad because there was not a good market for capital investment in this country.
In the past our periods of prosperity have been followed by a succession of depressions
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and booms. The idea occurs to me that while each successive boom actually rose to a higher level than the preceding boom and brought about a higher standard of living and more comfort to many people, we may now be reaching the point where there may be a recession in these peaks and I sometimes raise the question in my own mind whether we may not for some time to come fail to reach a peak as high as we have reached during the past boom. There are certain things which indicate this. Intensive nationalism such as has developed throughout the world calls for lower standards of living. I do not think there is anyone here so stem an advocate of protection and of the doctrine of exclusion that he would deny the assertion that when each little nation is cribbed, cabined and confined within its own narrow boundaries, the standard of living is not going to be as high as it would be in normal times. Second, we have rigid control of industry. We have fixed prices. There is so much of the economic area which is fixed that those who are outside the field of privilege, that is the farmer, the basic producers generally and the common labourer, are on a very low level, and they must have a difficult position during any period in which business is not above its normal level. Third, a highly mechanized industry produces at a low cost when it is running at 100 per cent level of activity; but when mechanized industry begins to produce in a period of depression, when the steel industry in the United States, for example, is down at a level of approximately 26, that is high cost production, and it means high costs in selling and high cost for its consumers. When these high costs are reached it is extremely difficult for the men in the lower income brackets to be able to buy back the goods which are produced, because they have no real purchasing power.
I say this further-and here is where I shall get into difficulty with the hon. member for Rosthern who, I am sorry, is not with me. I am not sure that we can solve all these problems by the new method of playing with the counters. We are now to have managed currency. Managed currency has to be managed by men. Men are capable of making mistakes, just as well as the old form of currency was capable of wrong use. But there is this that can be said of the gold standard, that at least it kept its word so long as men did not make it impossible for it to keep its word. The problem we have to-day is not so much to play with the money we have as

to get goods exchanged and to develop markets, and this is a problem which we are not facing when we turn our sole attention to the problem of money.
Now what is to be done? The capital goods market has been more or less destroyed. There is maldistribution. Consumptive demand is insufficient. In the United States they have developed a certain solution or attempted solution of this particular problem. It is the great and glorious pastime of "soaking the rich." They have also tried the other method of expanding the demand for credit and money by means of government expenditures. Well, I suppose I have the right to differ from some of my friends in this corner of the house. The hon. member for Rosthern suggests that highways can be built and other large government enterprises undertaken. But I suggest that that involves the production of something which must have an exchange value equal to its cost of production; otherwise it is not profitable to the community as a whole to have it produced. For if the people of Canada have to be taxed to build a road to a park in northern Saskatchewan-and I am not singling that out for distinction as not being a good place to build a road; the same reasoning would apply if they had to pay taxes to build a road into Huron county-if they are to pay taxes for the building of a road, it must be because the Canadian people feel, that that road has an exchange value equivalent to its cost of production; in other words, that the Canadian people as a whole or the people of some community in Canada will be able to exchange the product which they produce for the benefit of having that road where it is.


Mr. MARTIN:: Would the hon. member permit me? Is he not considering purely the economic aspect of the problem and overlooking what is equally or more important, the sociological aspect?


Robert John Deachman: Quite. But a nation which is in the midst of a period of hard times, when it is difficult for us to provide food, clothing and shelter, and when, as I noted from the record to-day, schools in Ontario are sending out money to support schools in Saskatchewan, can very well, in my opinion, turn its attention to the production of things which are needed more than are roads in any district at the present time, unless those roads have a value in service to the community and are worth producing for that reason. I am in no doubt so far as that is concerned. We may put up beautiful

Use of Canada's Financial Resources
buildings and fine monuments, and they have a value; but when the government expends money upon 'the construction of a public building it is an entirely different matter from spending it upon a business enterprise. If we build a new post office in Ottawa, does it increase the payroll? Will there be more stamps sold? Will more money orders be bought? We may operate more efficiently in a new and better equipped post office, but it will do very little to add to the production of wealth in Canada.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.


Robert John Deachman: When the house took recess at six o'clock I had pointed out that in the United States they had tried a number of different means to restore prosperity, but despite these attempts the United States today seems to hold the lead in the drift into another depression. Some time ago the Natural Resources Committee in the United States made a report on the development of industry in that country. A summary of their finding appeared in the Index published by the New York Trust Company in November last. The investigation covered manufacturing, mining, steam railways and telephonic communication. I give you only one illustration, that of manufacturing. Taking 100 as representing the volume of output in 1920, production in 1934 stood at 94. The man hours required in 1920 for that year's production being shown by the index number of 100, the man hours required for the production of the reduced volume of 1934 were 52. This gives us a figure of approximately 56 for the man hours required to produce 100 units of goods in 1934 in comparison with 100 man hours for production of the same volume of goods in 1920.
I want to make that point clear. It took approximately fifty-six per cent of the number of man hours to produce the volume of goods in 1934 which was produced by 100 man hours or units of work in 1920. Measure what that means in volume of unemployment, if nothing else occurs to alter that movement. I admit at once that there are variations in the kinds of production between 1920 and 1934; also there are variations in the means of distribution. I admit that other factors may operate to relieve the volume of unemployment resulting from that decrease in man power required. But I want to ask the house just one question: If that number of men
can be discharged from industry with the volume of production remaining practically the same, what becomes of the problem of employment in Canada and the United States unless some other adjustment is made?
Now what adjustment is necessary? Why is machinery installed? Machinery is put in because it will reduce the labour cost of the product. No manufacturer instals new machinery unless he believes that by doing so the number of men required to operate his factory can be reduced. I do not suggest for a moment that if the free play of natural forces were allowed to operate, that would mean, over the long period, a reduction of employment. But if there is something which enables the manufacturer, after dismissing these men, to continue to sell his goods at the same price, then there is unemployment, and the next step is to throw the burden of that unemployment upon the state. The only remedy as far as I can see is that the price be permitted to fall in order that there may be enlarged purchasing power, and the increase in demand for goods, although it may not apply to this particular factory, expands into other divisions of production, because the desires of man are limitless; as long as he has purchasing power he will go on buying. That is the only way as far as I know by which that balance can be effected. But if on the other hand we are going to hold prices up; if we are going to have, as we have in Canada now, rules and restrictions of every possible kind tending against reductions in prices; if we are going to pile up tariffs; if we have obstructions which restrict imports like sections 36 and 43 in the Customs Act, then the inevitable follows. It makes no difference what speeches we make about these questions; it matters not what we do at election time; the thing that matters is what we do when we assemble here trying to govern this Dominion of Canada.
The hon. member for Rosetown-Biggar (Mr. Coldwell) who spoke this afternoon, is in entire accord with me, I think, in the analysis I have given so far. We have moved along somewhat parallel lines. But he proposes an entirely different remedy. His idea, as expressed this afternoon, is that the government should take over the control of production and that we should move towards the socialist state. I fail to see how any man can hold that opinion in view of our knowledge of government efforts to-day in Canada and other countries. We have problems enough on our hands, with the hydro-electric development in Ontario, the Canadian National Railways, the operation of government owned utilities in different
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provinces. It seems to me that if the solution is to be found along that line our progress must be very slow. We have to develop step by step the ability to walk, the ability indeed to stand upright and to move at all, before we go on to face the problem of the administration of the entire industrial life of the dominion. Think of the complexity of the problem of trying to organize production and distribution of all the multi-complex lines of production and distribution and services in Canada if we remove free initiative and say that all has to be planned by government.
Last year I read the record in the Saturday Evening Post of some United States engineers who were working in Russia. Their great difficulty was that they had to compile so many records and so much time was consumed in making reports to this division and that, and in the voluminous correspondence, that they had no time to go on with their work. By the time they had the reports finished and plans prepared and approved, the whole thing was so completely mixed that it was surprising that they ever reached the stage of production.
The only remedy I can see is to face the situation by a return to freedom, by removing the barriers and permitting the free play of natural forces. What is there to control production except price? When the price falls too low we cease to produce; when it goes up we return to production. There may be waste in that process; mistakes may be made, as they made mistakes in the United States a short time age when they tried to control production and ran into a period of scarcity. But after all, over a period of years, the only possible way by which you can reach a reasonable level of production and price is by the free play of natural forces.
In discussing this question the other day the Minister of Finance (Mr. Dunning) came to what I think is a reasonably wise conclusion. I have noticed some criticism of the efforts of the government in the past few years, and sometimes I am free with that criticism myself. But I am wondering what the results would be if my hon. friends in the other corner were in power.


Miss MACPHAIL:: It could not be worse.


Robert John Deachman: I wonder if it is not worse in Alberta. At least we have kept clear of some things in regard to which they are somewhat involved out there. If my social credit friends had absolute power in Canada I wonder if they would do any better or show any greater capacity for the direction of affairs

than they have shown in Alberta. I wonder, too, how my Cooperative Commonwealth Federation friends would get along if they were directing affairs. One of my hon. friends remarks that things could not be worse. Well, in that connection there would be as much diversity of opinion as there sometimes is in this party, with perhaps no better sense of direction! My hon. friend the Minister of Finance made this remark:
Fundamentally our need is an actual increase in material wealth, not a different yardstick with which to measure it.
I agree with that, but it is not the only fundamental need. It requires the redistribution of the wealth now being created so that the relationship between savings and consumption shall be altered in accordance with the needs of to-day. Change the direction of savings and of investment; and again I say the only means by which that can be done is by free competition, by lowering the prices of goods and increasing consumption, thereby establishing demand. We may hold prices, but when we do volume drops. After all, the total measure of goods and services which we secure for our work is the result of two variables, price and volume, and if you hold the price at a high level the volume of consumption will be decreased. Therefore in terms of actual goods you will be poorer than you were before. My hon. friend the Minister of Finance also caught the vision of that need, and I hope he means to apply it. In his concluding paragraph he said:
Such an increase in material wealth can be best secured by facilitating the production of the many commodities which Canada is best adapted to produce, and by exchanging these products on as large a scale as possible for products which Canada cannot advantageously produce, receiving in return for our exports as much rather than as little as possible.
That is a delightful phrase. I might almost have written it myself, but the strange thing is that my hon. friends who hold out this admirable advice do not always follow it.
I referred to section 36 of the Customs Act. I want to read a word or two of that. This is a section of an act which is framed for the purpose of making goods cost more. It serves no other purpose. It reads:
The value for duty of new or unused goods shall in no case be less than the actual cost of production of similar goods at date of shipment direct to Canada plus a reasonable advance for selling cost and profit-
In other words, when we bring in goods from the United States we have a section of an act here which says that these goods shall be valued at a price which covers the cost of production and i\ reasonable selling cost, plus

Use of Canada's Financial Resources
a profit to the United States manufacturers. We are not to buy from United States sources unless we see that the United States manufacturer makes a profit. That is the essence of the story. Farmers in my constituency bought cattle last fall for six cents a pound. After feeding them all winter they will probably sell those cattle this spring for five and a quarter cents a pound, and there is not a word from either side of the house. Can you tell me what is the remedy? I do not know, but you ought not to insult these farmers by telling them that in the Customs Act there is a section which says that if they want to buy blue denim to make a pair of overalls they must be very careful to see that the United States manufacturer from whom they buy those goods is paid a price which allows him a reasonable profit. I wonder what would happen if one of my hon. friends, on either side of the house, were to employ a purchasing agent and send him out to buy goods. Would he give that agent a lecture first and say, "Buy where you like, but be sure that the man from whom you buy gets a profit." Yet that section remains part of the legislation of our country; it is in force, and was put into effect last year for what reason? It was done to prevent prices of cotton goods in Canada from being reduced, when they had fallen in the United States by virtue of the reduction in the price of raw cotton both in that country and in this.
That is what happened. That is the situation. We have legislation to keep up selling prices,' to make us pay more for material we buy, and the same sort of things runs all through the Customs Act. I have on my desk a letter which I received from the Minister of National Revenue (Mr. Ilsley); I am sorry he is not in the house. All it means is this, that a manufacturer in my own constituency bought some leather in the city of Chicago. A man was sent post-haste from Ottawa to Wingham in order to investigate that purchase-to see if the man paid too much for it? No; to see that he paid enough for it; to see that the price was sufficiently high, made so by government regulation, so that he would be compelled to charge a higher price for the gloves which he produced from that leather. When you face that situation; when you look at what we have done in regard to sugar, it makes you wonder. Under section 43 of the Customs Act we revalued sugar coming from Cuba at a price which took millions of dollars out of the pockets of the Canadian people.
We see the provisions contained in sections 43 and 36 of this act; we see this tariff
piled as high as it is to-day, after we have been in office for some time, and I say this is evidence that you are not recognizing the fundamental problem which faces us in this dominion to-day. Whether it is applied by the hon. gentlemen on this side of the house, I mean those separated from me spiritually but not physically; whether it is applied by hon. gentlemen on the other side of the house, associated with me spiritually but separated physically, and differing sometimes quite widely in regard to the questions I am now discussing, or whether it is applied by hon. members in the far corner; no matter how it is done, for what cause or on what excuse, I say the sure, certain, inevitable result of that policy is to lay the foundations, not for the expansion of employment in Canada, but for the still further restriction of the employment-which we now have.
I appeal to you to-night to place this upon a reasonable basis. I am not making these statements merely to oppose somebody on this side or that.
In the debate of the last few days rve have been trying to find out the causes of these conditions, to seek a solution-as I asked that it should be sought the other day, when I said that debate should be nothing but a search for the truth. There is no desire on my part to challenge the attitude of any party, no matter upon what side they may be, so long as they make an effort towards the solution of this problem. Do we mean to say that 245 members of the House of Commons, who are trained in political life, trained in economics and with a vast experience, are going to close their eyes and say that the problem is impossible of solution-impossible of solution, because it is impossible for us to blaze a new trail; impossible of solution because we cannot do something which has not been done before; impossible of solution for one reason, and only one, namely, that we fail to realize that we must live in conformity with certain economic laws, sternly set, built in the veiy fabric of our lives? Believe me, you cannot escape obeying them without paying the price-and that price is unemployment, higher taxes, disruption of government and, far, far above that, the payment in terms of broken lives. For that is what we do when we break the economic laws by which we are governed, and which we ought to obey, if we are to find a solution and make life happier for the people of Canada.


Mr. NORMAN JAQUES (Wetaskiwin):: Mr. Speaker, since criticism has been directed against social credit, and since the founder of social credit is not here to speak for himself,
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I would like to read a few quotations from the works of Major Douglas. He puts the root causes of our economic troubles as follows:
(1)	Wages, salaries and dividends will not purchase total production. This difficulty is cumulative.
(2)	The only sources of the purchasing power necessary to make up the difference are loan and export credits.
(3)	All industrial nations are competing for export credits. The end of that is war.
(4)	The major distribution of purchasing power to individuals, is through the media of wages and salaries. The preponderating factor in production is improving process of the utilization of solar energy.
(5)	This latter tends to displace wages and salaries, and the consequent distribution of the product to individuals. The credit factor in purchasing power thus increases in importance and dominates production.
(6)	This production is consequently of a character demanded by those in control of credit and is capital production.
(7)	The fundamental derivation of credit is from the community of individuals, and because -individuals are ceasing to benefit by its use it is breaking down.
The hon. member who has just taken his seat has said that the remedy is to lower prices, so as to cheapen production. I would like to read Major Douglas's answer to that. He is speaking of that very policy which was put into force by the British government a year or two after the end of the great war, at which time there was a cry of "produce more and consume less." They thought that by so doing they could save enough money to pay for the war. Douglas says this:
Consider now the policy actually being pursued at this moment by the government-
That is the British government.
-and the financial powers to deal with the problem. They can be summarized in one sentence-the reduction of costs, and more especially the labour costs. But labour costs are wages and form by far the most important item in the total purchasing power inside the country available for the distribution of goods. Even supposing that retail prices were reduced in exact ratio to wage reductions, which is highly improbable or even impossible, how is the distribution of goods to people in this country, which is the true object of British industry, thereby advantaged? As the prices fall by this method, so the amount of money to purchase also falls, and we are as badly off as before, with the added complication of the discontent evoked by the reduction of wages.
As previous speakers from this comer of the house have intimated, the social credit remedy is the creation of credit, and its distribution direct to the consumer, to make up for the chronic shortage of purchasing power. The answer to that, of course, by the orthodox, is inflation. I would like to read 
Douglas' remarks on inflation, because social crediters, and particularly Douglas, are spoken of as inflationists. This is what Douglas has to say on inflation:
There is almost nothing to be said for a policy of deflation, as defined by the average banker, except that it provides a breathing space in which to consider what to do; the real argument against it is not that it reduces prices, but that it only does so at the expense of the producer, but a policy of inflation, that is to say a policy of increasing issues of money or credit, in such a manner that it can only reach the general public through the medium of costs, and must therefore be reflected in prices, has one thing and one thing only to be said for it at this time; that it is absolutely and mathematically certain to reduce any financial and economic system to ruins. It is in fact a capital levy of the meanest and most one-sided description since it taxes the purchasing power of those who obtained it by work, for the benefit of those who obtain it by financial manipulation.
When we are warned about the terrible consequences of inflation, the German example is always pointed out to us. But our opponents always omit to say that the German inflation was deliberate, and was caused so as to destroy Germany's internal debt and, as they thought, to give her a better chance of paying her external debt. That was done deliberately. However, I do not know of any instance in British history, or the history of any other country, where inflation has brought about any real ruin. On the other hand, since the end of the war deflation has cost in the loss of real wealth infinitely more than the great war itself. I had a letter from Senator Thomas, who is the senator from Oklahoma and, I believe, chairman of the agriculture and forestry committee of the senate of the United States, in which he said that since 1929 it was calculated that' deflation in the United States had cost that country a loss of real wealth, that is, wealth which might have been produced but which was not, to the extent of 8250,000,000,000.
We learned more about finance during the four years of the great war than I suppose we would have learned in four hundred years of peace. How was it possible to finance the cost of the great war amounting to tens of thousands of millions of dollars without inflation? The answer is that during war time finance was put to its proper use and financiers were put in their proper places. In peace times those who are in control of the financial policies, namely private individuals and private corporations answerable to none but themselves, deliberately and designedly bring about conditions of inflation and deflation. In war times the financier is put in his proper place. He dare not bring about

Use of Canada's Financial Resources
such a condition for if it were known he would be put against the wall and shot. When we consider the misery that has been forced on the people of Canada during the last seven or eight years, then I say that those who caused it should be brought before the bar of this house and made to answer to this parliament for their crimes. When we do that, then we can say that this is a sovereign parliament.
It is a curious thing, but history is absolutely dumb on the questions of money and finance. I believe I had a reasonably fair education. I have spent a lifetime on the farm, but I have been always a heavy reader. I have read a lot of history, but I was fifty years of age before I knew anything about money. I do not mean knowledge of the manipulation or the accumulation of money; I mean knowledge of the nature of money. Until then I knew little more than I did when I went to school. A man could take the highest honours in any university and still know nothing of the fundamental part that money has played during the course of our history. We read of great famines and hard times down through the ages and in most cases governments and nature have been blamed. We realize now that it was nothing but financial manipulation. That was one of the great causes of bad times. As the hon. member for Lethbridge (Mr.' Blackmore) said the other day, Edward III attempted to overcome this by debasing the currency. At that time the hon. member for New Westminster (Mr. Reid) replied that Edward III was merely trying to get rich quick for his own benefit. I would remind the hon. member for New Westminster that Edward III lived before the conquest of England by Scotland.


Mr. REID:: If you said that Scotland conquered England you would be correct.


Norman Jaques: It was when William Patterson, a native of Dumfries, founded the Bank of England in 1694.


Thomas Reid: Douglas never conquered Scotland.


Norman Jaques: No; he reconquered England. Before I conclude I should like to remark that the Minister of Finance (Mr. Dunning) told us the other night that this government, or one might say, that he himself as Minister of Finance controlled the financial policy of Canada. One might as well say that a sultan's steward controls the sultan's harem, obviously the control is very remote. The house has heard Douglas's opinion of inflation, and I think it can be said that he is no more looking for inflation than is anybody else. He suggests a
simple way of preventing it. Inflation is not, as so many seem to think, an increase in the amount of money. It seems to me that many people do not know the difference between inflation and expansion. Inflation means an increase of money accompanied by an increase in prices.
The orthodox speak about the inexorable laws of economics; but there are no such laws, there are merely rules. You might as well talk about the laws of whist or bridge. These are merely rules made by men that can be altered by men any time they care to do so. If I drop this book it falls to the ground according to one of the inexorable laws of nature. There is no altering that law, but I do not think it is right to say that the rules of economics are laws. I have only to mention the gold standard. A few years ago it was regarded as an inexorable law and we all know what has happened to that. I believe the orthodox view of inflation is based upon orthodox principles or rules of political economy. I would like to quote from Ricardo's Principles of Political Economy as follows:
The natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist and to perpetuate their race without either increase or diminution. It is, in practice, more likely to fall below, than to rise above, the subsistence level, but, after their privations have decreased their numbers, the market price of labour will rise to the natural price.
That is a "law" of economics. It is fairly obvious that our opponents regard any state of prosperity that is above or even a little below the subsistence level as inflation, and the only remedy they see, like the hon. member for Huron North (Mr. Deachman) is to lower wages and purchasing power until the sufferings and privations of the labourers would cause a scarcity of labour and eventually a rise in its price. We do not see it in that way. We do not believe that is a law: we think it is a rule.
Douglas has provided a very simple way to avoid inflation. He suggests that retail prices be lowered to the extent necessary to equate production and consumption, and that then the retailer be compensated by the treasury for the amount which he would thus be out of pocket. That would prevent inflation because it starts out with a reduction in prices. In other words, Douglas proposes that the people be enabled to buy their retail goods at the real cost of production instead of at their financial cost. We say, and we prove-I have not the time to do so tonight-that the price of goods produced is,
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or ought to be, the cost of goods consumed; in other words, that consumption is the cost of production.
The just price, or the price discount, whichever you like to call it, is not a fixed price. It does not attempt to set a price. It allows prices to find their natural level through the free play of competition, but it does say that whatever the retailers find it necessary to charge for their goods in order to pay for their production and provide the retailer with a living, that level shall be reduced until the total prices in the country equal the total amount of purchasing power in the consumers' pockets. That credit would be created by the state-not by taxes, of course. I do not know why some people imagine and will insist that the only source of money which a government has is what it can borrow or what it can raise by taxation, and if we have done nothing else since we have been here, we have at all events persuaded the Minister of Finance to admit that banks can and do create money. And if banks can do it, I would like to be told why the state itself cannot do it. But apparently the inexorable law of economics in some miraculous way prevents it. The banks can do it, but the state cannot.
The easiest way to understand the subject is perhaps from a short illustration. Here I would like to read a statement that was handed to me by the Douglas Social Credit Bureau of Canada, headed Production and Consumption. They wish me to make this statement for them:
In dealing with estimates or with actual figures of production and consumption, it is well to bear in mind that, for the most part, the statistics obtainable to-day are only approximately correct. They are sufficiently accurate, however, to permit definite conclusions to be reached.
The dominion bureau of statistics gives actual production in Canada for the year 1935 as 2,554 million dollars and consumption as 2,036 million dollars, or eighty per cent of actual production. There is, however, a vast difference between actual production and potential production, for whereas consumption may be eighty per cent of actual production, it might be a mere fifteen or twenty per cent of the potential production attainable if our enormous plant operated at full capacity.
The Rotary International social credit research committee-
The Rotary International set up a committee to inquire into social credit, and it brought in this report:
The Rotary International social credit research cotamittee in its report gave the following estimate:
"The present potential output of industry is at least four times its actual output."

Thus we have a picture of consumption being eighty per cent of actual production and, in turn, actual production being twenty-five per cent of estimated potential production.
Further, the Dominion Bureau of Statistics gives actual production for the boom year of 1928 as 4,122 million dollars and consumption for the depression year of 1933 as 1,777 million dollars, or forty-three per cent of the "proved capacity to produce" attained in 1928, which in turn was less than the potential capacity to produce.
No physical deterioration had occurred between 1928 and 1933 and the capacity of Canadians to consume had not altered but a financial collapse had restricted purchasing power. This illustrates the vast difference between demand and effective demand. The desire for goods and services, which is demand, counts for little without the necessary purchasing power to make it effective demand.
Considerable effort has been made in some quarters to link rising prices or inflation with social credit, in effect confusing one of the injurious processes of the present, financial system with its remedy. The Douglas price discount formula is a scientifically devised mechanism designed to act as a governor that will automatically prevent either inflation or deflation, maintaining a balance between supply on the one hand and effective demand on the other.
The Douglas Social Credit Bureau of Canada, Inc.,
Ralph L. Duclos,
President.
Suppose we take the figures which are quoted here, that according to the bureau of statistics consumption this year equalled eighty per cent of actual production. I have said that retail prices would be reduced to the point where consumption and production would equate, and this would mean that we could reduce the prices of retail goods by twenty or twenty-five per cent. That is to say that an article retailing at a dollar could be sold to the public for seventy-five cents, and the retailer would then be compensated by the treasury for the amount he was out of pocket. In that way, whatever the people cared to produce they would be enabled to consume, and industry would become for the first time self-liquidating, so that it would be possible to continue without incurring debt- which is certainly impossible to-day. I might go into the details of how that is to be administered, but I do not think it is necessary. There is the principle; it is designed to prevent inflation by stopping it before it starts, because it acts by means of reducing prices, and you cannot have inflation unless prices increase.
Social credit is a great deal more than a system of economics; it is a philosophy of government and a philosophy of life. Douglas says:
What are we trying to get? What are we aiming at? We are endeavouring to bring to birth a New Civilization. We are doing

Use of Canada's Financial Resources
something which really extends far beyond the confines of a change in the financial system. We are hoping, by various means, chiefly financial, to enable the community definitely to step out of one type of civilization into another type of civilization, and the first and basic requirement of that, as we see it, is absolute economic security.
Now, as to the social credit idea of government, we believe that it is the privilege of the people to demand what they want, to demand results, and it is the duty of their representatives to obtain those results for the people who elected them, not by turning themselves into amateur experts but by engaging the experts needed to do the technical work. I have heard that idea laughed at, but how else do we do a thing when we have to accomplish something really big? I was not a member of this house when war was declared ; but I am certain that hon. members did not then rise in this chamber and express their ideas of inflation and deflation and advise how this, that, and the other thing shoidd be done. They were not concerned with exactly how these things were to be done; what they said was, "They must be done," and they ordered those who were responsible to get them done, because they knew that if those objects were not achieved they would be answerable for their failure to the people. If that be true in time of war, why is it not true in time of peace? In war time anything physically possible becomes financially possible, but in peace time only what is financially desirable is permitted to become physically possible. As soon as we say that you could cure unemployment; that you could reduce the age for old age pensions to sixty or even fifty years and could pension the blind, the lame and the halt if you really wanted to do so, what do we hear? What have I heard repeatedly in this chamber? "Yes, of course it ought to be done, but where is the money coming from? We cannot afford it." I should like to see any hon. member, if war were declared next week, rise in the house and say, "We cannot go to war, Mr. Speaker, for where is the money to come from?"


Paul Joseph James Martin: How do you know that will not be done?


Norman Jaques: It never was done and
never will be done. A few years ago the people of Great Britain were faced with the consequences of unemployment and other social problems which occasioned great suffering; but no matter what was proposed by way of remedy, whether the dole, or widows' pensions, or mothers' allowances, or any other social service, always the objection was raised.
"Where is the money to come from?" When, however, it became evident to the real rulers of the nation that their own property and lives were in danger from enemy action, did anyone say, "How are we going to finance ten thousand million dollars to increase our defences?" I am not arguing against the expenditure of money upon defence. If you want to, you can spend up to the limit of your physical capacity to produce. What I do say, though, is that if money can be found for war it can be found for peace. If this house is a sovereign parliament, as it is said to be, the money can be found. Unfortunately the experts, who, of course, are the only people qualified to carry out policies, formulate the policies themselves. As Douglas says:
The experts should be on tap, not on top.
But that is where they are, all over the world. The financial expert is not so much on tap as he is on top. As Mr. McKenna says, bankers control the policies of governments and hold the destiny of the people in the hollow of their hands. The proof of this is that Canada, along with all other countries, was able to finance a great war. Before the outbreak of that war it was said that such a thing was impossible because there was not enough money to finance it. But the war did not stop for lack of money. Nobody ever said, "You cannot put these men into the firing line; you cannot pay them a dollar a day; we have not the money." The money was found; if there was any idea worth while it was carried out without reference to the money cost. And all this was done without any degree of inflation worth mentioning. There was prosperity in spite of the fact that the cream of the nation was either in the firing line or in the munition factories producing, not goods and services which the people needed, but shot and shell. Yet I repeat that in spite of these vast numbers engaged in munition factories or serving in the trenches, the mass of the people lived better during the war than they have ever lived, before or since. And the reason, the only reason, is that finance was put to its proper use and the financier put in his proper place. We have heard it said that the war impoverished the world, but it did nothing of the kind, apart from the appalling loss of life. In any material sense the world was infinitely richer after the war than before. The productive capacity of all countries was enormously increased. But having won the war we had to lose the peace. The financier lost it. What else could he do? It is an inexorable law that financial control by the financiers is absolutely certain to bring

Use oj Canada's Financial Resources
about the position we are in to-day of poverty and unemployment. It cannot do anything else; it is not meant to do anything else.
We believe that the people, and only the people, have the right to decide on policy. But the carrying out of that policy is the business of experts. Let me illustrate. Suppose a community wanted to build a bridge. They lived by a river and the only means they had of crossing was a ferry. As the papulation increased they found the ferry inconvenient so they began to consider the possibility of building a bridge.


Walter Edward Foster: I am sorry to have to tell the hon. member that his time has expired.


Norman Jaques: Might I finish this illustration.


Some hon. MEMBERS:: Go on.


Norman Jaques: A meeting would be called to discuss the question of building a bridge. Now that question of whether the bridge should be built is entirely, for the public to decide. Having decided that, they would call an engineer to give an estimate of its cost. The engineer would say, "Well gentlemen, what kind of bridge do you want? Do you need a foot-bridge or a bridge for motor cars or one to carry Street cars and a railway?" That question having been settled, the engineer would examine the site, prepare plans and present them to the people, probably with an estimate of the cost. They would decide whether they were willing to spend that sum and, if so, would instruct the engineer to go ahead and build the bridge. The actual design of the bridge they would leave to the engineer, as an expert; he would be responsible for the design of the structure. That is what we mean when we say the people settle the policy and the experts carry it out. That is the policy of the Alberta government at the present time. Those men were elected to obtain results. I know many of the members of the Alberta legislature myself, some of them intimately. They are not here to speak for themselves, so I want to say something in their defence. I can speak for myself and you can judge me as you please; I do not care what you think of me. But, knowing these men, I say that no people were ever represented by a finer, more honest and hard working lot of representatives than the present members of the legislature of Alberta.


Ernest George Hansell: May I remind the house of the exact wording of the proposed amendment:
That all the words in the motion after the word "that" be struck out and the following substituted therefor:

This house is of the opinion that for the effective removal of poverty from Canada this government has neglected and is now neglecting to use the resources of the dominion as adequately as the people of this country have a right to demand.
I read that because I am going to deal first with what the hon. member for Lethbridge (Mr. Blackmore) has said and then follow that by attempting to show that the Minister of Finance (Mr. Dunning) in his rebuttal did not attempt to refute the argument of the hon. member for Lethbridge. In fact one is tempted to think that the speech of the Minister of Finance was not prepared in any terms whatsoever as a rebuttal of the argument put forth in that debate. The Minister of Finance dealt a. good deal with w'hat the hon. member for Rosthern (Mr. Tucker) said a year ago and then launched into something of an attack upon the Douglas social credit philosophy.
The hon. member for Lethbridge dealt first with the question, What is money? He showed the difference between currency and credit, and used a term which, I think, was unique for this house at least, advocating " king-created " money. Of this the Minister of Finance made no particular mention The hon. member for Lethbridge then dealt with the sources of money, and contended that money is in the last analysis created. I should like to amplify that a little. When one talks of money there seems to be some little misunderstanding regarding its source. In fact while the hon. member for Lethbridge was speaking along this line and attempting to show that there was only one source from which money should come, an hon. member on the other side said, "Why, you can earn it." This did not get into Hansard, but the remark was heard by myself.
I should like to point out that there is a difference between the source from which money comes and the avenue through which it comes. Some months ago I was having a bit of an argument with a gentleman, and I asked him where money came from anyway. He said, "Why, if I have a farm out here and grow a crop of wheat, the money comes from my wheat." I said, "Well, sir, you do not mean to tell me that money actually grows on your land?" "Yes, yes; of course it does. That is it." For the life of me I could not seem to drill into that gentleman's mind that there was a difference between his receiving money by means of the sale of a crop of wheat, and the source from which money originally came.

Use of Canada's Financial Resources
I believe a year or two ago the Minister of Labour (Mr. Rogers) raised the same question, and I know he is well informed upon this subject. At that time he suggested that all money comes through production. I think I am right in that reference, though I am trusting to my memory. It was either a year ago or two years ago. Of course the Minister of Labour was right in what he said; but I should like to point out to hon. members that if he had said that money comes from production he would have been wrong, and I think he is aware of that fact. In other words, that is a difference between money coming through the process of production and money originating with production. The hon. member for Lethbridge attempted to point this out. Money does not grow on trees. We do not dig it from the ground, and at its source we do not earn it. It is created by the banking system, and it gets out into circulation only by way of a primary loan. Whether or not all the hon. members are aware of this I do not know; but the result is that when loans are paid money is taken out of circulation, and I think it goes without saying that all the money which is in existence has a debt attached to it by reason of the fact that the only way it came into existence was through a primary or initial loan.
This argument the Minister of Finance neither confirmed nor denied. In the next place the hon. member for Lethbridge dealt with what gave money value. He said that in the first place it was confidence; that in the next place Canada was behind it as a nation, and that what gave value to money were the goods and services, the producing and consuming power of the nation. I think the minister would agree with that, although he did not touch it in his speech. The hon. member for Lethbridge then went on logically to discuss how much money Canada could have, and he showed that it all depends upon the use Canada can make of the money, that is upon the number of exchanges the people of Canada can be enabled to make. In this connection I am going to do some quoting, from Planned Money by Sir Basil Blackett, at pages 103 and 106. I hope my hon. friends opposite will not be too much discouraged when we give these quotations, though it is beginning to appear that citations from eminent authorities are a little bit annoying to them. This is the quotation:
The purchasing power of the medium of circulation depends solely on the relation between the quantity in which it is available and the work which it is at any given moment called upon to perform.
A few pages later this quotation occurs:
It is customary in most countries to place strict limits on the amount of notes which the central bank may issue. Such restrictions are usually bound up with laws and regulations regarding the amounts or proportions of the total issue which must be covered or backed by gold or particular kinds of securities, internal and external. There is no need for any such restrictions in the local currency system now under discussion-at any rate, in one which has no foreign contacts. The right amount of currency in circulation at any given moment is that amount which will do the work required of it at a given level of prices. If it is too much, prices will rise. If it is too little they will fall.
The next question my hon. friend asked was whether king-created money was sound. The Minister of Finance rather agreed with this, not in his speech but in some comments that he made at the time. Then my hon. friend went on to point out that the present financial set-up is such that for every dollar of gold which the Canadian banking system can create, eighty dollars of money-that is, four Bank of Canada bills and S76 in bank credit-can be issued. Here I should like to give a quotation from The Canadian Banking System, by Professor James Holladay, doctor of philosophy and professor of economics at the university of Alabama. This appears at page 140:
The Bank Act of 1934, however, sets up a specific quantitative reserve which tile chartered banks are required to hold against their deposit liabilities. In form, this reserve must consist of a deposit in and notes of the Bank of Canada. In amount, it must be equal to five per cent of the deposit liabilities in Canada. As a result, the chartered banks as a group can legally create deposits amounting to $20 on the basis of a one dollar reserve. A much larger secondary expansion is made possible, however, for the Bank of Canada is required to hold only a twenty-five per cent reserve against its liabilities, which in turn constitute the reserves of the chartered banks. Consequently, the Bank of Canada can expand a dollar into four dollars of liabilities which, if borrowed by the chartered banks, will enable them to lend an aggregate of $80 against a primary deposit of one dollar. This compares with a possible legal expansion of $28.50 under the federal reserve system in vogue in the United States.
Then the hon. member for Lethbridge went on to show the tremendous extent to which money can be created in Canada out of virtually nothing. We contend that what the system can do for the profit of the banking system, surely the government ought to be able to do for the profit of the people.
I shall not deal at length with the matter of inflation, because the hon. member for Acadia (Mr. Quelch) dealt with it this afternoon, and-the hon. member for Wetaskiwin (Mr. Jaques) again this evening. I wish

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to point out, however, that over and over again the hon. member for Lethbridge urged hon. members not to think of his Suggestions as a conflagration, but suggested that we look at the matter as we would a fire in a kitchen stove which need not necessarily spread so as to cause great destruction. He used the illustration of the rain storm, and asked why it should be necessary to think of a great destructive thunder storm, bringing its floods and its destruction of life and property, rather than think of the shower of rain.
However, in spite of that the Minister of Finance entirely ignored the approach of the hon. member for Lethbridge, and immediately plunged into a discussion of the terrible conflagration which would have to be met if the proposals of the hon. member were carried out. Further reference was made to the German inflation. It is always the bogey man hon. members like to poke up when they speak in rebuttal on matters of inflation.
At this point may I read an interesting quotation from Paul Einzig. I refer to World Finance Since 1914, published in 1935, and particularly to page 67:
These were the circumstances in which inflation attained extreme stages in Germany. There was the currency already weakened by inflation during the war. There was the exhausted state of the country; there was the defeat and revolution which reduced the capacity of the executive power to keep monetary developments under control; there was the necessity of replenishing food and raw material supplies by weakening the technical defences of the currency; there was the necessity of making huge reparation payments, with their effect upon the budget and exchange. There was the wholesale flight of capital from Germany; and lastly, there was the political and financial effect of the Ruhr occupation. Is it conceivable, we may well ask, that the effects of such a formidable series of adverse factors should repeat themselves in circumstances totally different from those prevailling in Germany during 1918 to 1923. To the minds of all but the fanatic deflationists, the answer must be emphatically in the negative.
Now, notice this:
And yet time after time we are told that if France were to devalue the franc to the extent of twenty per cent, or if the British government were to continue its policy of cheap money, or if President Roosevelt were to spend a few milliards on public works-
May I pause there for a moment. Let us make no mistake about this matter of inflation. We are well aware of the fact that a milliard is a thousand million; and Professor Einzig is referring to the possibility of a few milliards being spent by President Roosevelt on public works. The quotation continues:
-France, Great Britain and the United States would share the fate of post-war Germany.

And let us listen to this:
The argument could be regarded as childish, if it were not so thoroughly dishonest.
The hon. member for Lethbridge continued by saying that, like the rest of the American continent, Canada can produce plenty for all her people. He showed that production is increasing at the rate of three per cent a year, compounded annually. He showed, further, that this was like a growing boy. He particularly pointed out that we need new money, as a growing boy needs new blood. Personally I thought this analogy a very good one; yet the Minister of Finance did not touch it when he replied. If the banking system creates the mone3r-and it does-the banks get the profits. The nation gets the debt. Our contention is that the nation should create the money, get the profit and remove debt and poverty.
In the little time I have left to speak there are one or two matters with which I should like to deal. The hon. member for Lethbridge did not mention social credit as such. He was dealing with monetary matters, showing that we could use our resources in Canada to give a high standard of living to all our citizens. But when the Minister of Finance replied, in an attempt to explode this, he brought the philosophy of social credit into the picture. He brought in the A plus B theorem. That is something which hon. members in this corner of the house have not stressed in any particular way. But the Minister of Finance brings it in and attempts to show that there is a false premise.
I am wondering whether the Minister of Finance thought his speech had entirely exploded all Major Douglas had ever written or proposed in connection with his social credit doctrine. The hon. member for Lethbridge has claimed that the government has failed, and the Minister of Finance did not repudiate the suggestion.
I should like to say one or two words about the battle the Prime Minister (Mr. Mackenzie King) promised to carry on. I do not mind worrying our hon. friends opposite by continually reminding them of the battle that was supposed to be fought. I am still at a loss to know when it was fought. I am still at a loss to know who won the battle. I believe the people of the country might very well ask themselves that question. I should like now to read the observations of the Prime Minister in his speech on June 17, 1936 This is his quotation of what he had said on a former occasion;
The Liberal party believes that credit is a public matter, not of interest to bankers only, but of direct concern to the average citizen.

Use of Canada's Financial Resources
I want to emphasize the fact that the Prime Minister brought the average citizen into the picture. He continues the quotation:
It stands for the immediate establishment of a properly constituted national central bank, to perform the functions of rediscount, and the control of currency issue, considered in terms of public need.
I would emphasize the expression, " considered in terms of public need." Let me pause for a moment to suggest that just as long as there is one poor man in the country, just so long has the government neglected to see to it that currency is issued in terms of public need. In this country the government has not seen to it that currency is issued in terms of public need. I quote a little further:
A central bank is necessary to determine the supply of currency in relation to the domestic, social and industrial requirements of the Canadian people.	'
Once again I suggest that so long as there is one poor home in the Dominion of Canada, the supply of currency has not been regulated in relation to the domestic and social requirements of the Canadian people. I shall not quote the Prime Minister any further. We all know, " Once a nation parts with the control of currency and credit," and " Usury once in control will wreck any nation." and so on. That quotation has been worn almost threadbare. I should like to quote from the Prime Minister just once more; in connection with the banking legislation he said:
There is the pledge which was given to the people of Canada over the radio by myself as the leader of the party. I say that every word and every line of that pledge is being literally and absolutely fulfilled in the legislation that is before us.
I leave it to hon. members to judge whether the government has done that since it gained the apparent control of the central bank. Let us refer again to this battle. I imagine that the very moment the governmnet commenced to wage this battle which the Canadian people expected them to wage, we would have had some degree of protest from the financial interests. But we did not hear any protest. It was as though they said, "That is fine; that suits us quite well." Let me quote from the Financial Post of March 26, 1936, just at the time when this banking legislation was being considered. They say:
With the announcement of the government's legislation to "nationalize" the Bank of Canada, all danger of any important change in the existing set-up of this institution evaporates.
Then I quote from the London news bureau dispatch to the Evening Citizen, dated March 23. 1936:
Bankers and financiers in London express no anxiety at Premier Mackenzie King's proposal for state control of Canada's new central bank.
51952-S4i
"It should not be assumed," says the financial editor of the Times, expressing the opinion of 'The City,' to-day, "that government ownership either in Canada or New Zealand will bring about any change of real importance. It is probably true that in neither country has the government any intention of making any revolutionary change in banking or monetary policy."
The Times financial editor, however, sees danger if at a future date a political party- obviously the social credit party is meant- should obtain power to "pursue some dangerous monetary experiment."
They refer to the dangers to the city of London.


Mr. BLACKMORE:: They knew the battle would start then.


Ernest George Hansell: The battle has commenced in Alberta.


Richard Bedford Bennett: With a heavy casualty
list.


Ernest George Hansell: I can assure you that
there are some casualties. You can depend upon it that there will be a protest when we begin the battle against the money powers.
The hon. member for Huron North (Mr. Deaehman) referred to the province of Alberta. There is one thing we can say; we have attempted something out there and it is only because the financial interests have showed fight that we have been deterred in our progress. He referred also to our Cooperative Commonwealth Federation friends and asked what they would do if they were in power. Perhaps a fight would commence then. While I do not agree with everything that they propose, I am sure it must be a source of satisfaction to know that some of the things they advocated for many years, perhaps not as the cooperative federation but more as the Fabian or socialist philosophy, have since been adopted. We are initiating these things, and it would not be surprising to us to find in a few years that the government in power, even though it be a Liberal government, had adopted them.
I shall not take up any more of the valuable time of the house. I am going to vote for the amendment because I believe that this battle which was supposed to have . been carried on, especially in its first reference, is simply an election blind. I want to see the time come when the government that sits in power to-day will actually do something to alleviate the conditions which now exist.


Mr. E. J. POOLE (Red Deer):: Mr. Speaker,
I am glad to have an opportunity once more to join my group in a vote of want of confidence in the government because I think their record is one of failure. I fail to find one
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redeeming feature or one piece of legislation that they have brought down since they were elected in 1935 which has alleviated the distress of this country in any degree whatsoever. I noticed that when the Minister of Finance (Mr. Dunning) spoke the other day he skilfully switched the debate. I suppose he believes in that old tactic of offence being the better method of defence, and he endeavoured to place social credit on trial. But it must be obvious to the people of Canada that social credit has never had a trial. When we wanted to place it on trial in Alberta this government stepped in and did what the bankers could not do openly.
I was also struck with a note in the speech delivered by the Minister of National Defence (Mr. Mackenzie) in Edmonton. I fail to understand why the Liberal party should be so anxious to win this by-election as they have all the strength they need in this house to put through anything they desire. The issue in that by-election seems to be one of defence, but I cannot understand who has disagreed with the government on that question.


Mr. HEAPS:: He promised them pensions at sixty years.


Eric Joseph Poole: The Liberal party promises anything to get in and does nothing when it succeeds.


Mr. FINN:: How do they stay in?


Eric Joseph Poole: I want to show you, Mr. Speaker, the contradictions among the Liberals themselves. The Minister of National Defence, speaking at Vancouver in 1935, said: "If the Liberal party is elected to power we will issue $500,000,000 of new currency."


Some hon. MEMBERS:: Oh, oh.


Eric Joseph Poole: Yes, and then speaking in Edmonton he said: "We believe there is a sufficiency of purchasing power, but it is maldistributed." Now which is right? The issue on every platform in that election was not national defence but monetary reform; but the Minister of National Defence skilfully endeavours now to befog the issue by raising the issue of defence, to get away from explaining the failure of this government to carry out the mandate which was given to it by the people. The Minister of National Defence has a seat in this house, and he has the opportunity to answer. I wish he would. I wish he and the others who spoke like him would speak as strenuously here as they did on the platform in 1935. There is a Liberal candidate now', true to form, promising pensions at fifty-eight years of age, but he wall

have to have a lot more influence with the Liberal party on the benches opposite to bring that about.
I think we were justified, Mr. Speaker, in moving a motion of want of confidence because I do not see how the people of Canada can have any real confidence in a government that has done nothing.


Agnes Campbell Macphail: They are good lookers.


Eric Joseph Poole: They are good bluffers.
According to the Minister of National Defence, if they got into power they were going to issue new currency, have a public works program, and do away with relief; but lo and behold, three years later they have the nerve to stand on the platform in western Canada and tell the people that they had carried out to the letter the mandate which was given to them-in 1935. I will say this for the Liberals sitting on the benches opposite, that they are showing very little spirit, certainly not the spirit of true Liberalism, to allow the people of Canada to be fooled as they are being fooled by this government at the present time. This age demands more than bluff; it demands action, and demands it now-not just before an election. We cannot continue with just promises. In other countries, the liberties of the people have been taken away. There is a cause for all these things, and the cause exists right here in this country, just as definitely as it did in Russia and in Germany. The reason why the liberties of those peoples have gone is because democratic governments failed to carry out their promises.
Unemployment is still rampant in Canada. There are still 900,000 of the youth of this country registered who cannot find a job.


Mr. ROGERS:: Many of those are under the age of sixteen. My hon. friend is not giving the figures of the unemployed.


Eric Joseph Poole: I think the minister will agree that there are many unemployed who are not registered, farm boys, for example. The difference between economic conditions in this country now and prior to the election of this government is due to a speeding up in armaments, which has resulted in increased exports. But the proportion of unemployed, comparing our production and export of to-day with those of other years, is greater now than it was then.
The Minister of Finance, speaking in this debate, endeavoured to take us into the technicalities of economics, but the people are not interested in such technicalities. It is not the job or the duty of a democratic people to go into the intricacies and details of economics. The people of Canada have

Use of Canada's Financial Resources
given this government a mandate; they have told them just what they wanted; they have elected them to power and told them to do the job. Have they done it? That is the question.


Malcolm McLean: The same in Alberta.


Eric Joseph Poole: I shall deal with Alberta in a moment. Remember, Alberta did not have the power. Had Alberta had the power, it would have done it.


Malcolm McLean: What did you promise the people of Alberta?


Eric Joseph Poole: We promised to give the people of Alberta economic security, and had the Liberal party kept out; had they played the game; had they cooperated to bring prosperity to Alberta; had they, for example, set aside for a moment a clause in our constitution so that we could issue our own credit, then this would have been done. But whether Alberta won or not, there is no question at all as to the power this government has in this house, and what has it done? The Minister of Finance has told the house: " Wt have the instruments." In other words he says: There is nothing to stop us-only one thing. When the Minister of Finance told the house that this government had the power to control, I wondered who controlled him and his colleagues. That is the question which arises. I have heard time and again in the house such statements as: We have overproduction. And if you ask them the simple question, Why cannoi the people get the goods if we have so many of them, they simply turn around and make some kind of statement which does not amount to anything. If, when they tell us we have not enough, they are asked to put the people to work to produce more, then they tell us that we have not any money. You may argue on the A plus B theorem and switch the debate to something irrelevant, but the best evidence on the A plus B theorem is the 900,000 unemployed in this country.


Norman McLeod Rogers: May I correct my hon. friend again? There are not 900,000 unemployed in this country. The actual number of employable unemployed receiving nonagricultural aid is not in excess of 150,000. He is including dependents under 16 years of age. They are not, strictly speaking, unemployed.


Eric Joseph Poole: If they are 16 they still have the right to a job and cannot get it. There are thousands on the farm who have not been registered.


Paul Joseph James Martin: You should be where they are, at school.


Eric Joseph Poole: I hope it would be a different school from where my hon. friend got his education. I should go to school? When the government here, responsible to the people of this country, does not know enough to distribute the goods we have the ability to produce.


Malcolm McLean: Who has the
goods?


Eric Joseph Poole: You have the unemployed; is that not potential wealth? Let the hon, member get on his feet and answer the question. He asked me one.


Malcolm McLean: Why does the
hon. member not answer it?


Eric Joseph Poole: The hon. member asked me where the goods were. I tell him, they are where the unemployed are. There is the machine.


Malcolm McLean: I asked the hon. member who has the goods.


Eric Joseph Poole: It makes no difference who has them. They are available for sale. That is the point, is it not?


Malcolm McLean: Well, will the
hon. member's group confiscate them?


Eric Joseph Poole: Why split hairs? There is no need to confiscate. Give the people purchasing power. Is that not what we of the social credit movement advocate in the house? Give the people effective demand. I should like to ask members of the government, seeing they are of a different school of thought from my own, What is the purpose of the economic system? Is it not to produce in abundance? Is it not to distribute total production? Is it not to make life richer? What is it for if it is not for these purposes? And has not the government failed to bring about this happy condition, this "abundant life", as the president of the United States terms it? What have the government done? They have waited, of course, for some miracle to happen. They are waiting for an expansion of trade, hoping for that happy day when it will be proved that Mars is populated and that we can export to that planet. But it is too long to wait for that. Long before then the people of Canada will have passed into oblivion. We know where our market is.


Malcolm McLean: Why does Aber-hart not pay out the money he promised?
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Eric Joseph Poole: The money power is in the Dominion of Canada. 'Will the government hand over that power to us? All we want is a chance.


Mr. YOUNG:: What power is my hon.
friend referring to?


Eric Joseph Poole: The power to issue money, credit.


Alexander MacGillivray Young: Is the hon. member referring to fountain pen money?


Eric Joseph Poole: Yes, "fountain pen money," that which is loaned by the banks, that which is responsible for the fixed charges and the uncontrollable expenditures in every province. In almost every province of Canada the fixed charges amount to over fifty-one per cent of the total income. That condition was brought about through "pen and ink" money. That is how we became indebted. The banks can issue money. Surely the people of Canada can use the sovereign power which belongs to them to issue it in terms of public need. What was the Prime Minister (Mr. Mackenzie King) going to use when he mentioned "money" in 1935? What kind of money did he intend to use?


Mr. DONNELLY:: Why do hon. gentlemen not start their own bank in Alberta?


Eric Joseph Poole: We want the right to create money.


James J. Donnelly: Let them start their own bank and make their own money.


Eric Joseph Poole: We may start a citizens' bank, but not a government bank.


James J. Donnelly: We will give the hon. member's party a charter.


Eric Joseph Poole: We may take the hon. member up on that.


James J. Donnelly: Weil, we will.


An hon. MEMBER:: It would be only
another bank.


Eric Joseph Poole: If you give us a charter we want to make our own terms of operation.


Some hon. MEMBERS:: Oh, oh.


Walter Edward Foster: Order.


Eric Joseph Poole: Not your terms. The platform upon which this group was elected was one of monetary reform. The platform upon which the Liberal party was elected was that of monetary reform; yet now we find the Liberal party in power denying the right to a province to carry on the mandate which they themselves told the people of Canada they believed in. It reminds me of how Liberals in Alberta appeal to the people. They have two catch

phrases: One. "Down with Aberhart"; the other one, "Put good, sound business men in government." Turn for a moment to the history of "business" administration in Alberta, Saskatchewan and British Columbia. Taking first our own province, lo and behold we find that the government debt alone of Alberta amounts to $168,000,000, which debt was created by these same "sound" business men. We turn to Saskatchewan and find the same condition. It was not Aberhart, but these sound business men, who were responsible for that; and now they expect the people to be so stupid as to believe that this sound business policy of sound business men is all that is needed. They should have learned by this time that there is a big difference between private business and public business. When industry wants to reduce its expenditures because it is selling a smaller volume of goods, it fires its employees and assumes no further responsibility for them. But a government cannot do that. When these people pour out of the back door of industry they come to the front door of government. That is the important difference.
So the western country is insolvent, and, according to the brief submitted by Saskatchewan to the Rowell commission, the indebtedness per acre is greater than the value of the land itself. We find the debts of the municipalities pyramiding year after year. We find the debts of the provinces increasing. Yet when someone in this corner of the house mentions monetary reform, the issue of money in terms of public need, he is held up to ridicule. Well, I believe that the times and the circumstances of the times are with us. The Liberal party may win a few more by-elections; no doubt it may and it will express many platitudes and much sympathy for the people of Canada. But winning by-elections and singing sweet praises of "our industrious people" are not enough. The day is past for that kind of thing. What the people want is action. They do not want platitudes; they demand economic planning. The youth of this country are asking for a chance; they want life and opportunity. If they do not get these in a few years from now they will not ask this parliament any more; they will do as they have done in Germany; they will throw our opponents out where they should go if they do not get on with the job. These are the facts.


Some hon. MEMBERS:: Oh. oh.


Eric Joseph Poole: It is all right to laugh.


An hon. MEMBER:: The hon. member
ought to know.

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Eric Joseph Poole: It is too serious a matter
to laugh about. I shall express my feelings plainly: it is all very well for hon. members who are getting four, six and ten thousand dollars a year to smile and giggle; but two or three hundred yards from this building they will find, in the homes of the poor, young men deteriorating while the Liberal government goes on. It is no laughing matter. Hon. members should be ashamed of themselves. An attitude of levity is not the proper attitude for parliamentarians to take. I hope a certain hon. member will groan to an entirely different purpose before very long; and when the Minister of Finance goes out to Edmonton, as I trust he will, let him tell the people there all that this Liberal government has not done.
The world to-day is a small world; people everywhere are turning their minds to the question of money. They recognize that it is the key position to the solution of many of our social evils. They know, as indeed any boy in kindergarten knows, that if a nation can produce plenty there should not be starvation. I wonder if they taught that in the Liberal school. Even an ass when he is hungry will not pass a pile of hay without taking a nibble; but human beings are deprived of that privilege; if they go into a restaurant and get a meal for which they have not the means of payment they are put in gaol and termed communists or classed with disreputable people. But when war comes, that evens everything up. The thin shoulders of the poor snap back; they are the first to have a uniform; then they get a dollar ten a day and are treated as Canadians, taking their place in Canadian society.


An hon. MEMBER:: That is true. It is a true picture.


Eric Joseph Poole: It is a true picture, and hon. members cannot laugh it out of existence. These are some of the A plus B theorems as I know them. To-day all the people of the British Commonwealth of Nations are turning their attention to this thing called money. They want to know the nature of it. History tells us that in the past most parliamentarians knew nothing of money, and the situation has not changed much since. Listen to men who have passed on, men who made great contributions to their country. For instance Thomas Jefferson said:
I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs.
F. G. Bonfils, former owner and editor of the Denver Post, said:
All gold produced in the world in 428 years would make a block thirty-eight feet square. Nearly two billion people are tied by the leg to this golden fetish.
Mr. S. P. Chase, secretary of the treasury from 1861 to 1864, chief justice of the United States supreme court from 1864 to 1873, said:
My agency in promoting the passage of the National Bank Act was the greatest financial mistake of my life. It has built up a monopoly which affects every interest in the country. It should be repealed; but before that can be accomplished the people will be arrayed on one side and the banks on the other, in a contest such as we have never seen before in this country.
Now let us review for a moment the latest campaign in the United States when seventy-five per cent of the press was against President Roosevelt because his battle was against money, a battle for the liberties of the people. With whom do we find the press aligning itself? Exactly the same thing happened in this country with social credit in Alberta. People who fight against the money power can expect no mercy and no justice from the press. I am glad to see that some men in the Canadian parliament have seen the difficulty which faces us. For instance, the right hon. leader of the opposition (Mr. Bennett) said:
Canada on the dole is like a young and vigorous man in the poorhouse. The dole is a condemnation, final and complete, of our economic system. If we cannot abolish the dole we should abolish the system.
With that I agree. Men are not made for systems; systems should be made for men to use. That, I contend, is the duty of this government. The time for apathy, for political manoeuvring and bickering in thii Canadian parliament should be past. An engineering problem confronts us. It makes no difference where the suggestion comes from, or from what party, we should all be associated together in grappling with this problem. I turn to the ministerial benches; I ask the Minister of Labour (Mr. Rogers) this question, Have you any solution within the framework of the present monetary system to provide employment for the unemployed in this country?


Ernest George Hansell: He will have to say no.


Eric Joseph Poole: Without causing inflation? I turn to the Minister of Transport (Mr. Howe) and ask him, Have you any method of dealing with the railway deficits under the present system? I turn to the Minister of National Defence (Mr. Mackenzie) and ask him, Can you give the ex-service men of this country an
1328	COMMONS
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adequate standard of living commensurate with the services they rendered to this country and the productive capacity of the country? And they answer, We have no money. We find that money is the root of the whole thing. Splitting hairs over irrelevant matters will not bring us one step nearer the goal. It has been said by the leader of our group that we are not a political party; that we are an economic group. We believe that the duty of parliament is to call in experts to carry out the mandate given by the people. Parliament should place upon the statute books the necessary legislation to carry out the mandate of the people. It is from the people of Canada from the Atlantic to the Pacific that we get our power; it is their wishes that we come here to fulfil, not some pet theory of the Minister of Finance.
Many people are taking an interest in monetary reform. Let us turn for a moment to the church; let me quote from a letter from the Very Rev. Paul Stacey, of Coventry, England:
In the past they have endeavoured to link the need for monetary reform with an understanding of Christian values, and to obtain united Christian support. This policy has caused many misunderstandings, but it is now generally realized that we have been working along the right lines.
Commenting on a statement issued by various churches concerning the need of monetary reform, a United Christian petition campaign is being started, and a petition to parliament prepared, similar to the petition to the king in council, to be used simultaneously in England and the dominions. The object of the parliamentary petition is to enable the dominions to bring pressure to bear upon their parliaments while cooperating in the empire petition to the king, and to enable Christian people in other countries to join in the united action by petitioning their legislative bodies and arousing public opinion. The relation between the monetary reformer and the Christian petition movement is obvious. The petition is an instrument for mobilizing public support which will enable the new economies to be given a fair trial. The statement of the various churches referred to maintains that:
The notion that our souls may find salvation whilst we are indifferent to the needs of our brethen whose souls are warped through living under evil social conditions, or, on the other hand, through amassing great wealth by methods injurious to their fellow' men-a condition contrary to Christian teaching and to common sense.
Widespread poverty in an age of abundance, and the inability of great nations to find employment for hundreds of thousands of their citizens-except when they are preparing for war-are the major symptoms of the general disorder.
One of the primary functions of the state is to safeguard and foster the material and

spiritual wellbeing of the individual and the home. As long as the state fulfils this function it is entitled to respect and has a rightful claim on our loyal allegiance.
The church must reject financial dictatorship, because it treats man as a machine, whereas in fact he is a child of God.
Under the leadership of the Pope and the Archbishop of York respectively, a group of leading men in both churches have declared that we must work to suppress the private monopoly of credit. And both are explicit as to the means and objective.
I could read dozens of quotations from prominent church people. When I spoke last in this house I challenged the ministers of the crown for just one hour in their busy lives to put aside their parliamentary duties and go and see how the other half lives. Go down to the soup kitchens; see these men shovelling snow for relief. The press accuses them of cheating and chiselling. It is a crime the way we are making cheats and chisellers of the poor. We make them sign an affidavit that they have not earned $2 outside their relief. A man has to choose between swearing a false affidavit or buying a child a pair of shoes, and like a Christian he swears the false affidavit and buys the shoes. I could go on and on, but I wonder whether anyone will ever rise in this house and make an impression upon the government as to what faces them. I wish hon. members would lose their incomes for a while; I wish they were cast adrift like thousands of Canadians; then they would get a more complete education in six weeks than they have had in the last twenty years.
The Minister of Finance, again speaking in Edmonton, told Alberta that if it voted against the Liberal party it would be a clear indication that it wanted to remain away from the other provinces. Well, just a moment; since when was there such unity among the Liberal governments of Canada? We find a motion introduced in the Manitoba legislature by Mr. Turnbull calling upon this government to bring about monetary reform, and that resolution was adopted. We find some disagreement between Mr. Duplessis and this government; we find some disagreement between Mr. Hepburn and this government, and I have a suspicion that even the members of the party in this house do not all agree.
Now, Mr. Speaker, in conclusion I should like to say a few words about western Canada.


Some hon. MEMBERS:: Hear, hear.


Eric Joseph Poole: Oh, I know my hon. friends would like me to finish, but they will hear

Use oj Canada's Financial Resources
plenty more along the same line in this house; no matter whether they like it or not, they will hear it anyway. I came here to represent the people of the west, not to represent the opinion of one little party and just be a good fellow. I want to say a few words about western Canada. It is history that w*e have continually made attempts to convince this government that they have a responsibility with regard to relief payments on the part of the cities and municipalities. So far we have been unable to convince them of the need of centralizing this responsibility. Again, we have asked them time and again to relieve us of this burden of debt which is crushing the western provinces, and time and again in this house the west has been referred to as the pampered child of the east. The truth is that even in depression years the four western provinces annually buy between three and four hundred million dollars worth of goods from the east. The same goods might be purchased for twenty-five to fifty per cent less if tariffs were abolished. In other words, the western provinces have paid to eastern manufacturers tribute amounting to a hundred million dollars a year, even in depression years.
I should like to see a new set-up in Canada. I think the interests of east and west conflict too much. If this government finds that it cannot do anything for the west, then I would respectfully suggest that it leave the west to its own fate. Certainly we will never be any worse off. For instance, the four western provinces might well be given the power to create and regulate their own tariffs, and to operate their own money machine. We would be prepared still to remain part of Canada, still to come under the same administration of justice, still to take the same interest and the same responsibility with regard to defence, and the same responsibility with regard to postal and railway deficits and the national debt. But if you cannot find a solution, do not remain in the way of men who are doing their best. Step out of the field. Leave it to the west to solve its own problems. Give us our own financial autonomy. That is what we ask, and that is what will come unless we have a new deal for western Canada.
So, Mr. Speaker, I close with this one thought in mind. I believe that we are at the crossroads of our national destiny. I would suggest to some of the Quebec members, some of the eastern Liberal members, that they take a tour through the west and find out what our people are thinking and how they are living. Even their courage, great as it is, cannot forever keep their heads above the river of debt. I am pleading now
that the young men of this country be given a break. If they all feel as I do they are extremely tired of the slowness with which you move. We are tired of your apathy. We want action. These conditions confront us now; we must have action now, not to-morrow. So I would suggest that when the Liberals next get together in caucus they should show a little pioneering spirit. Do not be dictated to from the top down. Remember, your people sent you here; the youth of this country rely upon you, and platitudes will not solve our problems. They are real, even though the A plus B theorem may be wrong.


Richard Bedford Bennett: Mr. Speaker, the reply of the Minister of Finance (Mr. Dunning) the other evening indicated that he had to rely on the advice of his technical advisers with respect to the highly complex monetary questions with which he was dealing. It was painfully apparent that he was reading an essay prepared by his technical officers, and he stayed very closely with the text. The occasional annotations, if I might use that word, are some of the matters to which I should like to direct attention.
At the same time I think it is a very bad practice for this house to follow the procedure of the congress of the United States and extend remarks on to the record in the form of written essays, as they do in the Congressional Record there. I recall securing one of Henry George's books in that way, as an extension of a speech that a member delivered in congress. The essay of the minister, delightful as it was, in my judgment added very little to the matters that were under discussion. But the annotations of the minister were interesting.
It might be well to remember that the central bank act was passed in i934 by the late administration, and that the passage of that bill was very strongly opposed by the chartered banks. It is true that the Liberal party had intimated that they would pass such an act if they came into office; but having regard to the statement made by the Prime Minister (Mr. Mackenzie King) that the most important matter which would engage the attention of this parliament was the battle with the money power, and having regard to the lack of any sign of battle with the money power since they came into office, it might be well to ask ourselves if we would ever have had a central bank in this country if the Liberal party had not found the legislation on the statute books when they came into office. The general consensus of opinion is that there never would have been

Use oj Canada's Financial Resources
central bank legislation passed by a Liberal government, having regard to the manner in which they have kept their promise to do battle with the money power.
Now, Mr. Speaker, I direct attention to the fact that this act was placed on the statute books by the late administration. The second point to which I direct attention is that when the present government came into office in October, 1935, it found in operation the central bank. The bank had been organized, the directors elected, the governor and deputy governor appointed, and provision made for taking over the offices of the receiver general in the several provinces, except in British Columbia, where a branch of the Bank of Canada was organized in the city of Vancouver. I point that out, because it is important in the light of what has been said on several occasions to-day and on Tuesday last.
The bank was in operation, and this government came into office and found it in operation. In addition to that it has been said that this was a private bank. I should like to deal with that for a moment. When the bill was introduced I went down to the banking and commerce committee and explained to' them the reasons why the bill provided for a private bank. At the same time I made it quite clear that, so far as the then government was concerned, it was quite content that the bank should be wholly owned by the people-a state owned bank. But the reasons I gave them were reasons that so impressed my mind at the time as to induce me to change my original conception of the bank.
When we determined to organize a central bank we intended, as I pointed out to the committee, to organize it as a publicly owned institution. But so strong did the pressure of patronage become before the bank had assumed form and before the statute was passed, and so many were the clamorous demands upon the various members of the house and upon the government to find positions for innumerable people, that we reluctantly provided that this should be a privately owned institution. If hon. members will turn up the records or minutes of evidence of that committee they will find that I told the committee there were four considerations which apparently governed men's minds with respect to appointments to positions in the Bank of Canada. One was the place where the man lived; the second was his religion; the third was his race, and the last was his fitness.
That is exactly the position, and I told the committee, as I fell this house to-night, that I did not think we could have successfully

organized that bank had we not taken the steps we did to try at least to keep it out of the slough of patronage into which it threatened to fall.
I said in the house, and I repeat, that the government was quite content, once the bank was organized, to make it into a publicly owned institution. I stated that frequently during the campaign of 1935, and I say it to-night. I say again that I think the manner in which this government dealt with the matter was extremely inept. They should have done as was done in New Zealand, namely taken over the private holdings, by expropriation, if necessary. There was no difficulty in doing so. The shares had a par value of $50, and they were selling at a premium. In New Zealand they took over a privately owned institution, or that portion of it which was privately owned, and that was the end of the matter.
The government have not accomplished the public ownership of this bank. They still leave it half public and half private, except that a trifling amount more than half rests with the government, which of course gives them control in voting power, and the selection of directors. But it does not place this bank in the category of a publicly owned institution-and this could have been simply accomplished. But it did more; it raised the capital to $10,100,000 and this bank, as everybody knows, has no use for that extra $5,000,000. That was just $5,000,000 upon which four and a half per cent is being paid to the country. The use to which this is put, may I point out, was first of all for bank premises. That is to be seen in the last report, and now the amount is on the way up to $2,000,000. The other was an item, to which I may have to refer, as indicating a loan for a purchase, shall I say, made by the Bank of Canada, of securities which never should have been acquired.
That is the position with respect to the matter when the late government went out of office and this government succeeded. They kept a promise by increasing the bank's capital to $10,100,000, and they left the margin of $100,000 more than half as an amount sufficient to create a majority of shares in the part held by the government.
But they have not changed the essential character of the bank. If the house is interested and will look at section 13 of the Bank of Canada Act, it will find these words:
13. (1) There shall be an executive committee of the board, consisting of the governor, the deputy governor and one director selected by the board.

Use of Canada's Financial Resources
Then there is provision for a deputy minister to be a member of the executive committee, but without vote. Now, it will be observed:
(3) The executive committee shall be competent to deal with any matter within the competence of the board but every decision of the committee shall be submitted to the board at its next meeting.
The rate of discount and rediscount is settled by the executive when the board is not in session. Minutes are to be kept, and all actions must be concurred in by the governor or deputy governor before any resolution arrived at by the executive can be validly effective.
Bear in mind that that section has not been amended; it has not been varied. It is the section which governs and controls the operation of the bank; and that section confers upon the governor, the deputy governor, and that member of the board of directors selected by the directors, designated as the executive committee, powers completely to control the organization in the absence of action being taken by the board, which of course means but seldom, and results in the whole conduct of business being carried on by the executive committee.
Then there came in connection with this bank a further matter to which I think the observations of the minister necessitate my directing attention, and that is this: We provided for a twenty-five per cent gold coverage, and we also provided by the statute that the bank might, in addition, hold certain other forms of security. That is, it might hold securities of gold countries, exchange with the United States and the United Kingdom, balances at the Bank of England, balances in the Bank of International Settlements, and such other investments and securities as may be designated and regarded as the equivalent of gold.
That, of course, had the effect of broadening the provisions of the Dominion Notes Act. It will be recalled that the Dominion Notes Act, under which dominion notes were issued, provided for a coverage of gold to the extent of twenty-five per cent up to $120,000,000. It had originally been less than $50,000,000; then it was increased to $50,000,000, and then to $120,000,000. After that it was to be dollar for dollar. But in the Bank of Canada Act we altered that and provided that metallic coverage should be twenty-five per cent, without limit. The gold to be held by the bank was not only twenty-five per cent of its note issue but also twenty-five per cent reserve of its deposits. Those are the provisions, roughly, of the statute in that regard.
From time to time some of our friends wonder what value metallic coverage has. and why we should talk in terms of gold coverage at all. Some people assume that this country went off the gold standard in 1931 or 1932. As a matter of fact the Dominion of Canada was off the gold standard when the late Mr. Robb shipped $40,000,000 in gold to New York to meet obligations there. I did not intend to speak to-night believing that the Minister of Finance might return before I had time to say what I have said, but I remember distinctly the circumstances under which that $40,000,000 in gold was shipped out of this country to meet maturing obligations in New York. It was wrong to have done this and the effect of it was to throw us off the gold standard, having regard to the then provisions of our statute dealing with the issue of dominion notes.
I can recall-I can say this now-telling our hon. friends in caucus in 1930 that this country was in a rather difficult position and that we should not make any reference in the house to the facts to which I have alluded. Shortly after that the present Minister of Finance, who became Minister of Finance, having succeeded the late Mr. Robb, was confronted with just exactly what the caucus had been advised would happen. An enterprising man in New York acquired half a million dollars worth of Canadian bank notes. He proceeded to Montreal and converted them into legal tender at the chartered banks, into Dominion of Canada notes. He thereupon went to the receiver general's office, or had his agent proceed there, and demanded gold. To have parted with that amount of gold at that time would have been highly inadvisable and inconvenient and the-Minister of Finance made the necessary arrangements to meet the situation.
The basis of a country being on the gold standard is the interchangeability of its currency with gold. Those of us who recall going to the old country for the first time will remember that Bank of England notes were being converted into sovereigns, half sovereigns and silver currency. When a country can no longer interchange its paper for gold, it is no longer upon the gold standard. That interchangeability must be absolutely unlimited or you are off the standard. This country is off the standard to-day, and it must be a matter of amazement to some of our friends when they take a bill out of their pocket and see it stated thereon that the Bank of Canada will pay on demand ten dollars. What does that mean? You walk
1332	COMMONS
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into the Bank of Canada with a ten dollar bill and you get two fives, five twos or ten ones, all in paper.
I pointed out last year that Australia, realizing this, had passed a statute by which the form of their bills or currency was changed entirely. Their bill states that it is a certificate; that it is legal tender for the payment of obligations, which of course is the proper method to pursue. As it stands now, Bank of Canada notes are legal tender, but Bank of Canada notes are interchangeable only for Bank of Canada notes. When you go to the bank you do not get metal as you would in a gold standard country, whether it be small or great; you get other pieces of paper issued by the same bank aggregating in the pieces the amount of that which you had presented to the bank for payment.
Perhaps this leaves a wrong impression on the minds of some people who secure our currency. The value of the gold standard, to which reference was made by the minister the other evening, divides itself into three. First of all, there is the old, traditional and historic value that attaches to it. It is not my purpose to-night to discuss how that grew up. The bankers in London were the originators of it, and it was because of the great commercial and financial power of England that they were able to impress that view upon all the nations of the world. It will be recalled that Germany did not adopt it until she had received the indemnity from France. That is the traditional and historic side.
Then you have the fact that gold has always occupied a peculiar position in the economy of the world. There is in the library a book dealing with this that makes strange reading. We little realize the extent to which that value attaches to gold as compared with the value attaching to any other metal. That aspect of the matter is important. Then there is the use of gold for the settlement of international balances. If this country in its trading account shows that it has imported more than it has exported, obviously it must settle its obligation with something which will be accepted by the country that we owe as being of value in the terms in which they have made their arrangements or contracts with us.
Of course that is the reason why the world is so disturbed at the moment. There is no longer a gold standard prevailing among all the nations of the world, and the settlement of accounts between nations becomes increasingly difficult because of the inability to secure the gold with which to make settlement. I think that is well known. I shall

give an illustration. WThen Russia needed gold with which to buy machinery for the purpose of entering upon industrial activities, she had to sell anything she could at a cheap price in order to secure the gold. That is why she sold wheat at sixty cents a bushel; that is why she sold various other commodities cheaply enough to secure the gold to enable her to make payment for machinery and her other necessary industrial requirements. But to-day Russia is the second gold producing country in the world and this year she may possibly reach first place. The result is that she no longer has to sell commodities at any price she can get for the purpose of obtaining gold. She has gold in very large quantities and, as I say, may become the first gold producing country in the world.
There is a matter arising out of this bank act of ours. Having dealt for a moment with the gold side of it, I should like to point out that we provide in our original act that a return shall be made by the bank every week. If any hon. gentleman will be good enough to look up section 33 of the Bank of Canada Act he will find these words:
(1)	The bank shall as soon as practicable after the close of business on Wednesday of each week, make up and transmit to the minister in the form of schedule C to this act a statement of its assets and liabilities as at the close of business on that day.
(2)	A copy of every such statement shall be published in the next succeeding issue of the Canada Gazette.
(3)	The bank shall also as soon as practicable after the close of business on Wednesday of each week, make up and transmit to the minister a statement of the amount of its notes in circulation on each business day during the preceding seven day period.
Then there is provision for a monthly statement of assets and liabilities. Then subsection 6 reads:
The governor in council may from time to time, as he deems necessary, amend the form of schedule C to this act.
That form, schedule C, is the form which was adopted for the purpose of enabling the public to have complete knowledge of what the bank had been doing during the week or month, as the case might be. I hold in my hand a return made by the bank, being a statement of assets and liabilities as of October 23, 1935, that being as close as I could possibly get to the date on which the government assumed office. Bear in mind that that return is in the form provided by the statute. Let us look at the information which it gives. Under "assets" we find:

Use of Canada's Financial Resources
1.	Reserve:
Gold coin and bullion.
' Silver bullion.
Reserve in sterling funds.
Reserve in U.S.A. funds.
Reserve in funds of other countries on a gold standard.
Total
2.	Subsidiary coin.
3.	Bills discounted:
(a)	Commercial bills.
(b)	Agricultural bills, etc.
(e) Dominion government treasury bills.
(d) Provincial government treasury bills.
Total
4.	Advances to:
(a)	Dominion government.
(b)	Provincial governments.
(c)	Chartered banks.
Total
5.	Bills bought in open market not including
treasury bills.
6.	Investments:
(a)	Dominion government short term securities.
(b)	Provincial government short tem securities.
(c)	Other dominion government securities.
(d)	Other provincial government securities.
(e)	United Kingdom, other British dominions or U.S.A. securities of a maturity exceeding three months.
Total
7.	Bank premises.
8.	All other assets.
Total
That detail was included in form C of the act passed in 1934, and it gave the casual reader as well as the banker complete knowledge of the operations of the bank. It indicated what loans had been made to this dominion and what loans had been made to the provinces; for you will remember, Mr. Speaker, that difficulties arose because two or three of the provinces charged that the Bank of Canada had not been giving them the accommodation to which they claimed they were entitled.
With respect to short term loans, it will be recalled that at the last annual meeting the governor of the Bank of Canada indicated to the Canadian people that mostly they were dominion government treasury bills. He indicated also that the S86.000.000 included in the accounts were largely dominion government treasury bills.
The first sale of treasury bills in this country was brought about by the late administration. It was said to us that we were not able to make a market for treasury bills in Canada. We questioned that, and we began to make sales of treasury bills. It was extremely difficult at first, but as days went by treasury bills-it will be realized they are
for not more than three months-became more and more negotiated. I recall that the president of Barclays Bank, Mr. Goodenough, when he came over from London, told his bank here to take a substantial holding of treasury bills, and despite the fact that the Canadian bankers told me-I was Minister of Finance at the time-that we would not be able to establish a market for treasury bills, the fact remains that to-day we have $150,000,000 of treasury bills outstanding. That form of security has come about by reason of what was done by the late administration. And all that the present government did was to succeed to that practice. It was a small issue of treasury bills in the first instance, but it has gradually increased until to-day this country is borrowing $150,000,000 on its treasury bills. The governor of the bank a few days ago pointed out at the annual meeting that when you see in the return, as you do, short term securities, it has reference largely to treasury bills, and he gave the average holding of treasury bills by the bank during the year. He indicated also that the major part of the $86,000,000 was treasury bills of this dominion.
But mark you, in form C there was a provision, as it was originally framed, indicating what were provincial short term securities and indicating also the advances made to provincial governments. But, Mr. Speaker, you cannot get that information now. This government altered that form which had been provided under the statute. It had the power under the clause I have read, subsection 6 of section 33, to alter that form, and it did so, and I am presently going to point out why. See what the result was. I hold in my hand now a report of the Bank of Canada for the second day of March, 1938, and let us look at the change in the form:
Assets:
1.	Reserve:
Gold coin and bullion.
* Silver bullion.
Sterling and U.S.A. dollars.
Sterling and U.S.A. dollars, not separated, but linked together, by reason of an order in council passed by this government. It will be recalled that the reason why form C originally separated these two items was that the bankers of this country said that in the ultimate analysis you are trusting to a governor and his executive committee as to the extent to which they will buy either sterling exchange or United States exchange. And he said: Our deposits are there. That is the reason why this Dominion of Canada gives its guarantee with respect to these deposits.

Use of Canada's Financial Resources
It is important to the bankers and to the public of this country that it should be known how much the Bank of Canada holds in value of sterling securities, on the one hand, and of United States exchange on the other, so that the banks may know as they read that return how the moneys of the Bank of Canada are being placed for the purpose of conversion into gold if the occasion should arise or the necessity should demand. Let us see what follows. I am quoting from the same report of the Bank of Canada, March 2, 1938:
Other currencies, of countries on a gold standard.
2.	Subsidiary coin.
3.	Bills discounted.
Now in the original form C, under bills discounted, we had no fewer than four divisions: commercial bills, agricultural bills, dominion government treasury bills, and provincial government treasury bills. All that has been wiped out. That information is no longer available. It is true, though-and I think one should say this-that the Bank of Canada has not rediscounted any bills to any extent during its existence, and I am going to point that out as being an exceedingly interesting fact, a most significant fact to every man in this chamber who is concerned about the question of currency. One of the great purposes for which a central bank comes into being is to afford an opportunity for rediscounting the banks' paper. That is, it contemplates such a move in business, such activity commercially, that money may be required to enable the banks to function with their customers, and to do that successfully they will rediscount their paper. Provision was made also for the kind of paper that might be rediscounted- commercial bills, agricultural bills, dominion government treasury bills and provincial government treasury bilk That wording has been changed under the order in council, and the wording now is merely: "Bills discounted." Then we come to No. 4:
4.	Advances to:
(a)	Dominion government.
(b)	Provincial governments.
(c)	Chartered and savings banks.
The word, "savings" has been added. Then you come to what were called open market operations by the Minister of Finance the other evening, namely, the purchase of bills in the open market, not including, of course, treasury bills. The growth of the bill market is one of the most interesting stories connected with the history of banking in England. The story of Lombard street is the story of the purchase and sale of bills.

Let me give an illustration. The great firm of Morgan's have a branch office in London, and they agree, we will say, to finance the operations of the International Harvester. The International Harvester will draw a bill on Morgan's; they will accept it. Then that bill will be sold openly on the bill market from time to time, and it is bought for the chartered banks, and in turn very often finds its resting place before it matures in the Bank of England. The bill market is the great method by which England carries on her commercial and financial operations.
A better illustration perhaps is that of one of our own banks down, say, in Buenos Aires. It makes a draft, with the insurance policy and bill of lading attached, on a cargo that leaves Buenos Aires for London. The draft is drawn upon the bank in London. The bank accepts it. Then the owners of it go out and sell it on the open market, the bill market. We have not developed that in this country, or in America; but in the old land it is the standard method of doing business, and the provision in our form C was to provide for bills bought in the open market. I only wish there were a demand for the purchase of bills here in the open market; that may come in time.
This comes through the matter to which I wish to direct particular attention-6. Investments. Bear in mind that the original form provided for five details being furnished, namely dominion government, provincial government, other dominion government than short term, other provincial than short term, and United Kingdom, other than British dominions or United States of America with maturity exceeding three months. How does it read now? What has been done with it by order in council, by this government that talked about orders in council? No matter. The Minister of National Defence (Mr. Mackenzie) smiles. It must make him think of days long since past. By an order in council they have now provided that instead of these details are the following:
(a)	Dominion and provincial government short term securities.
(b)	Other dominion and provincial government securities.
(c)	Other securities.
There is no separation between the dominion and the provinces, no method by which one can ascertain the extent to which the bank holds securities of each of the several provinces or holds securities of the provinces as a whole. What is the reason for this? I fancy that every member of the government knows the reason. Perish the thought that there could be anything of this sort in a Liberal administration, anything where every member did not

Use of Canada's Financial Resources
know everything about the transaction of business! Be that as it may, what are the facts? The facts are that Ontario was refused accommodation-that was known in the public press -and the premier of that province made fairly strong statements about it. But one province which I cannot mention to-night, the minister not being here, managed to get three million dollars from the Bank of Canada. Of course the money had to be paid in three months. It could not be paid, and there was only one way by which the bank could continue to hold it, namely, by converting it into an investment. It was no longer a short term security but an investment security. So about that time form C was changed, and no longer does it appear that there is an advance to a province of three million dollars. I cannot say how it stands at this moment; but there was a time not so long distant when they still held the three millions in the vaults of the Bank of Canada, earmarking it now as an investment, and assuredly it is an "investment." It is one of those long term " investments " with which we who live in western Canada are too familiar.
That is what has happened to our Bank of Canada since the government came into office, through order in council plus the legislation that I referred to, in 1936, by which the capital was raised to $10,100,000. The executive committee remains as it was created in the original statute. Now I put this to the government. Will they or any one of them say that their control over the Bank of Canada has been greater than was the control under the former administration? " Each looks at each and wonders why."


William Daum Euler: No. We are looking at the
right hon. gentleman.


Ian Alistair Mackenzie: There is no question about that.


Richard Bedford Bennett: Certainly there is no
question. The Minister of National Defence is right. There is no change. If there has been an interference, what is it? It is not upon the records. Is there an order in council we have not seen? "Eye hath not seen, nor ear heard." Nothing of that sort? Then I should like any member of the government to point out a single particular in which there has been any more or greater control of the Bank of Canada since October, 1935, than there was between March, 1935, when the bank was established, and October of the same year. It is true that the bank had then been in operation for only a short time; from March to October is not a very long time; but the essential fact is that the bank was controlled by the same men under the same powers except as the return was
modified by order in council to remove from the realm of public knowledge the details of the operations to which I have referred. That cannot be gainsaid.
Bear in mind something further that I wish to say with respect to the bank. The bank was brought into being by a former administration, and the officials whom the minister refers to as having been so excellent -with which I agree-were officials who in the first instance were selected by the government, to the extent that they had to do it, but they left the bank afterwards wholly responsible for their staff. Mr. Rhodes was then Minister of Finance, and I recall clearly and distinctly the form of letter that he wrote to various people, that we had nothing to do with respect to the staff; that this matter had to be dealt with by the governor and those associated with him, except to the extent, of course, that the go\rernment of the day had to assume responsibility for the appointment of the governor, and for the securing of the deputy governor, who was loaned to us by the Bank of England, Perhaps the Minister of National Defence will be able to enlighten us as to the extent to which, not his monetary policies have been carried out-oh, no, nothing of that sort- but the extent to which there has been a disregard of what was done in the days before October, 1935, what has been done by the new government that had not been done previously.


An hon, MEMBER:: Eleven o'clock.


Richard Bedford Bennett: I am sorry, Mr. Speaker. I had not intended to speak to-night. I suppose I shall have to adjourn the debate.
On motion of Mr. Bennett the debate was adjourned.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Tuesday, March 15, 1938