RAILWAYS AND SHIPPING


Hon. C. D. HOWE (Minister of Transport) :: Mr. Speaker, I desire to lay on the table the annual report of the Canadian National Railways for the year ended December 31, 1937; the annual report of the Canadian National (West Indies) Steamships, Limited, for the year ended December 31, 1937; the report to parliament of George A. Touche and Company, auditors of the accounts of the Canadian National Railway system, for the year ended December 31, 1937, and the annual report of the Canadian National Securities Trust for the year ended December 31, 1937.
These annual reports, together with the railway estimates, will be referred to the standing committee on railways and shipping. With the unanimous consent of the house, Mr. Speaker, I now move:
That the resolution passed by the house on February 11,	1938, referring the following
estimates to the committee of supply, be rescinded, and that the said estimates be now referred to the standing committee on railways and shipping:
Vote 427-Maritime Freight Rates Act, Canadian National Railways Eastern lines, 20 per cent reduction in tolls, $2,278,000.
Vote 428-Maritime Freight Rates Act, railways other than Canadian National Railways, 20 per cent reduction in tolls, $860,000.
Vote 437

Prince Edward Island car ferry and terminals, capital construction and improvements, $35,000.
Vote 438-Canadian National (West Indies)
' Steamships, Limited, capital advances, $24,000.


Right Hon. R. B. BENNETT (Leader of the Opposition):: Mr. Speaker, I think on
reflection the minister will be inclined to withdraw his motion in so far as it affects
C.NR.-Employees

at least two of the votes he mentions. As to the first two, we have passed a statute by which a twenty per cent reduction in tolls is to be made in respect of the government road as well as other railways, and that obligation we cannot lessen or increase unless by statutory authority. It is merely a matter of computation. I should think therefore that votes 427 and 428 would not be referred to the special committee, because they represent a commitment that we cannot avoid. The item with respect to the car ferry is really a part of the accounts of the Canadian National and was so dealt with until the representatives of the island and all parties were insistent that there should be separate accounts of the island ferry. Inasmuch as the item of $35,000 which covers capital expenditures would be in the ordinary course money that has to be found by the country-perhaps more, perhaps less, depending on circumstances-I think that properly should be referred to the committee, and the same applies to vote 438. I am inclined to think the Department of Justice would advise the minister that the first two items are such that the committee cannot exercise any authority over them.


Clarence Decatur Howe: With reference to the two
statutory items, it has been the custom to refer them to the special committee. There has frequently been a good deal of interest on the part of the committee in how the accounts are made up. We have on occasion called Mr. Campbell, of the railway board, whose particular function it is to make up these accounts, to explain them to the committee, and I believe that under the circumstances the committee will be interested in examining those two items.


[Stage Direction]
Motion agreed to.


[Stage Direction]
On the orders of the day:
Mr. E. J. WERMENLINGER (Verdun):: May I ask the Minister of Transport (Mr. Howe) a question? If, according to to-day's news, three hundred and fifty employees of the Canadian National Railways are to be laid off at Pointe St. Charles shops, St. Ann's constituency, on Thursday of this week, is this not a contradiction of the explanation given to the house last week?


Some hon. MEMBERS:: Order.


Edgard Jules Wermenlinger: It was supposed that there was to be an agreement between the

heads of the unions and the transport board. There is to be a general convention of railway employees-


Some hon. MEMBERS:: Order.


Edgard Jules Wermenlinger: -in Vancouver.


Mr. SPEAKER:: Order. I must inform
the hon. member that he cannot make a speech, but must confine himself to putting his question.


Edgard Jules Wermenlinger: I ask the Minister of Transport to give us an explanation why three hundred and fifty men of the Canadian National Railways shops are being laid off on Thursday of this week.


Clarence Decatur Howe: The reason for the reduction in shop forces is, of course, the lack of work to keep the number of shop men now employed at work. The management of the railway and the heads of the unions are coming to my office tomorrow to discuss procedure. Pending that discussion, I can add nothing to what I have said before.



DUTCH ONIONS


[Stage Direction]
On the orders of the day:
Mr. F. C. BETTS (London):: Will the Minister of National Revenue (Mr. Ilsley) state whether, in view of the very grave threat to the onion growers of Canada arising from the fact that the Canadian market is being flooded with a huge surplus of Dutch sets of onions that are being offered at as low a figure as one and a half cents per pound, and in view of the further fact that if any relief is to be afforded there must be immediate action by the government, the government has yet decided to impose the dumping duty, as was done in the spring of 1931?


Hon. J. L. ILSLEY (Minister of National Revenue):: The responsibility is not that of the governor in council but of the Minister of National Revenue, and the matter has been fully considered. It was discovered upon investigation that seventy-five per cent of the stocks of onion sets now in Canada are not in the hands of farmers or growers of onion sets but in the hands of dealers; and, as the effect of a dumping duty would be to benefit the dealers rather than the growers, and as the persons who would be injured would be farmers who are purchasing onion sets, it is not deemed advisable to impose a fixed valuation for duty purposes.

Use of Canada's Financial Resources

use op Canada's financial resources for



ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE AND SUBAMENDMENT OF MR. BENNETT

[Stage Direction]
The house resumed from Tuesday, March 22, consideration of the motion of Mr. Dunning for committee of supply, and the amendment thereto of Mr. Blackmore.
Richard Bedford Bennett: I do not know whether this is the third or the fourth time on which I have had a few observations to make upon this motion. Apparently the time available at any one sitting was not very long.
In view of the observations made the other day by the Minister of Finance (Mr. Dunning) I should now like to direct attention to the problem of international payments and their effect upon our general monetary position. It will be recalled, perhaps, that in this country during the last few years we have had a good deal of difficulty with respect to exchange, and we have had discussions on more than one occasion with respect to favourable and unfavourable balances.
International balances consist, of course, of visible and invisible items. We refer to the visible items generally as commodity balances, and we now include in commodity balances gold, it being no longer part of our standard but merely a commodity. On the other hand the interest we pay abroad, the freights we pay, the insurance premiums, royalties on moving pictures, dividends, and all matters of the kind constitute the invisible outflow of money from this country.
In 1926 we had reached the point in the development of our trade where a substantial favourable balance was indicated. We had 275-6 millions in our favour at the end of the year, and we had an additional 31-5 millions with respect to gold. We had also an item which we cannot consider too carefully, namely the tourist trade, which consists of the amount of money left by tourists in this country; and had it not been for that item during the last ten years our position on more than one occasion would have been one of extreme difficulty. In 1926 the tourist trade amounted to 102-5 millions. The total of all these accounts during the year 1926 amounted to 409-6 millions. Against that we had an adverse balance with respect to freight, shipping, also insurance, royalties and dividends and matters of that kind, and we had to make net interest and dividend payments amounting to 201 millions. So that after we deducted that from our favourable balances we had left a
favourable international balance of 189-1 millions, which we are told would be represented by the movement of that much capital out of this country for investment elsewhere.
In 1927 our commodity balance-that is, the goods we export and import-had fallen to 138-9 millions. Our gold had risen to 25-5 millions and tourist expenditures left in Canada amounted to 129-8 millions, a total of 294-2 millions. That year our interest and dividend payments amounted to. almost as much as the previous year, but our favourable balance amounted only to 63-2 millions. Now that in itself, I submit in view of what is happening in the country at the moment, indicates a condition to which any government should pay the closest attention having regard to the circumstance that England has recently been directing attention to a similar significant fact in her own economy. In 1928 our trade on commodities was favourable to the extent of 131 millions. Gold had risen to 89-2 millions, and the tourist expenditure stood at the very substantial sum of 167-7 millions making a total in our favour of 387-9 millions. But again, there were payments in respect of freights on shipping insurance and the like, and in addition, dividends and interest, and these stood at the very large sum of 221 millions, so that our favourable balance was 131-7 millions, nearly twice that of the preceding year.
In 1929, and I can recall the circumstance very vividly, as many hon. members no doubt will, during the discussions in parliament it seemed to some of us at least that the danger signals were waving. There are differing views in this regard; if there were not there would be no political parties. At any rate we believed that these matters were of serious moment, and we find that our commodity account showed an adverse balance of 131-3 millions; that is to say, our imports exceeded our exports that year-commodity exports-by 131-3 millions. And it will perhaps be within the memory of some hon. members from western Canada that that was the year the Winnipeg Free Press so strenuously advocated the farmers holding their wheat and not being misled by Argentine sales and prices. Further, also, it will no doubt be recalled that in the succeeding speech from the throne it was pointed out that we had in hand practically the last year's crop.
Now that is important because it contributed, of course, to the adverse commodity balance. Then, before taking care of all these matters, we had the following points to con-
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sider. First, we had a gold balance, favourable, of 74'5 millions; our tourist expenditures had risen to the very large sum of 187-8 millions; but we had to pay that year, as well as freight insurance and the like, interest and dividends, 260 millions odd; so that on all our accounts we had 195-8 millions of an adverse balance.
That is an important fact and one which I think cannot readily be overlooked in view of existing conditions; indeed, if it were not for that fact I perhaps would not feel that I was warranted in taking up the time of the house at the moment to direct attention to the matter.
Then we come to the year 1930. It might be said that our friends opposite were in power during the whole of that year, from the point of view of the figures, although they went out of office during the last half of the year. That year we had a total adverse commodity balance of 122-1 millions. Gold had fallen 2-7 millions and the tourist expenditure-I direct attention to this very significant factor -was still at the high figure of 178-8 millions. The payments that we had to make outside of this country rose to 288-6 millions and on balance we had an adverse showing of 286-5 millions.
Remember that long before the stock boom had collapsed international security vras no longer what it once had been, and investors throughout the world became apprehensive of all their foreign holdings. That, therefore, is some explanation of the condition that then arose. Bear in mind also that in 1930, at the end of the year, this country had an international adverse balance of 286-5 millions. I said, and I believe my hon. friends opposite wall agree, that that was a significant fact with respect to the depression that was upon us. But the danger signals had been flying in 1929. They continued to fly in 1930 and matters became so acute in that year that there developed the situation to which I have directed attention, wherein there was an adverse balance of 286-5 millions. Confronted with that situation, what did w-e face? Such a situation, unless it is arrested, means national bankruptcy; there can be no gainsaying that, and no one attempts to deny it. I suppose that most hon. members of this house realize the discussions that took place in England in that connection. She was having a continued adverse trade balance notwithstanding the vast interest payments that were coming to her from investments abroad; and that is why economists there were agreed on the question of raising tariffs.

We come now to the year 1931. Things were very bad but we had reduced our commodity trade balance to the small figure of 17-4 millions. Our gold item had gone up to 90-1 millions and our tourist expenditure still stood at the large figure of 174-4 millions. I point out that this tourist item has been the one thing that has been of such value to us during all these years in relation to our international trade balance. As I say, it amounted in that year to 174-4 millions and the gold item was only 90 millions. So that one gets some idea of what the tourist trade has meant to this country. After taking the gold and the tourist trade and allowing therefor, we find that we had to provide for payments abroad the large sum of 279-8 millions, and after the balance was taken between the two, visible and invisible, we found that we had reduced our balance, still adverse, to 78-3 millions, an improvement of over 200 millions over the previous year.
I am not going to discuss here at length the reasons why that was brought about, but it was brought about by the imposition of dumping duties for one thing, and, of course, the tariff that we passed as an emergency measure in the fall of that year. I point out these two factors because they are of tremendous importance in view of the international situation at the present moment. I also point out that in the fall of 1931 Great Britain went off the gold standard. England had gone on the gold standard in 1925 or 1926, too soon after the war, some people thought. In the fall of 1931 the gold in the Bank of England was exhausted and she went off the gold standard and passed a statute indemnifying the Bank of England for what had been done during the Friday and Saturday when they should not have carried on their operations owing to the depleted state of their gold.
Now we come to 1932. In that year we had a favourable commodity balance of 73-7 millions. We had gold that year of 73-1 millions, and our tourist income, although it was dropping, still retained its vigour to the extent of 155 millions. In other words, it was more than twice the value of the gold which we had available to correct our adverse position. Again we find that we had been able, by the financial action taken, to reduce somewhat the extent of the payments we had to make abroad. That year interest and dividends were against us to the extent of 261-8 millions. So that when the balance was finally struck we found that we had reduced the adverse balance to the triflng sum of 22-3 millions.

Use of Canada's Financial Resources
In that year the empire trade agreements were initiated and came into effect. We entered on the year 1933 with much more confidence than we had had in the preceding year. In that year our favourable commodity balance stood at 146-6 millions; gold had risen to 87-8 millions. The tourist income had dropped to 66-2 millions. Altogether these items made up 300 millions in our favour. Then we turn to the external payments for interest, freight, royalties, etc.; that year, by the operations carried on, interest and dividends were 224-3 millions. We then found ourselves not only out of the red but with a credit balance that amounted to 20 millions. That represented the culmination of efforts that commenced in 1930 and had been carried on-the Minister of Finance says not with much vigour, but our opponents of those days used to say with too much vigour- with all the vigour at our command at any rate, utilizing the machinery of tariffs and dumping duties and everything we could command by legislation and otherwise for the purpose of restoring our position in the international world.
In 1934 we increased our commodity balance, that is of exports over imports, to 148-1 millions. Gold now had risen to 109-6 millions. Tourist income was a little better than the year before, at 82-4 millions, making a total with respect to these items of 340-1 millions. By the operation of our reduction of interest rates, and of course, I am sorry to say, by the diminution of dividends that our enterprises were paying abroad, representing investments of nearly $7,000,000,000 of United States capital in this country, we found that our payments abroad had been reduced to 211-6 millions. So that we finished the year with a favourable balance on visible and invisible items of 74-8 millions. That was the year in which you might say we definitely began to show an upward movement in the curve of return to prosperity. The lowest level was in 1933, then it began slowly to go up, as pointed out by the banks in their returns.
In 1935 we had a total favourable commodity balance amounting to 192-7 millions; gold had risen to 116-7 millions, with tourist income once more improving, so that in that year we had 123-2 millions from tourist expenditures, making a grand total of those three items of 432-6 millions. Here again we find interest and dividend requirements lessening; in that year they amounted to only 208-6 millions. In 1935 therefore we had a favourable visible and invisible balance on international account of 180-9 millions.
Compare that with the situation that was left us as a legacy in 1930. If the student of affairs is concerned to look for analogies, look at the condition of this country to-day. What is the position? The figures show that last month our exports to the United States fell from 36 to 17 as compared with the preceding month. That is a significant fact, and it marks exactly what took place in 1929 and 1930. To-day our exports are diminishing, our imports increasing. We met the situation with our dumping duties and emergency tariff, and I suggest that with these danger signals flying it is the duty of the government to take some cognizance of the situation and prepare us against that day which is fast upon us. In making that observation I am merely recording views which find expression not here only, but in every part of the world. Everyone in the world realizes what these dangers and difficulties are.


James Lorimer Ilsley: The right hon. gentleman does not suggest that we had prosperity when he had these high trade barriers, between 1930 and 1935, does he?


Richard Bedford Bennett: I suggest just what I said a moment ago, that by reason of the action which was taken, prosperity had begun in this country in the latter part of 1933; it continued upward in 1934, 1935 and 1936, and in 1937 it stopped sharply. I suggest that prosperity did not come in a single day or a single year. Depression did not come in a single day or a single year. I again point out to the minister that, cognizant of these conditions, realizing that these adverse balances were rolling up against us, we adopted the only methods to which we had recourse to meet them, and accomplished the purpose we had in mind. And more; we not only accomplished it, but we obtained from the manufacturers of this country their undertaking that they would not raise their prices except in respect of increased costs of raw materials. They kept their word, with but one single exception of which I know, and the consumer did not pay. To add the tariff to the cost of goods for the purpose of showing the incidents of the tariff between these years is entirely beside the question and wholly wrong.
Let us look at 1936. A new government came into office; and the Minister of Finance talks about the vigour with which it acted. Show me what was done in 1936 that was not merely maintaining what was done between 1930 and 1935. Did your excise tax remain at three per cent? Is it there yet? Did your tariff duties remain where they were before, except with respect to United States
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items? And with regard to the United States tariffs remember it was a Republican tariff, the highest tariff the United States ever had. It was not a Democratic tariff. Instead of reducing their tariff by legislation they provided that the president should have power to make treaty agreements, for what purpose? For the purpose of extending favoured nation treatment, to all the nations of the world if you will, but the amount of reduction could be only fifty per cent and no more. Fifty per cent of that ad valorem tariff was fifty per cent of an average of almost forty-five per cent; fifty per cent of the whole, adding the ad valorem to the specific, meant fifty per cent of sixty per cent, the highest tariff in the world. That was what it meant; that is what it means. And more; under that agreement he could not make a free item dutiable or a dutiable item free. Congress would not authorize him to do so, and congress placed a limitation on the period over which these agreements were to extend. That is why we have quotas. That is why I objected in this house, and our friends objected. That is why we will continue to object to an agreement that imposes a quota upon the exportation to a market of 125,000.000 from a market of 11,000,000, when they have free entry for all their products in the market of 11.000,000. Those are the reasons,why we at least tried to make the position clear.
Then in 1936, with the government continuing the very policies against which they had railed, what was the trading balance? Look at the result of it, from the day we endeavoured to correct the position by the emergency tariff of 1930, with the undertakings to which I have referred. Let us look at it. We find that in 1936 the commodity trade balance had increased to 322-2 million dollars. That was not brought about by any action that was taken within twelve months, after the change of government. That was the maintenance of that principle upon which we had accomplished these results. That is known by all. We had gold increasing to $131,000,000; we had tourist expenditures once more increasing up to $156,000,000, making a total under those three items of 609-2 million dollars. Interest and dividend payments, freight payments and payments abroad amounted to 233-8 million dollars, because by this time some of our dividends had been increased, and the money pouring out of this country to service this seven billion dollars of investments here had increased, so there we had 233-8 million dollars. And we had a net total favourable balance of 323-6 million dollars, brought about by the maintenance of those provisions which had

been made for the purpose of correcting what had commenced in 1929.
Perhaps it is not pertinent at this moment to enter into a discussion with regard to the export of capital from this country, and various other matters to which reference might be made. Sufficient for my purpose it is to say that the statistical department has furnished us with an indication that our trading balance at the end of December, 1937, was still favourable, but was falling as compared with the preceding year. Our commodity trade was favourable to the extent of $212,000,000. Gold had risen to $145,000,000. The tourist trade had increased to $170,000,000, and interest and other payments abroad amounted to $247,000,000. Other items totalled $63,000,000, still leaving us a credit balance of $217,000,000 at the end of the year. But look at what has happened since. It has been only three months, but they have been three months which, it seems to me, more nearly make the analogy between 1929 and 1930 very important to any government, and to the government of this country in particular. There you have the flags flying distress signals. They are apparent. There is no business man who has not seen them. Go and look in the factories. Go and look at the reduction in the number of workmen in the factories. Go and look at the business man's attitude towards the problems with which he has to deal. You find the signs everywhere. What are we doing about it? AVe have the significant railroad situation. Do you realize that during one of these three months our nationally owned railway did not earn its operating expenses? Is that not something to think about?
With these other signs to which I have directed attention, with respect to these matters, I shall close that phase of it, but I have in my hand a document issued by the United States government concerning trade between Canada and the United States. It is their version of their relations to us, not our version of our relations to them. I fancy most hon. members have received copies of this document. I commend to my fellow members of this house a consideration of these words:
Canada is our largest single foreign market for finished manufactured products.
Just think of it; eleven million people-


Mr. CRERAR:: What is wrong with that?


Richard Bedford Bennett: -is the largest single foreign market for United States finished manufactured products.

Use oj Canada's Financial Resources


Thomas Alexander Crerar: What is wrong with that? Is it dangerous?


Richard Bedford Bennett: Well, I would expect
that question from some people but not from a minister of the crown whose sworn duty it is to protect the people of this country and who doubtless is endeavouring to do his best in that regard. He wants to know what that means. I shall tell him what it means. It means that to the extent to which those manufactured products have supplanted Canadian factory products we have dispossessed our people of employment and given it to people somewhere else.


Thomas Alexander Crerar: Would my right hon.
friend explain, then, how unemployment has dropped in Canada, if his statement is correct?


Richard Bedford Bennett: But surely the minister
knows that unemployment is going up by leaps and bounds.


Thomas Alexander Crerar: I know it has gone down.


Richard Bedford Bennett: It has gone up 25,000
during the last month. If instead of making radio speeches the minister would read the reports of the other departments of the government he would know these things. Does he not know that? Surely he should know it.


Mr. ROGERS:: Not in secondary industries.


Richard Bedford Bennett: Did I say anything about secondary industries? I said "industries." That' is what I thought; here you have the other mind at work. Here is the academic mind at work. There is the mind that does not bother reading about it, and here is the academic mind which says they are not out of employment because it is not secondary industry.


Norman McLeod Rogers: Is the right hon. leader
of the opposition speaking about tariff-protected industries, or is he not?


Richard Bedford Bennett: He is speaking of this
statement:
Canada is our largest single foreign market for finished manufactured products.
My hon. friend asks if employment is less than it was a month ago.


Norman McLeod Rogers: My right hon. friend just
now stated that he is not speaking of secondary industries. His figures must cover unemployment in all industries including seasonal occupations.


Some hon. MEMBERS:: Hear, hear.


Richard Bedford Bennett: Well, the Minister of
Mines and Resources (Mr. Crerar) at any
rate can count on these troops when occasion demands, and I am sure the Minister of National Defence (Mr. Mackenzie) would be glad to bring them up to his support.


Mr. McLEAN (Melfort):: There has been so little applause from the opposition side that it appears to be welcome.


Richard Bedford Bennett: Another county heard
froml Dunvegan is now heard from!


Malcolm McLean: It is not Dunvegan; it is just another illustration of the fact that the right hon. gentleman does not know everything he aspires to know.


Richard Bedford Bennett: Well, as a matter of
fact, Mr. Speaker, it is a great compliment to have the hon. gentleman make that observation, because it indicates that after all the standard by which the measurement is made is not very high.


Malcolm McLean: That still leaves my observation correct, that the applause from the opposition in recent weeks has been so scarce that any applause is welcome.


Richard Bedford Bennett: The second paragraph to which I direct attention contains these words -and these are the words of the United States:
Approximately 49 per cent of the total exports to Canada in 1937 consisted of finished manufactured articles. 42-5 per cent was crude material and semi-manufactured products, and about 8-4 per cent was foodstuffs.
I shall not do more than commend this document to the consideration of hon. members opposite, because it contains month by month the statement of imports into the United States from Canada of various kinds of commodities. And it will be noted that in 1937 our exports, which are their imports, fell to $24,876,000. It might be of interest to note that even in those sad, dark days of 1935, in May of that year the exports from this country to the United States were over $27,000,000. The returns which came the other day from the office of the Minister of National Revenue indicate that in the month of February they fell to $17,000,000. Those were our exports to- the United States. But you do not notice a very great diminution in imports, do you, from there?


Mr. MOORE:: Would the right hon. gentleman give the reference number of the document to which he has referred?


Richard Bedford Bennett: This document can be obtained from the office of the United States attache in Ottawa, and is entitled, Trade of the United States and Canada, Division of

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Foreign Trade Statistics, Bureau of Foreign and Domestic Commerce, Department of Commerce, Washington, D.C.
I have not time to deal with that, further than to point out that it might be supplemented by a document which no doubt the hon. member for Ontario (Mr. Moore) has seen, which was issued on January 27, 1938, by our bureau of statistics, and which deals with our trade balance. I direct attention to these things at this time only for one purpose: I conceive it to be my duty, as it was in 1928 and 1929, to point out to the house, in as moderate language as possible, what the figures show. The immoderation of my language might in other respects be criticized, but not with respect to figures. I have merely pointed out what the figures indicate. I did it then. I draw from them the one inference that I did then. I was told that my inference was wholly unwarranted but, unfortunately, I lived through three or four years of responsibilities and I knew too well that the inference was sound. I give this warning to-day which may or may not be listened to. I have done my duty by pointing out the analogy between those days and these. I have pointed out what the effect of the trade agreement with the United States has been upon the United States; on another occasion I will deal with what the effect has been from the standpoint of Canada. I am pointing out to-day that what we have done is to afford them the principal market in the world for their manufactured products.


Mr. MACKENZIE KING:: Is it right to assume from my right hon. friend's remarks that at the present time the tariff against the United States should be increased?


Richard Bedford Bennett: I did not say anything about the United States. But I do say this, that if this country's integrity is to be maintained it may become necessary to take those steps of an emergency character which were taken in 1930 to safeguard the life of Canada.
What is more, I could-but I do not propose to do so-deal with questions having to do with the trade of this country, under the empire agreements. That matter may properly remain for another occasion. I have dealt with this primarily for the purpose not of discussing trade but of dealing with the monetary side of it. The stabilization of exchange must always be one of the foremost considerations in the mind of any one responsible for the exchequer.
When England went off the gold standard -it is idle for me to say to the house what

hon. members know as well as or better than I do; I apologize for even making the observation at all to the hon. member for Melfort (Mr. McLean)-the immediate effect was to have our dollar sensitive to the falling of sterling exchange. Our dollar in the United States financial mind is so closely connected with the pound sterling that we can maintain our dollar at par when you have the British pound at par or thereabouts. The pound is now about five dollars, and our dollar remains at par.
The question arose at one time whether as soon as England went off the gold standard we should not resort to some kind of inflation. It will be recalled that fluctuations of the pound were very marked-so marked, in fact, that the pound in New York did fall to 83.30, a very low quotation indeed. I suppose it must be within the minds of most hon. members that steps were taken here to endeavour to prevent our being made bankrupt, because we had so -many obligations to meet in the United States. At this point may I quote briefly from a statement I made before the board of trade at Toronto at the beginning of 1933:
Another difficulty, of considerable importance to us all, was the depreciation of currencies. When the pound sterling fell from 84.8(5 to $3.70 ($3.30 in New York) and the currencies of all other European countries and of Japan fell to the level now obtaining, it created additional difficulties for the Canadian people. I will not stop to speak of the methods by which we endeavoured to grapple with these difficulties, except that I would like to say a word with respect to the question that arises out of the depreciated currencies. Sometimes I find suggestions from those who have given little study to the problem to the effect that all that is necessary for us to do in Canada is to embark upon a policy of inflation. What does inflation mean? Nine out of ten that I ask have no answer, except they say, you will have two dollars where you had only one before.
Gentlemen, may I point this out to you; geographically, we are part of the North American continent. Who by taking thought can add a cubit to his stature? Who by taking thought can change Canada from being a part of North America to being a part of Europe?
The Prime Minister made an observation somewhat like that the other day.
Gentlemen, I invite you to remember that fundamental fact, that the Dominion of Canada geographically is part of the North American continent. And it gives me no joy to remind you also that financially it is in the same position. But frank recognition of a fact is absolutely essential if you are going to deal with the problem that it raises. In this year of grace, the Dominion of Canada must meet in the United States of America, Canada and Great Britain, for principal and interest on Dominion loans, direct and guaranteed, provincial loans, direct and guaranteed, loans of municipalities and a few public corporations,

Use of Canada's Financial Resources
the enormous sum of $684,149,048. Of this $323,346,120 represents principal and $360,802,928 represents interest. You will note the interest alone is almost a million dollars per day, including Sundays and holidays. We have to provide this by renewals of our promissory notes or by payment. And of this vast sum there is due in the United States of America $266,124,100. Of this sum $109,392,776 represents principal due this year, and $156,731,324 interest. The obligations of the dominion due in the United States this year for principal and interest direct and guaranteed aggregate $108,244,576. Similar obligations of the provinces amount to $70,600,073; of the municipalities to $25,136,536 and of public corporations to $62,142,915.
Thus, Mr. Speaker, it becomes apparent even to the most thoughtless of us all that we had a situation to meet which required that we should do everything possible to stabilize the exchange situation, in other words, to give value to our dollar; and one of the reasons why balances, visible and invisible, become important, is that if we have a favourable trade balance with the United States it means that we at least have some dollars there with which to meet our obligations.
I want to refer to another statement I regard as somewhat important because it was made at the imperial economic conference held in Ottawa in 1932. The situation we were there dealing with was world trade, not exchange. These are the words used by me at the imperial economic conference of 1932, as reported at page 116:
One of the most important effects of the fall in prices is the increased burden of the fixed charges payable on our governmental and private obligations held abroad, chiefly in the United States and the United Kingdom. Canada is an important debtor country; on January 1, 1932, total British and foreign investments m Canada were estimated at 6-4 billion dollars, against which is an offsetting Canadian investment abroad of 1-8 billion dollars.
It is a little less than that now.
A careful compilation of the amounts we will have to pay abroad during the fiscal year ending March 31, 1933, indicates a total of $362,000,000, or over a million dollars a day (exclusive of Sundays). Of this total, $233,000,000 represents interest and $129,000,000 represents maturing principal. Moreover, declining commodity prices have greatly increased the drain of this interest and amortization bill upon our national production. As one dollar to-day will purchase at wholesale 48 per cent more than it did in 1929, the real burden of the service charges on these foreign obligations has increased from $362,000,000 to $535,750,000.
It is true that there would be some offset because of the fact that these commitments include interest and principal payable to Canadian nationals who will exercise the privilege of cashing their coupons and bonds in NeV York when the terms of the security allow that alternative. Such payments will eventually come back to Canada. It is estimated that possibly from 25 to 50 million dollars will
return to this dominion. (There is a wide range to this estimate because it is impossible to estimate with precision.) This leaves a net balance of service charges payable abroad amounting to from $310,000,000 to $340,000,000 which in terms of the 1929 dollar would be equivalent to from $460,000,000 to $500,000,000. The total value of our wheat and wheat flour exports in the record year 1929 was $494,000,000; in the fiscal year ended last March it had fallen to $135,000,000.
From another angle these obligations abroad are of major significance in the consideration of Canada's monetary policies. Most of them; are payable in New York or optionally in Canada and New York, or Canada, London and New York. Where such options exist the premium on New York funds makes it practically inevitable that payment should be demanded in New York funds. This means that during the year ended next March a maximum of over $279,000,000 will be payable in the United States. England's going off the gold standard was followed by a drastic decline in the price of our dollar on the New York market.
I should like to ask my friends opposite, especially the Minister of Finance (Mr. Dunning), to listen to this;
The effect which this action by England had on Canada is difficult to exaggerate. It has resulted in a struggle to maintain the national integrity.
Hon. members have perhaps heard me say that too often.
It was necessary for us to increase customs duties not for the purpose of protection, but to maintain the balance of our national position. We had either to face bankruptcy or restrict imports. At one time, our dollar fell as low as 75 cents in the New York market. To-day the premium on New York funds is only 14 or 15 per cent, but even with this premium the increased burden to the individual corporation or government of servicing these foreign loans is obviously a heavy one. ii ^ >
e<iually clear that the depreciation of the Canadian dollar and the fluctuations in New York exchange increase the difficulty of refunding old loans and floating new issues in the American market. This is particularly important in view of the fact that since the war the United States has been our chief source of capital imports. Of the 6-4 billions of foreign investments in Canada referred to above, over 3-9 billions or nearly 62 per cent are owned m the United States, and only 2-2 billions or 34 per cent, in the United Kingdom.
The figures are somewhat changed now as shown by the bureau of statistics, but I shall not take time to correct them.
From 1924 to 1931, the United States absorbed over 41 per cent of the public issues of Canadian bonds, whereas the United Kingdom's purchases averaged less than 2 per cent of the total as compared with approximately 75 per cent before the war. At the end of 1931 Canadian banks had 83 million dollars loaned on call in New York and over 100 million dollars in bank balances in that market. Under present conditions, therefore, the relationship of our dollar to the American dollar is bound to be of great significance to Canada.
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Finally, the evils of fluctuating exchanges are especially injurious to Canada because of the importance of foreign trade in our national life. With only ten million people Canada ranks fifth among the nations in imports and sixth in exports, whereas on a per capita basis we rise to third place in exports and to third or fourth in total foreign trade (depending on the year selected). Normally, about 20 per cent of our productive activities, it is estimated, are directly involved in commodity exports. Nor, as was pointed out in other discussions this morning, is the major portion of this foreign trade with empire countries. In 1930, for instance, 46 per cent of our exports of Canadian produce went to the United States and 67-9 per cent of our total imports came from that country. With the whole British Empire, on the other hand, the proportions were onlv 33 per cent for exports and 20*3 per cent for imports. For Canada, therefore, stable exchanges with gold standard United States^ as well as with the empire countries are a vital necessity.
Mark you, the United States was then, on a gold standard basis.
With our southern neighbours, also, tourist expenditures and other forms of commercial and social intercourse bulk large. Invisibles play an important part in our international balance of payments. Tourist expenditures m this country, for instance, have amounted to from $200,000,000 to $250,000,000 annually.
I think last year it was higher still.
Our new production of gold has also been a matter of great importance to us. Although we have not been on the gold standard since 1929 in the sense of maintaining a free market for gold, we have been obliged to meet in terms of gold the external payments referred to Our production of gold last year was $55,000,000 and the present rate of production is ab9ut $5,000,000 a month. You can realize how important this has been to us.
That was the statement made by myself at the meeting of the imperial economic conference here. Bear in mind that the United States had not then gone off the gold standard, and we had to service our obligations in terms of our contracts or be defaulters-and we were not defaulters for a single dollar. That is worth keeping in mind. At the present time the Minister of Finance has no difficulty such as that. The United States has gone off the gold standard, and the situation is no longer that of our having to find yellow metal, in the language of my friend from Ontario, with which to meet the obligations that arise in respect of provincial or federal securities. That situation has passed away. But we had to do that. We had to do whatever could be done to reduce that discount on Canadian dollars from twenty-five to ten, to eight, to seven, to six per cent; in- 1933 we got it down to 98i cents on the dollar, and thought we had been exceedingly fortunate. That situation is no longer burdening the government of Canada; that situation has been relieved by the action taken in the United States of America. And I should like here to do something I have always longed to do, to say that when England went off the gold standard and our difficulties were very acute, the president of the United States, Mr. Hoover, sent me word saying anything he could do within the limits of his constitutional rights to assist us, he would do, because we had declared that we would meet our obligations in the terms of our contracts-and we did. That is the side to which I draw attention.
Under these circumstances we believed it essential, as we still do, that this country should have a central bank. We believed it for reasons that I will not analyse at the moment. I had in the back of my head the idea, which apparently was not sound because our population was too small, that we might be able to do something with respect to exchange between Great Britain and Canada and not do it through New York; that we might be able through our central banks to establish our own exchange system throughout the countries that constitute the empire, with the central banks of Australia, New Zealand, Great Britain and South Africa. But our population is too small and our volume of business too limited as compared with the tremendous business of New York for us to hope to be able yet to establish clearly-I say, clearly-our position with respect to exchange.


Mr. McGEER:: Was that message from the president of the United States official? Was it a document?


Richard Bedford Bennett: No, it was not a document. It was by word of mouth.


Gerald Grattan McGeer: Could it be defined in the terms that the speaker has mentioned? Apparently there was a reason why the assistance of the United States was-


Richard Bedford Bennett: Not a bit.


Gerald Grattan McGeer: Apparently it was because we had taken a different course from that of England. If there was any such arrangement between the Prime Minister and the president of the United States I think we should know it.


Richard Bedford Bennett: I have said distinctly there was no such arrangement; it was never discussed. But I want to pay tribute to a man who is no longer in an official position, and who, through his minister here, came to me

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and said anything they could do to help us they would do. That was all, because the constitutional limitations made it impossible for him to do anything.


Gerald Grattan McGeer: That is a very different thing from what was said a moment ago.


Richard Bedford Bennett: That is the position. The idea that it had anything to do with the attitude of England was never thought of or hinted at or discussed. It seems to me passing strange that that observation should be made.
At any rate, that is the position we found in 1933. I was going on to point out that in dealing with this problem of exchange we had one of the most difficult of all the problems that confront any government. For here were these maturities of Alberta, Saskatchewan and Manitoba, payable in New York in gold; here were the maturities of our country, for instance the renewal of deposits with the Chase National bank,-and I do not forget, either, their great consideration for us at that time of peril and danger. I met the directors and told them exactly what the position was, and what we were striving to do, and they said, "Certainly, if you are trying to do that to meet your obligations, we will renew your obligations", and they did so on what was regarded at that time as most favourable terms. One should at least pay a tribute to those who have endeavoured to help in times of great stress and strain and have done what they could within the limits of their powers, having regard to their constitutional limitations, for the purpose of giving us assistance.
Then we established our central bank; and that was a slow process. Some people think it is a very simple thing to pass a statute. I explained the other day what the difficulties were. The deputy governor said last night in an address he made in this city that the government did what apparently he thinks it is the duty of a government to do,-to appoint a governor and take his advice. At least that is his statement that is printed in the press this morning. That was done, and when this government came into office what did they find? They found a well-equipped, well-officered and manned central bank operating in every province in Canada. They found more. They found not only the original set-up but that the provisions that had been made with respect to treasury bills had been so expanded that from 105 millions they had gone up progressively to 150 millions, where they now stand.


Mr. DUNNING:: No, not when we came into office.


Richard Bedford Bennett: Not the day that the present government came into office. But the governor points out that there was a rise from 105 millions to 150 millions. He says in his report:
During 1936-
That is what I am talking about, the year after the present government came into office.
During 1936 the amount of dominion government treasury bills outstanding was increased from 105 millions to 150 millions. The average tender rate during the year was -85 per cent for 90-day bills. The rate ranged from 1-198 per cent on the offering of January 2, 1936, to a low of -643 per cent on September 15, 1936, and the last offering of the year was sold at a rate of -746 per cent.
He then points out the difficulty of having any wide market for treasury bills, because bills of that kind in this country are, or were until the offering was made during these five years, an unknown thing. The only dealing with bills had been through the operations of the Finance Act, which by no extension of meaning could be said to be a market for bills in the sense in which that term is used in England.
One word more about that phase of it. The effect of these efforts was to place machinery functioning in every part of this dominion at the disposal of the incoming government. The United States had gone off the gold standard. That trouble had disappeared. Our funds were substantially at par. and if we maintained our trade balances they could be kept there.


James Lorimer Ilsley: They still are.


Richard Bedford Bennett: Certainly.


James Lorimer Ilsley: That shows we have kept our trade balances reasonably normal.


Richard Bedford Bennett: Reasonably normal. I am only pointing out what the tendency is, and I can only read the figures as they are; I have not any ability to do other than that.
The other morning a report appeared in the press that the Minister of Agriculture (Mr. Gardiner) had said at Edmonton:
. . . If no other party interferes with present legislation passed by the Liberal government, such control will be in effect in 1945.
The control he referred to was:
Changes are being made, and I say the time cannot come too soon for me when the government has control over credit and currency in this country. I mean control entirely in the hands of the government of Canada.
Then follows the statement I have read.


Mr. GARDINER:: Mr. Speaker, may I call the attention of the right hon. gentleman to the fact the statement was corrected in the press the following day.
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Richard Bedford Bennett: It was?


James Garfield Gardiner: Yes.


Richard Bedford Bennett: Well, it was not published here, then, so far as I saw. What was the corrected statement?


James Garfield Gardiner: I have seen it in a number of papers. It appeared correctly in the Edmonton Bulletin the morning after the meeting, and was quoted in every other paper in the same way.


Richard Bedford Bennett: As a matter of fact this report is clipped from the Winnipeg Free Press of March 17, 1938. The hon. gentleman says it has been corrected, therefore I will say only this about it, that no legislation has been passed by this government so far as I know that gives the government control of credit. The hon. member for Vancouver-Burrard (Mr. McGeer) may say that there has been an appropriation of some of his views and an adoption of some of his opinions, but they have been so circumscribed and limited in their operation that I am afraid he would deny their paternity. That is the position with respect to the matter at the moment. The only construction that I can place upon it is that the minister meant that the banks would be practically out of business so far as note issue is concerned by 1945. Well, the Liberal government did not provide that. In the revision of the Bank Act it is provided that on the first day of January, beginning with 1936, the banks shall retire five per cent of their note issue, and after the next five years, on the first day of January retire ten per cent per annum. That leaves twenty-five per cent of bank notes in Canada and elsewhere in 1945; and I should like the house to keep in mind the "elsewhere." I suppose it is known to every member that there are a number of branches of Canadian banks abroad, and by statute we authorize the issue of paper money in the West Indies by some of our Canadian banks. It will be recalled that in the return which the banks make they indicate not only the circulation of their notes in Canada but in every other part of the world; and the whole set-up as indicated by the return from time to time in the Gazette, is of course predicated upon its being a return for the whole of their operations in every part of the world. And twenty-five per cent was left because there are circulating the notes of one or two banks, in particular in the West Indies, in a rather extensive way, The reduction in the note issue of five per cent on the first day of January has now been operative for three successive years, so that 15 per cent has been retired-five per cent on January 1, 1936, five per cent on January

1, 1937, and five per cent on January 1, 1938. The governor of the Bank of Canada refers to the matter but does not indicate the exact volume of notes that had been retired by the beginning of this year. I believe, however, that it now stands at $22,000,000 or more. Is that right?


Charles Avery Dunning: That is about right.


Richard Bedford Bennett: Those notes have gone
out of circulation and have been destroyed.


Charles Avery Dunning: And replaced by Bank
of Canada notes.


Richard Bedford Bennett: Yes; and, as pointed
out by the governor in his report, the necessity of increasing Bank of Canada circulation arises from the diminution of bank circulation. As their notes go out of issue Bank of Canada notes come into issue, and that is responsible for the marked increase in Bank of Canada notes at the first of the year, when the transaction for the past year has been completed.
There is one point to which I would like to direct attention, because the other day we seemed to be at cross purposes in language though not in reality. I indicated to the minister my fear that when people talk about being able to make loans or investments to the extent of ten per cent of their cash reserve they at once create in the minds of the public-


Charles Avery Dunning: The right hon. gentleman is starting wrong again; I am sorry to interrupt him.


Richard Bedford Bennett: Ten times the amount
of the cash reserve-what did I say?


Charles Avery Dunning: You said ten per cent.


Richard Bedford Bennett: I meant ten times. When people talk that way they at once conjure up a very difficult situation. For instance, here is the Ottawa Citizen, published only last night, Monday, March 28, reporting what one minister said-


Charles Avery Dunning: In his pulpit in a sermon.


Richard Bedford Bennett: Yes. Let me read a line or two:
He also commented on a statement by finance minister Dunning that banks could loan ten times their cash reserve. This was disquieting and perplexing to the ordinary man, he said. "I don't think a healthy life can be built in Canada on any proposition that any institution can go ahead on ten times more than it can back up."
It was for that reason that I was endeavouring to use another formula. The real truth about the matter is this. I have in my hand

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the bank statement for February. It would be a different matter if we said, "Banks can never make loans in excess of their deposits and be solvent."


Mr. LANDERYOU:: What are deposits
composed of?


Richard Bedford Bennett: I will tell you what
deposits are.


John Charles Landeryou: What are they composed of?


Richard Bedford Bennett: Your account and mine
and a few others of that kind. Demand deposits in Canada at the end of February amounted to $634,068,054 and notice deposits $1,614,569,798, or a total of $2,248,637,852. That is in Canada; those outside Canada I leave alone.


John Charles Landeryou: Is that cash?


Richard Bedford Bennett: That is deposits. My
hon. friend the Minister of Finance says it is my turn to bat now, and I do so with alacrity. And I am not going to take a base on a strike.


Charles Avery Dunning: A base on four balls.


Richard Bedford Bennett: A base on a strike, yes. The real truth is that we had demand loans at that time for $807,279,133 and investments for $1,440,435,948, a total of $2,247,715,081, or $1,000,000 less than deposits. The business of banking consists in the maintenance of equilibrium between time loans and time deposits, demand loans and demand deposits; and for the purpose of preserving that equilibrium beyond question a cash reserve is set up, which in this case consists of Bank of Canada notes in the hands of the banks and deposits in the Bank of Canada that can be converted into Bank of Canada notes. That may consist of eight, ten, seven per cent or whatever you will of the deposits, but in practice it has been found ample to meet the situation. Why? Because our bankers have thus far been careful enough to maintain that equilibrium between time loans and time deposits and demand loans and demand deposits, so that there has been no claim made upon the cash reserve which exists for the purpose of maintaining the solvency of the institution. The other day I referred to the Merchants' bank, the Union bank, the Northern Crown bank, the Traders' bank, and other institutions that had not maintained that equilibrium between the loans and time deposits. For instance, one of these banks in my own community had lent to a real estate agent several hundreds of thousands of dollars. The boom burst, and where was that money?
The deposit-where was that? Unrealizable. Instead of talking about ten times or eight times, or any other number of times, people should keep in mind the fact that the management is what determines the value of the bank; the administration maintains that high principle of an adjustment between time loans and time deposits and demand loans and demand deposits.


John Charles Landeryou: How are the deposits, created, then?


Richard Bedford Bennett: The deposits are created usually ,by someone writing on a deposit slip and handing so much money into the bank or discounting a piece of paper; that is the reason that Mr. McKenna made the statement that every loan creates a deposit. It does only if the deposit is made in the bank; if it is put elsewhere, in a safety box, or somewhere else, it does not create a deposit.


John Charles Landeryou: Why should anyone draw a thousand dollars out of the bank and carry that money around in his pocket and pay interest on it?


Richard Bedford Bennett: It frequently happens that substantial sums are carried about. Loose money is put away in the cupboard or somewhere else in the home for various purposes. All moneys do not go on deposit in the bank.


John Charles Landeryou: But it has to go back to the bank in interest.


Richard Bedford Bennett: The question of interest does not arise here.


John Charles Landeryou: It does.


Richard Bedford Bennett: The question at the moment is the maintenance of that equilibrium that I have already referred to. There are two kinds of deposits. In the first place you have notice deposits, that is to say, deposits that cannot be withdrawn from the bank unless notice is given to the bank. Loans are made for three months, six months, nine months and so on. but they must be so adjusted that when a man draws a cheque against his account he will find that cheque honoured. And if there comes a time when such a cheque is dishonoured then the bank has failed.


John Charles Landeryou: Would the right hon. gentleman say that the banks of Canada are safer and stronger than the banks of England? In 1914 when there was a run on the banks of England they did not have the amount of the deposits in cash.


Richard Bedford Bennett: I have told in this chamber once before the story of the difficulties in England. It is difficult to induce

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some hon. gentlemen who have very strong views to listen to the facts. The truth is that England was then on the gold standard. The Bank of England did not fail because it had not paper money; it failed because it could not provide gold to exchange for paper money. That is the story.


Gerald Grattan McGeer: That is not true of 1914, the year to which the hon. member refers.


Richard Bedford Bennett: I am talking about the failure of the Bank of England. And what is more, I have never listened to a tale' about an inanimate thing that was more moving than the tale of the failure of the Bank of England.


Charles Avery Dunning: That was not 1914?


Richard Bedford Bennett: No, this is the failure of the Bank of England, when they had to close as described by the late Chancellor Snowden.


Charles Avery Dunning: I think the question was as to 1914.


John Charles Landeryou: Yes, I was referring to 1914.


Richard Bedford Bennett: 
Gerald Grattan McGeer: Would the right hon.
gentleman say that there is any difference between the pound sterling of to-day and the Bradburys of 1914-15? Neither is backed by gold, and that is the only thing of which there could possibly be any difference.
fMr. Bennett.]


Richard Bedford Bennett: I have no intention of engaging in a controversy that would lead nowhere. I say they were backed by gold, and I say that the Bank of England has more gold to-day than it ever had at any time in its history, and is carrying it at $20.67 an ounce and not $35. While the currency is not backed by legislation making it technically gold standard money, there was never a time in the history of England when its currency was more fully backed by gold than it is to-day. Anyone who reads the financial newspapers or the last return of the Bank of England will know that. Why try to delude people with a specious story which has no foundation in fact or logic? Why endeavour to cover an issue up by vain words that mean nothing, when as a matter of fact the very money about which the hon. member for Vancouver-Burrard is speaking is covered by gold to an extent that it never was covered before in the history of England?


John Charles Landeryou: Can they cover the deposits with gold at the present time?


Richard Bedford Bennett: Was there ever a time when the deposits could be covered with gold in any country? Everyone knows what the position is. In the long experience of mankind, by sound judgment and intelligent discretion people have learned to ascertain the likelihood of a run, the likelihood of men demanding their money all at once. I remember during the five years to which I referred one of our banks was suddenly confronted with a run for $10,000,000 because of certain rumours, and they handed out their bills and met the demands promptly and proudly. Under our law as it stands there is no chance of any difficulty arising as long as that is done, because we are the only country in the world that has so favourable an arrangement by reason of the issue of these bills in the terms in which we issue them, as I pointed out the other day. Why endeavour to create a suspicion in the minds of the people that something rotten is being done with respect to these institutions that we ourselves have created? In nine cases out of ten you will find the difficulty arises because someone wants a credit he cannot get. Someone wants to borrow money and cannot; that is what is the matter. Hon. members of this house have said to me: Why cannot I borrow so and so from the bank? I shall never forget a gentleman from Claresholm complaining to me that one of our chartered banks would not lend him money. I said: "Yes, I have a few dollars in that bank; I have an account there. They

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will not lend that money to you? What have you got?" "Well," he said, "I did have a quarter-section, 'but I sold it, and I have not got much-well, I haven't anything to speak of at all." "Listen," I said; "I would not lend my money to you with any hope of getting it back, and now you are complaining because someone who has control of my money for the moment will not lend it to you. If he did lend it to you I should like to have him dismissed." Did it ever occur to hon. gentlemen that that is the whole story?


Charles Avery Dunning: But the hon. gentlemen in the corner do not intend that money borrowed shall ever be paid back.


Some hon. MEMBERS:: Oh, oh.


Charles Avery Dunning: I listened with my own ears to Mr. Aberhart saying just that on the radio on Sunday night, and dozens of other hon. members doubtless heard it. I do not know whether the leader of the opposition (Mr. Bennett) heard it.


Richard Bedford Bennett: As a matter of fact I prefer to attend church. I prefer to take mine undiluted. But this is made a catchword amongst our friends in the country-"Oh, look at those banks! They can buy securities or lend ten times their cash reserves!" And someone thinks that means all the money they have on deposit.


Charles Avery Dunning: That is the trouble. But surely my right hon. friend will acquit me of any intention of conveying that impression.


Richard Bedford Bennett: Oh, quite. I would acquit my hon. friend of almost anything in connection with financial matters.


Gerald Grattan McGeer: While we are on that point, if what the right hon. gentleman is now saying is said in earnest, what is the meaning of section 59 of the Bank Act, passed in 1934, which fixes the cash reserve for the merchant bankers at not less than five per cent of the total amount of their deposits? And will he also tell us how much they now have on deposit to support the $2,200,000,000 plus another $600,000,000 on deposit in the banks outside of Canada?


Richard Bedford Bennett: I do not think there is any difficulty about that question, except that it is not quite accurately put. I cannot be both questioner and answerer at the same time, so I shall take the question as though it were accurate and answer it as it should be. The maintenance of the equilibrium between time loans and time deposits and demand loans and demand deposits depends
upon two things. There is the discretion and judgment of the man who is making the loan, whether fifteen, thirty, sixty, ninety or one hundred and twenty days; he has to decide whether notice deposits that he has will be drawn upon within that period, and to what extent. If the notice deposits are not drawn upon-all this is highly technical; he knows it all, has it in front of him-


Mr. CAHAN:: He has it every day.


Richard Bedford Bennett: Yes, I was about to say he had it twice a day, in the larger banks. Therefore he makes his arrangements accordingly. The amount of money is put there as security, in the Bank of Canada or in the gold reserve, and as far as that is concerned my information is that when that is drawn upon to any extent you can be sure that something has gone wrong with the business of the bank.


Gerald Grattan McGeer: What about section 59,
which you wrote into the Bank of Canada Act?


Richard Bedford Bennett: I have not section 59
before me.


Gerald Grattan McGeer: Apparently not.


Charles Avery Dunning: It provides for the
statutory portion of cash reserves required.


Richard Bedford Bennett: That was what I assumed. That is covered at the present moment, Mr. Speaker, by the provisions of our Bank of Canada Act and the Bank Act. To-day our banks have a line of reserve which consists first of Bank of Canada bills and second of deposits in the Bank of Canada, convertible into Bank of Canada bills. Those are the reserves. Those reserves are merely an assurance to the people of the country that their deposits will be safe; that is all.


John Charles Landeryou: That a small percentage of them will be safe.


Richard Bedford Bennett: That is the assurance,
because based upon experience we are able to know that the withdrawals will be so trifling, as against the payment obligations that are provided by loans, that we can rely upon the draft not being made upon them. We all know that. Take your life insurance companies; take your fire insurance companies; take any of your companies. Look at the largest insurance companies in the world; look at the largest in Canada, with outstanding risks amounting to two and a half billion dollars. Why is it perfectly solvent? Because it is based upon those obligations maturing years hence, on an actuarial basis,
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computing the interest sometimes at two and a half per cent and sometimes at three per cent, as the case may be; knowing positively as an actuarial matter that some day they will become perfectly complete, and more; more in every case. For instance, there is one company that has $700 of assets for every thousand dollars of insurance outstanding. That is a very old company, needless to say, but that is almost incredible. Of course none of the companies has assets that equals its obligations.


Charles Avery Dunning: Its ultimate obligations.


Richard Bedford Bennett: The obligations on policies, because they are payable in future. The experience of the banks-and I know exactly what I am talking about-is this: every bank-and the older the bank the better- knows what is the likelihood of money being withdrawn. That is a factor of the first importance. For instance, in some parts of the maritime provinces there are savings accounts that have been there for long periods, one of them in particular for three generations. It was willed to somebody, transmitted to the next man and then transmitted to the next. It is one of those old things, a sort of standby; that is all. Those are the notice deposits referred to here. Supposing I go into a bank to-morrow and ask for $10,000. The bank will say, "No, Mr. Bennett, we cannot lend you $10,000." Why? "Because we have reached the end of our lending ability at this moment. In the light of our experience we will be called upon to pay deposits amounting to so much, and we must be in a position to do so."


Charles Avery Dunning: That does not happen.


Richard Bedford Bennett: Yes, it does. It happened in 1914 in this country, when banks were fearful that maturities would not be paid. It must be remembered that when a bank lends money-


Charles Avery Dunning: Oh, yes; in a time of crisis.


Richard Bedford Bennett: That is it, exactly. Just let me put this to this house: A bank predicates its loans upon its knowledge-and I say its knowledge deliberately-gained from experience and otherwise of the likelihood of the obligations being paid in time to enable any claim for deposits to be liquidated. That is the story, shortly put; and when there is a great crisis that interferes with the payments at maturity of course the bank has to take immediate steps to see what can be done to meet the necessities. In England they did it with Bradburys. We did something else, as you will recall, under the war time act 
that dealt with that situation. As far as loans and deposits are concerned the situation must always be this, that banks do not lend more than they have on deposit.


Mr. HAYHURST:: Every loan creates a deposit.


Richard Bedford Bennett: I am quite content that the hon. gentleman has said so, but the misunderstanding on the part of the less intelligent public who listen to a lot of words, such as I have been using, which perhaps they are unable to understand fully, leads to the result that they gather up just a catchword. They say, "By Jove, this bank business must be a terrible thing. There is that bank with its deposits, and it is lending $20,000 on deposits of $2,000." I will tell you that the banks have to deliver just what the deposits call for, and the banks will liquidate their obligations to their depositors in the terms of the deposits. Let there be no misunderstanding about that.


Charles Avery Dunning: We could not have a banking system for five minutes if that were not true.


Richard Bedford Bennett: It must be true, and that is just why new banks are so difficult to start. In the beginning they have no deposits to deal with, so they start out and lend money to make good fellows of themselves. The next thing that happens is that when my cheque is drawn on that bank I am told that the amount of my deposit is out in a loan that has not been paid, and the bank closes its doors. That is the story.
I am afraid I have gotten far away from what I intended to say-


Gerald Grattan McGeer: Just on that point the right hon. gentleman might give us a little information about the S35,000,000.


Some hon. MEMBERS:: Sit down.


Gerald Grattan McGeer: What I should like to point out to the right hon. gentleman is that I did not ask a facetious question. What I wanted to know was why, in the 1934 bank act, the government of that day decided that a five per cent cash reserve was sufficient security against all deposits issued. What has happened is this, that the banks have far more than five per cent of cash on deposit, but in 1934 the government apparently concluded that five per cent of cash was an adequate reserve against deposits in Canadian banks. If that is so the banks can create deposits, as far as the limitations of the law are concerned in Canada, to the extent of $20 for every dollar of cash that they can deposit with the Bank of Canada.

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Richard Bedford Bennett: What was the question?


Gerald Grattan McGeer: My right hon. friend does not need to do that.


Richard Bedford Bennett: What was the question?


Gerald Grattan McGeer: The question is this-


Richard Bedford Bennett: Why did the government do so and so?


Gerald Grattan McGeer: "The bank act of 1934 sets up a specific quantitative reserve which the 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 $1 reserve. A much larger secondary expansion is made possible, however, for the Bank of Canada is required to hold only-"


Some hon. MEMBERS:: Order.


Walter Edward Foster: I would remind the hon. gentleman that he must ask his question, and that he can interrupt only with the consent of the right hon. gentleman who has the floor.


Gerald Grattan McGeer: My question is: Why did the government decide in 1934 that five per cent was adequate reserve?


Richard Bedford Bennett: I think there were two reasons. One was that this was the amount required in a preceding bank act.


Gerald Grattan McGeer: There was no reserve at all.


Richard Bedford Bennett: There had been, by practice. There was no central bank, but they had to maintain a reserve in Dominion of Canada bills. That is what the law was. I take it that the hon. gentleman read from that very valuable handbook, McGeer on Progress and Poverty, was it?


Gerald Grattan McGeer: I am reading from The Canadian Banking System, by James Holladay, but I can tell my right hon. friend that if he will read that book of mine he will know more than he indicates knowing to-day.


Richard Bedford Bennett: I was mistaken. It was not McGeer on Progress and Poverty he was reading from. But I note with interest his observation that if I read his book I would know more. I always feel we should pay tribute where it is due. He presented me with one. If I were to follow his suggestion and read his book I would know more of what he knew, but I would not know more than I know to-day. It is a very fine distinction.
Let us proceed one step further. The reason why five per cent appeared was this: There was a provision that the banks had to hold Dominion of Canada bills to the extent of a certain sum indicated by statute. Knowing we were to create a central bank, we provided that the reserve should be five per cent. The reason why the five per cent provision was made was threefold. All our banks are not equally strong and, with respect to note issue, the strong have always been careful with respect to the smaller. We have a common fund which takes care of that. It was brought to the attention of the government of that day that a reserve of five per cent had, in the light of experience, been ample. The banks said it had always been and it would always be in excess of five per cent, but they thought that five per cent was sufficient, for statutory purposes, and that as conditions improved-we were then in the depression- it would be competent for them to change that.
As a matter of fact, I believe the banks have averaged since 1934-except at one time, when conditions were extremely bad-between eight per cent and ten per cent. Is that right?


Charles Avery Dunning: I think the average would probably be more than ten per cent.


Richard Bedford Bennett: I know it has run over ten per cent, but I am allowing for those dark days when things were lowest. I think it would average something like between eight per cent and ten per cent. It is nearer nine than eight, and I believe the minister might easily give it accurately. But at any rate it has risen, to answer the hon. gentleman's question at once.
In the light of experience it was found that, having regard to maturities and payments by those who borrowed, and in the light of the long time deposits remaining, and the nonfluctuation of them, that reserve would be sufficient to meet any demands which might be made by depositors for their money. In the light of experience that has turned out to be accurate.


John Charles Landeryou: Not in every case.


Richard Bedford Bennett: Since the act of 1934 I know of no case in which a depositor has not got his money.


John Charles Landeryou: The depositors have not all called for their money at the same time.


Richard Bedford Bennett: One thing I really delight in is that when a question is answered they merely suggest there was no reason why the
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question should have been asked. I always think that is highly entertaining.


John Charles Landeryou: I know of a case.


Richard Bedford Bennett: I said that there was no case since 1934 when the depositor had not been paid; but they say, "No, they did not want their money,'' or in other words, the question should not have been asked.
Banks have very large investments. The minister the other day referred to that fact. It is not from choice, but from necessity, that our banks place their money in securities. Here, for instance, is the central bank's statement for February, in crystallized form, and I find that they have investments of $1,440,435,948. I regret to say that the amount is larger than it was a year ago, and that it is rather larger than it was in January. These are dominion securities, provincial securities, and some municipal, but the one point I want to make clear beyond peradven-ture is that it is a bad sign when banks are compelled to invest their depositors' money in securities. Why?	Because it
indicates a lack of confidence on the part of those who have placed their money in the banks on time deposits, and who are not content to risk it in our industrial and commercial life. I draw an inference there that hon. members opposite will question: That, to me, indicates a lack of confidence. Confidence in this country can be restored only when, with some degree of certainty, men can engage in commercial and industrial enterprises.
At this time we have a trade agreement here, and another trade agreement there. "Shall I expand my plant"? "No; I do not know what is going to happen." " Shall I build a new plant"? "I do not know what is going to happen." "Shall I establish an industry "? " No, I have not confidence that the present situation will continue." I draw an inference my hon. friends opposite will repudiate at once. I say that lack of confidence arises because of the policy of this government; others disagree with that, and that difference of opinion is the foundation of party government. I say that certain things would establish confidence. I say that lack of confidence, non-confidence, is expressed in the central bank's statement, and I think at another time and place I can give very good reasons for so saying.
I have now led up to what I conceive to be the correct conclusion, namely, that we have here a complete lack of confidence, as evidenced by monetary results of policies of the government. One result is an increase in

the securities held by the chartered banks. They have been compelled to increase their holdings of securities, or to refuse to take deposits and pay interest on them, because there is the cost involved in maintaining an office, and in keeping books and records of the deposits themselves. Either one of two things must happen: They have to use that money by investing it, and the investment is of two kinds-loans to customers, or purchases of securities. Investment in a loan is based upon the assumption that the loan at maturity will be paid; that a call upon the reserves will not be made, and that cheques will always be honoured for the deposits of customers. Investment in securities is predicated upon the assumption that during the lifetime of the security nothing will offer for lending purposes, and that therefore it is desirable, yea necessary, that they lock that money up in securities, as is the case. In my judgment, that is an additional signal to this government to take note of the conditions to which I have alluded.


Charles Avery Dunning: Surely my right hon.
friend will be fair enough to say also that loans, as well as investments, have risen.


Richard Bedford Bennett: Yes; here are the figures. I did not insinuate that they had not risen, and I shall give my figures. A year ago call loans in Canada amounted to $118,000,000. To-day they are $70,000,000. A month ago they were $72,000,000. Those are the figures with respect to call loans.
Ordinary loans, or current loans in Canada have risen $46,000,000 since last year. The amount was $731,456,128, and it has risen $6,000,000 in the last month. It should be observed that the figures are very nearly alike. There is an increase, however, in loans. I do not wish the minister to say that I deny that fact.
I shall not trouble the house further; there is much that could be said, but the diversion which has been offered by the interesting questions which have been asked make it unnecessary to proceed further. The motion to leave the chair was met by an amendment, and the amendment was declared to be a vote of lack of confidence in the government and, as was indicated by the minister at the opening of his speech, was of such a nature that those who were opposed to the government would be disposed to vote for it. But the hon. member's amendment was made a means of suggesting that the alternative proposals of our friends of the social credit group would solve the problem to which they directed attention. That was their position.

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They talk about monetizing credit. I wonder, sir, how many members of the house have stopped for a moment to think of the extent to which credit has already been monetized in Alberta, and the result of it.


John Charles Landeryou: By past administrations.


Richard Bedford Bennett: Yes; but the credit was monetized to the limit, to such an extent that the interest on that credit could not be met, and default was made in payment of it. In the neighbouring western provinces credit has also been monetized beyond1 the possibility, according to the premiers of those provinces, of their continuing to meet without assistance the obligations thus created. Therefore, when you talk of monetizing credit and of social credit, we know that we have had the monetization of credit in those three provinces and that it has brought about conditions of such a kind that it is unnecessary to do more than merely refer to them as being the answer to the question: Shall there be a further monetization of credit? Of credit, mark you!- of the tar sands and of the Turner valley, of everything connected with the natural resources. All these were pledged when money was borrowed in London. I remember the prospectus of t'he Alberta and Great Waterways issues, and reference will be found there to Alberta's resources. We were monetizing our credit. We did this also in Saskatchewan and in Manitoba. We monetized our credit in every province.


John Charles Landeryou: And now we cannot pay it back.


Richard Bedford Bennett: Precisely, and although we cannot pay it back you want to have more of it.
I shall refer to just one other observation that was made in connection with the amendment, and that had to do with the question of inflation. I am not going to deal this afternoon with the complex and difficult problem of inflation, but I shall just content myself with reading what I said before the board of trade of Toronto in 1933. I said this:
Now I am leaving aside the question as to how you are going to accomplish inflation. I have asked many men for the mechanics of it, and none of them have it except to tell me to borrow perhaps fifty million of dollars, and buy sterling, and perhaps fifty million dollars and buy American exchange, and so manipulate the two as to maintain a stable value for the dollar in terms of the pound. I have had recipes of that kind given me, but they have not said who is going to lend the money or pay the interest.
Then I used these words:
Gentlemen, when you hear people talk about tying the dollar to the pound, I say, from investigations which I made during the last month abroad, we are making ourselves absurd. I use that term deliberately. How are you going to do it? I talked to the foremost authorities in Great Britain, discussed with them the question of inflation in Canada, and do you know what they told me?
And then I said:
This is what he said to me: "Mr. Bennett, in all the history of the world you will find no record of inflation or departure from sound money by any country of its own volition as a matter of deliberate choice. There are two reasons why countries go off sound money, two reasons only when they inflate their currency; one is because of necessity from lack of sound currency and the other insolvency."
These were the reasons given by men who know so much more about this than I shall ever hope to do, that I just give this statement to hon. members as I gave it to my friends in Toronto, for what it may be worth. Certain types of inflation have been going on in these countries all these years. Every thoughtful man knows that. But the type of inflation that has been mentioned in certain of the speeches here, the issue of paper money without regard to-


Charles Avery Dunning: Debt free money.


Richard Bedford Bennett: Yes. That sort of thing is quite impossible if we are to maintain our solvency. I think everyone realizes that. Professor Ivammener wrote a little volume on money in which he makes this statement which always staggers me, that when German inflation had reached its maximum, a single penny of the United States was sufficient to buy enough marks to discharge the entire mortgage indebtedness of the German empire before the war.


Mr. BLACKMORE:: Will the right hon.
gentleman permit a question? I know he would not like to have his statement misconstrued. I should like to point out to him that we did not suggest social credit as a solution. My right hon. friend, if he reads very carefully my remarks, will not find the words "social credit" anywhere. Furthermore, we did not mention setting the printing presses in operation. That statement or meaning was absolutely put into our mouths by other people.


Richard Bedford Bennett: My mind is quite clear
that the hon. gentleman who has just spoken (Mr. Blackmore) did not talk of using the printing presses; while he may not have used the words "social credit"-it may have

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been that it was not desirable to do so-I am bound to say that I could draw nothing else from his remarks, and certainly the theories propounded were what I considered to be an authoritative statement of the principles of social credit. Perhaps I did a wrong to the hon. gentleman in the wording of the subamendment I now propose. I move, Mr. Speaker, that the amendment be amended by adding thereto the following words:
-but that adoption of the policies of social credit as enunciated by its supporters in this house would afford no adequate remedy for such neglect.
I see no form of amendment by which I can express the lack of confidence in the administration which I have indicated as strongly as I can. At the same time I want to make it quite clear that I have not yet reached that state of intellectual advancement which would enable me to accept the principles enunciated by my friends to the left, with the invaluable assistance of their friend from Vancouver and his work on Progress and Poverty.


James Lorimer Ilsley: Mr. Speaker, we have listened to a long and rather remarkable speech by the leader of the opposition (Mr. Bennett). The subamendment he has just moved is interesting, and if it could be accepted without joining it to the amendment that was moved by the leader of the social credit group (Mr. Blackmore), I have no doubt that we on this side of the house would be prepared to support it. However, support of the subamendment involves the prevention of the house from going into committee of supply, and the subamendment will therefore have to be rejected by the administration along with the amendment that was proposed by the hon. member for Lethbridge. That is the position which I think the government will have to take on this motion.
Coming to the speech of the leader of the opposition, it is a little difficult for me to remember all that the right hon. gentleman has said. He began his speech on the fourteenth day of March; he continued it at considerable length on the twenty-second day of March, and he resumed it to-day. Having in mind that I might possibly wish to follow him I formulated some thoughts two or three weeks ago, but they have become a little vague and hazy at this late date. I have, however, this general impression of his speech as a whole. There were two parts of it that were quite surprising to me. The first was the position taken by the right hon. gentle-
man the other night in reference to a passage he quoted from the speech of the Minister of Finance (Mr. Dunning), and in order that there may be no dispute as to what the Minister of Finance said, and as to the position taken by the leader of the opposition in reference to it, I turn to page 1151 of Hansard of March 8, where the Minister of Finance said this:
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 ten per cent to roughly twenty-one per cent.
The sponsor of the suggestion contends that no inflation is intended or would result by thus increasing bank cash, so long as the gold cover of the Bank of Canada did not fall below the twenty-five per cent minimum. This factor, however, is not a test of inflation. 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?
The right hon. gentleman challenged that statement very sharply; in fact he characterized part if not all of it as "monstrous nonsense"; and because of the position taken by him, I think I should make clear what I believe is the true position. I believe, and I think most hon. members have believed for some years, that generally speaking it is true that loans create deposits, that is to say, that loans made by banks find their way immediately either into accounts in the same bank or into accounts in other banks, and that therefore loans are responsible for, result in, lead to, create deposits. The right hon. gentleman challenged that statement, and challenged it sharply. He put forward the case of a borrower from a bank who puts the money in his pocket and neither puts it in the bank himself nor gives it to anybody who directly or indirectly puts it in a bank. The simple answer to that is the one given this afternoon by the hon. member for Calgary East (Mr. Landeryou) in his question, that that is beyond the range of the normal experience of human beings. Human beings may hoard money; but they do not hoard money on which they are paying interest, and the amount of hoardings of borrowed moneys would be infinitesimal, so small a factor in the whole situation that it cannot seriously be advanced as a reason for challenging the

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broad general statement, now commonly accepted, that loans do create deposits.
As a matter of fact, there is the best of authority for this statement. I suppose that the highest authority in the English speaking world to-day is that of the committee on finance and industry, which was made up of some of the greatest monetary economists and practical bankers in the world. The chairman of this committee was the Right Hon. H. P. Macmillan, K.C. The right hon. gentleman would not challenge his authority; he himself selected Mr. Macmillan to head a commission in Canada which investigated the banking situation in this country. I desire to read at this time two or three sections of this report so that the matter may be clearly understood. A great many hon. members, in speaking to me about the speech of the right hon. gentleman the other evening, said that he was right; that his position was sound. But his position is unsound and incorrect, as is shown by the report of the Macmillan commission. I shall read two paragraphs only, although several others also bear out the position that I am taking at the moment. Paragraphs 74 and 75 put the position absolutely clearly.
74. It is not unnatural to think of the deposits of a bank [DOT] as being created by the public through the deposit of cash representing either savings or amounts which are not for the time being required to meet expenditure.
That I take to be the position of the right hon. gentleman the other evening.


Richard Bedford Bennett: No. I made it perfectly clear that a loan created a deposit, and I quoted McKenna to-day to the same effect.


James Lorimer Ilsley: The right hon. gentleman quoted McKenna only to criticize him.


Richard Bedford Bennett: No; I admit that a loan creates a deposit if it is deposited in a bank.


James Lorimer Ilsley: I will admit, Mr. Speaker, that the passage which was quoted the other night was not represented as "monstrous nonsense" to-day. The right hon. gentleman took an entirely different position to-day.


Richard Bedford Bennett: No, he did not.


James Lorimer Ilsley: And with nearly everything he said to-day I am in agreement.


Richard Bedford Bennett: Well, then, we shall have a dumping duty shortly.


James Lorimer Ilsley: I do not want anyone
reading Hansard of the other evening to conclude that there is something in the position he took on that occasion, and therefore-


Charles Avery Dunning: The minister does not agree with the tariff utterances of the right
hon. gentleman to-day, but agrees with his monetary references.


James Lorimer Ilsley: Yes; as has been suggested, I want to make it clear that it is with his monetary references that I am in agreement, and not with his statements about adverse balances and favourable balances of trade, to which I shall refer.


Mr. MacNICOL:: The minister will get there, too.


James Lorimer Ilsley: 
Charles Hazlitt Cahan: That assumes that all the deposits are made in one bank. It does not take into consideration that deposits are made in other banks or that deposits are made in other banks in other countries.


James Lorimer Ilsley: Well, then, I shall read paragraph 75:
75. The process is much the same when we remove the assumption that there is only one bank. The credit granted by one bank may

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reach the accounts of customers in another bank. There is thus established a claim by the second bank upon the first for cash, and the ability of the second bank to grant loans is improved in so far as that of the first bank is reduced. Over the banking system as a whole therefore, loans and investments made by the banks increase their deposits. There is, however, a limitation on this process. A bank which is actively creating deposits in this way will naturally find that a considerable part of the cheques drawn against them will be in favour of other banks. It will thus lose part of its cash reserve to those banks and must proceed to limit its loan operations if its normal cash ratio is to be maintained. In practice, therefore, no one bank can afford to pursue a policy of creating deposits by making loans or investments which is much out of line with the policies of other banks.


Charles Avery Dunning: That is exactly what I said the other night.


James Lorimer Ilsley: It is exactly in line with what the Minister of Finance said in his speech the other night.
I believe there is something in what the right hon. gentleman says to the effect that the statement that loans create deposits may mislead some people. There is something in that position, and I have no quarrel with the warning he gave to the house and to the country this afternoon. It is not true that a bank can lend wildly and indefinitely to any class of borrowers, thereby creating a huge amount of credit money which is put into circulation in the dominion. There are two very well understood limitations upon the power of banks to increase credit money: The first is the necessity of preserving an adequate cash ratio, and that has been fully explained this afternoon. The bank must follow the normal banking practice with regard to the preservation of the cash ratio, and if that ratio is too small, there is danger of the bank being called upon to make payment in cash which it cannot make, with the result that it will find itself in trouble. The second limitation is that the loans must be good loans. The loans and investments must be good. If they are not, then the bank will find that its deposits, which are good deposits created by loans, which are liabilities of the bank, will be in excess of the value of the loans and investments, which are assets of the bank, and the bank will be insolvent and will fail, as the Merchants bank failed. My right hon. friend explained that the other night. The right hon. gentleman did not say frankly that he was wrong the other night, as he might just as well have said this afternoon; but after the explanation he has given us today there is not much difference of opinion between the parties in the house with respect to the true nature of banking operations.


Mr. KUHL:: Is it true that the banks of Canada owe the people of Canada between one and two thousand million dollars cash? Have the people that amount on deposit with the banks? That is the first question I should like to ask the minister, and the second is this: If they have that amount, how can the banks pay their obligations to the people if there is less than $300,000,000 cash in the whole dominion?


James Lorimer Ilsley: The answer to the first question is, yes. The banks do owe the people of the dominion something over two billion dollars. The answer to the second question is that so long as the banks maintain an adequate cash ratio, they can pay all that in the ordinary course of events they will ever be called upon to pay. That is the practical way of dealing with the situation, and anything else is merely academic and theoretical.


Mr. POOLE:: Does that not prove that the banks do create credit; that a loan does create a deposit?


James Lorimer Ilsley: Everyone admits that. Everyone says so.


Walter Frederick Kuhl: Does that not prove that the banks do create money?


James Lorimer Ilsley: I shall answer a reasonable number of questions, but not too many.
Let me now deal with the other statement of the right hon. gentleman, a statement that surprised me. It is not so much a statement, for I do not think I can actually quote it; it is rather the general position he took in reference to adverse and favourable trade balances. Ever since I have been in the house I have heard this matter of adverse and favourable trade balances discussed, and while I am not sufficiently versed in economics or in the theory of international trade to deal at all thoroughly with the position taken by the leader of the opposition this afternoon, I am satisfied that almost any economist would regard with great surprise the touching faith which the right hon. gentleman has in favourable trade balances as a means of enriching a country. The position he has taken seems to be that if we send out more goods and services than we bring in, we are getting rich, and if we bring in more goods and services that we send out, we are getting poor; and that at all costs we must preserve a substantial trade balance.
My understanding is that over a period of time the amount of goods and services exported balances with the amount of goods and services imported, and if there is a tem-

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porary trend in one direction or the other, the effect on the currency is very likely to operate powerfully to restore the balance. For instance, if we were to export very heavily in proportion to our imports, there would be a demand by the purchasers of our exports for our exchange, which would cause our exchange to appreciate in terms of the exchange of the countries in which the persons buying our goods live; and when that happens, an adverse influence is set up against our exports. The same is true if we import excessively in proportion to our exports. For the time being there is likely to be a depreciation in our currency, which in turn will encourage exports.
I am sure the leader of the opposition when he came into power in 1930 did not start out consciously to affect the value of our currency by his dumping duties and high tariffs. I followed closely the course of events in those years. I was in this house in opposition, and I think the records will bear me out when I say that his object in raising the tariffs and imposing dumping duties to the exorbitant degree that he did upon goods coming into Canada was to end unemployment-to give work to the people of the country. That is what he said at the time.


Richard Bedford Bennett: That was one object.


James Lorimer Ilsley: We did not hear anything about currency for two or three years.


Richard Bedford Bennett: Oh, yes.


James Lorimer Ilsley: The records are there. The predominant motive, the reason given for the imposition of the dumping duties, was to give work to Canadian citizens-an object which, by the way, did not succeed-and it was not until people became interested in currency matters in 1932 and 1933 that the right hon. gentleman, ex post facto, took credit for having previously looked into the matter and taken steps to maintain our currency. It is an open question whether the maintenance of our currency at the level at which it stood in those years was a good or a bad thing for the country. I always felt, despite the argument to which we have listened this afternoon, that our currency for two or three yeare during that period was maintained at too high a level, though I admit that there are two views in that regard. As the leader of the opposition said, we were caught between the pound sterling and the United States dollar. As regards certain of our interests, it seemed advantageous to maintain our Canadian dollar at a high level so as to permit those of our municipalities and industries
which had payments to make in the United States to make them with greater facility than they could otherwise have done. But from the standpoint of our exporters, who are a very substantial part of the population, it would certainly have been advantageous if Canada's dollar had followed the pound sterling to a greater extent than it did.
Now, sir, I want to deal with two or three statements that have been made. One of them has reference to this $3,000,000 loaned to Saskatchewan. I deal with this because tL/_ statements made in the house by the right hon. leader of the opposition-or not so much the statements as the tone in which they were made-seemed to carry the implication of irregularity on the part of the Bank of Canada.


Richard Bedford Bennett: Not the slightest suggestion of irregularity.


James Lorimer Ilsley: Well, they certainly were calculated to disturb public confidence in the Bank of Canada. I say that, having heard the right hon. gentleman on the floor of the house and read his speeches since. I want to refer to that $3,000,000 transaction.
It will be remembered that these loans were made by the Bank of Canada in the spring of 1936. There had been a dominion-provincial conference in December, 1935, which continued into January, 1936. The delegates and this government agreed upon the setting up of a system of loan councils, that is an individual loan council for each province.


Charles Avery Dunning: Each of the provinces which desired it.


James Lorimer Ilsley: Yes. The essential feature of the loan council scheme was that borrowing and financing generally by the provinces which came into the scheme would be under the control of the dominion government. It was contemplated that there would be a refunding of the obligations of the provinces which came into the scheme. The government undertook to submit to parliament legislation which would establish a loan council scheme. That legislation, or the preliminary resolution necessary for the legislation, was brought into parliament, and if I remember correctly, if, was rejected by the senate. But before the legislation was so rejected, and while the Bank of Canada thought, and had reason to think, that a loan council scheme or system was coming into existence, the Bank of Canada made these loans to Saskatchewan, believing that they were making temporary loans. On May 1, 1936, a four and a half per cent bond issue of Saskatchewan, in the amount of

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$2,000,000, was to mature. As the old peace, order and good government legislation had expired on March 31, 1936, the dominion government had no power to make a loan to the province to meet this impending maturity. However, the premier of the province, without any prompting on the part of this government or any member of it, consulted the Bank of Canada, and the bank agreed to make a loan of $2,000,000 to the province to enable it to avoid default, on the assurance received from the province that it would introduce the necessary provincial legislation to enable it to enter the loan council scheme, and a further assurance from the Minister of Finance that the dominion government intended to proceed with the loan council scheme. At the same time the Bank of Canada agreed to advance a further $1,000,000 to enable the province to redeem a three and a half per cent issue maturing June 1, 1936. That was the inception of these loans.
The weekly statement of the Bank of Canada for April 30, 1936, shows, under the title Advances to Provincial Governments, a loan of $2,000,000, and the bank's weekly statement for May 30, 1936, shows that the other $1,000,000 loan had been made, as total advances to provincial governments were shown on that date to be $3,000,000.


Richard Bedford Bennett: That is April 30. I
thought the minister said the loan was not made until May 1.


James Lorimer Ilsley: The bond issue matured on May 1; the loan was made in time to take care of it, and would therefore show on April 30.
In the monthly statement of October 31, 1936, advances to provincial governments were down by $2,000,000, and the bank's holdings of dominion and provincial short term securities increased by $2,000,000. The weekly statement for November 25 is the last one on which the $1,000,000 is shown as an advance to provincial governments, and in the statement for November 30, 1936, this item disappears and the bank's holdings of dominion and provincial government short term securities increased by $1,000,000.


Richard Bedford Bennett: Then the bank still held the securities. That is what I want to know.


James Lorimer Ilsley: It is apparent, therefore, that the two loans were made as advances for six months under section 21 (1) (k) of the Bank of Canada Act, which section also provides that this type of loan must be repaid before the end of the first quarter after the
rMx. Ilsley.]
end of the fiscal year of the provincial government concerned. It is obvious that what the bank had in mind was that within the six months' period the loan council legislation would have been passed and an arrangement completed for refunding the outstanding debt of Saskatchewan as contemplated by the loan council legislation. Had this happened, the bank's loan to the province would have been paid off at maturity as a result of the refunding operation. However, as hon. members know, the loan council legislation failed of passing in the senate, and consequently the province had no means of finding the cash with which to pay off the $3,000,000 owing to the Bank of Canada. The bank's weekly statements show, therefore, that at the maturity of the loans the bank took the province's treasury bills. Is that not the whole story?


Richard Bedford Bennett: It does not show that; that is the point.


Charles Avery Dunning: Yes; the statement
shows it.


Richard Bedford Bennett: I have the statement. It does not show anything about treasury bills.


James Lorimer Ilsley: The right hon. gentleman is referring to another point, that the treasury bills of the dominion and of the provinces are not shown separately. I am advised that these treasury bills have a six months' maturity and consequently have been included under the only item under which they could be shown.


Richard Bedford Bennett: Does the bank still hold them?


James Lorimer Ilsley: Yes; as the six months' bills mature, they are replaced by treasury bills running a similar period.


Charles Avery Dunning: It was all tabled in the house. It is no mystery.


Richard Bedford Bennett: There is a little unfairness, though.


James Lorimer Ilsley: I want to deal with the question of publicity, because if there was ever a transaction to which the fullest publicity was given it was this transaction. It was thoroughly publicized in this house and out of it.
In the budget speech of May 1, 1936, the Minister of Finance referred to this loan. He said:	[DOT]
The province of Saskatchewan, which has an issue maturing to-day, May 1, has expressed a willingness to participate in the loan council

Use of Canada's Financial Resources
arrangement and with the understanding that the dominion will proceed with its legislation the province, 1 am advised, has made arrangements with the Bank of Canada to enable it to meet this maturity.
Then on June 18, 1936, a return was tabled in the house giving copies of the correspondence exchanged between this government and the government of Saskatchewan in regard to the loan to be obtained by the province from the Bank of Canada.
The third time that the matter was referred to in the house was the next year, on April 10, 1937. The minister had been moving the second reading of Bill No. 118, for granting to His Majesty certain sums of money for the public service for the financial year ending March 31, 1938, and after the leader of the opposition had made a statement in connection with this same loan to the province of Saskatchewan, the Minister of Finance made a statement in regard to the whole matter. I do not think it is so long that I should not read it. It may be found on page 2941 of Hansard for 1937.
So we said there would he no more advances to enable any province to meet maturing obligations.
Sir, we applied this policy absolutely and entirely without discrimination. We had applications from all the western provinces. Then, in an attempt to meet the situation, the dominion-provincial conference came to the unanimous decision to adopt a modified loan council idea, and they had our assurance that we would place the matter before parliament. While that process was going on maturities took place in British Columbia, Alberta and Saskatchewan, and I think a small one in Manitoba. It seemed to us that anything that could be done to anticipate the coming into force of the then contemplated loan council legislation, in order to prevent any of these provinces from being the first among Canadian provinces to default, would be worth while. But of course in order that it might be effective the province concerned necessarily had to consent to take advantage of the loan council plan.	British Columbia said, no;
British Columbia got no advance to meet its maturity. Alberta said, no; Alberta got no advance to meet its maturity. Manitoba said, yes, conditionally; we were not in a position to accept conditions, and Manitoba got no assistance. Saskatchewan said, yes, we will go in. But by the time they said yes, this government had no authority from this parliament to loan money for that purpose. The old peace, order and good government legislation had expired and we had no authority. They went to the Bank of Canada, and the Bank of Canada, without being prompted by this government in the slightest degree-in fact I had no knowledge of the initial negotiations- expressed a willingness to advance the money to save default, provided it had satisfactory assurance from the government of Saskatchewan that it would introduce the necessary
provincial legislation to enable that province to enter the loan council scheme, and provided that the bank had assurance from the government of Canada that it intended to proceed with the loan council scheme. Saskatchewan gave the necessary assurance. Naturally we also gave the assurance, and the funds were advanced to Saskatchewan by the Bank of Canada to meet that maturity. Were it not for that particular instance there would be no question of misunderstanding between the leader of the opposition and myself. To him the history of that transaction involves discrimination against the other western provinces. To me it does not, because I have been conscious of nothing throughout this whole difficulty more than a desire to treat each of those provinces absolutely equitably. When I say equitably, I do not mean equally. Equal treatment is impossible. Equitable treatment is possible, and I maintain has been extended by this government since we came into office. What do I mean by equitable treatment? I mean the establishment of a principle which is available to all, which applies equally to all, and which depends for its working upon acceptance by each.
The right hon. gentleman went further in his speech the other night and made an attack on the changes which were made in the form of the weekly statement of assets and liabilities of the Bank of Canada. He made a strong point of that and dealt with it at considerable length, and I want to reply to what he had to say.


Richard Bedford Bennett: That was done by the
government, not by the bank.


James Lorimer Ilsley: Yes; the governor in council did it under the authority of the Bank of Canada Act. The reason authority was given in that act was that we had not had any experience with a central bank in this country. The framers of the act realized-I assume the right hon. gentleman himself was the framer of the act-that it might not be possible to draft a form which should not be changed. It would have to be changed to meet changing conditions, in the light of the experience of the bank. That was why provision was made for change in the weekly statement of assets and liabilities. The old form will be found in the copy of Hansard which contains the speech of the right hon. gentleman, and I should like to place the new form on Hansard now without reading it.
Mr. BENNETT; I gave the new form, but go ahead.
Mr. ILSLEY; Only by parts. To get it all together I shall put one of these forms on Hansard:
1820	COMMONS
Use of Canada's Financial Resources
Bank of Canada
Statement of Assets and Liabilities as at Wednesday, March 16th, 1938 Liabilities
1.	Capital paid up	
10,100,000 002.	Rest fund	
1,348,414 473.	Notes in circulation	
150,275,876 654.	Deposits:
(a) Dominion government.. .. 23,311,408 70
(b)	Provincial governments ..	..
(c)	Chartered
banks	193,513,781 45
(d) Other	 2,553,440 12
Total	 219,378,630 27
5.	Sundry liabilities payable in sterling, U.S.A. and foreign
gold currencies	
5. All other liabilities	 2,439,166 07
Total	$383,542,087 46
Assets
1.	Reserve:
Gold coin and
bullion	180,013,989	22
Silver bullion.. 2,992,623 24 Sterling and
U.S.A. dollars. 23,289,750 44 Other currencies, of countries on a gold standard	419	54
Total	 206,296,782 44
2.	Subsidiary coin	 188,919 55
3.	Bills discounted	
4.	Advances to:
(a)	Dominion government	
(b)	Provincial governments ..	..(c)	Chartered and	[DOT]
savings banks.
Total	
5.	Bills bought in open market not including treasury bills..
6.	Investments:
(a)	Dominion and
provincial government short term securities	120,100,824 82
(b)	Other dominion and provincial govern ment securities.. .. 41,224,572 60
(c)	Other securities	
12,233,292 95Total	
173,558,690	377.	Bank premises	
1,341,796	328.	All other	assets	
2,155,898	78Total	$383,542,087	46Ratio of net reserve (Item 1 of assets less Item 5 of liabilities) to notes and deposit liabilities: 55-80 per centum.	-I want to show what changes were made, and why they were made. There were about half a dozen changes in all, not only the two that the right hon. gentleman attacked; that is, the union of sterling and United States funds and the union of dominion and provincial treasury bills. Those were not the only changes that were made. In dealing with the reserve, which is the first item, not only was this word used as a heading, but it appeared against three of the five items under the heading. This was unnecessary, and it was therefore deleted. That was the first change made. The second was this:	The
headings for sterling and United States funds were amalgamated under the single heading "Sterling and U.S.A. dollars." The right hon. gentleman said that was a wrong thing to do, because the public ought to know how much the bank had invested in sterling and how much it had invested in United States dollars. But there is a good reason why the public should not know that. The reason is just this, that speculators in these exchanges, studying the operations of the Bank of Canada and seeing that they were going out of sterling into United States dollars or going out of United States dollars into sterling, as the case might be, were in a position to get knowledge of the opinion of the Bank of Canada as to the trend or probable trend of these currency markets. That was the reason. To leave those separated as they were would be to give the speculators something by which they could guide their operations and anticipate transactions. That was the reason, and the only one.


Richard Bedford Bennett: Likewise the business men of the country.


Charles Avery Dunning: What right have they to get special information?


Richard Bedford Bennett: All the right in the world.


James Lorimer Ilsley: It is not the purpose of the Bank of Canada to give business men knowledge of what it has bought or sold in the way of sterling or United States funds.


Richard Bedford Bennett: The sole purpose of the act was to serve the business people of the country.


James Lorimer Ilsley: The purpose is set out in the preamble of the act, and it is not an information bureau for speculators, whether they are business men or anybody else. That was what it tended to be, with the other heading.
(Mr. Usley.]

Use of Canada's Financial Resources


Richard Bedford Bennett: Had there been any evidence of speculation?


James Lorimer Ilsley: I do not know about that, but certainly that was the trend of the thing.


Richard Bedford Bennett: Sir Thomas White, in his dissenting judgment, was particular to point out just that difficulty. He said, "should our bank funds be left in the hands of men like ourselves, without our knowing anything about it?" The hon. gentleman will remember his dissenting judgment with respect to this very point.


James Lorimer Ilsley: I do not think Sir Thomas White was dealing with a situation like this. The third change that was made was this: the wording of the last item was incorrect. It read, "Reserves in funds of other countries on a gold standard," which might have implied that sterling was a gold standard currency. It was therefore altered to "Other currencies, of countries on a gold standard." I do not think that was attacked. In the old return there were no less than four sub-headings to bills discounted:	Commercial bills, agricultural
bills, etc., dominion government treasury bills and provincial government treasury bills.


Richard Bedford Bennett: They followed the statute in that regard, as to the power of the bank.


James Lorimer Ilsley: But the statute did not provide that they must show those four categories. As the bank had hitherto held no discounts, did not anticipate having any, and still has none, it was thought unnecessary to subdivide this item until need should arise. I do not know whether or not the right hon. gentleman attacked that, but that was the reason for the change.
The fifth change was this: It had been observed that should the Bank of Canada make an advance to one of the Quebec savings banks, which was possible under the act, there was no place under heading No. 4 where it could be entered. The heading was therefore altered from " Chartered banks " to " Chartered and savings banks." Under item No. 6, " Investments," one item was made of all dominion and provincial government short term securities.


Richard Bedford Bennett: So we are no longer able to know what advances are made to the provinces.


James Lorimer Ilsley: Quite. That is the point the right hon. gentleman stressed the other night, perhaps I should say with a rather sinister accent.


Richard Bedford Bennett: This is the first time accents have been the subject matter of discussion in parliament.


James Lorimer Ilsley: This change was considered advisable, as otherwise if only one province were borrowing from the bank at one time, as indeed would be the usual case, the affairs of that province might receive undesirable publicity. I want to point out that the right hon. gentleman was trying to leave the impression the other night, and I think he stated in so many words, that the change was made to cover up this transaction.


Richard Bedford Bennett: The statement just made' indicates that to be so.


James Lorimer Ilsley: Not at all, because this-transaction was given the fullest publicity' six months before, as well as later. I have given the three respects in which this parliament was given full information as to this particular transaction, so this change could not have been made to hide that transaction. I think that follows. I suppose if we had a large transaction in the future, an important transaction such as this, the same publicity would be given to it; but if the Bank of Canada reached the position where it was making small loans or frequent loans to the provinces, is it in the public interest that the other provinces which are dealing with the bank should know what the financial transactions are between the Bank of Canada and the provinces? They certainly do not have it now when they go to a commercial bank.


Richard Bedford Bennett: The Bank of Canada declined to do anything for Ontario, and the very point I make is just what the minister has said, that it enabled this to be covered up. Now it is no longer apparent to anyone that a loan has been made to a province; still there is $3,000,000 due to this bank from Saskatchewan, and it is the only province which owes the bank money.


James Lorimer Ilsley: It was given the fullest publicity; therefore that could not be the motive or reason. The point is that the charge against the bank, that the bank did this to cover up something, certainly is not borne out by the record. The bank considers that in the matter of publicity, as in so many other things, moderation should be the objective. It considers that the present form of the bank return meets all reasonable requirements. Indeed, even in its present form the return probably discloses as much, if not more, information in regard to the bank's operations than is the case in any other central bank in the world.
I want now to refer briefly to another matter. The leader of the opposition challenged members of the government to show
1822	COMMONS
Use of Canada's Financial Resources
any respect in which control over the Bank of Canada is any greater under the present legislation than it was under his legislation.


Richard Bedford Bennett: Over the practice and operation of the bank.


James Lorimer Ilsley: If the right hon. gentleman is talking about interference in the routine operations of the bank, I think he is right. I do not believe his government, or this one, has interfered. But in regard to control and the power to direct policy, the power to map out a policy for the Bank of Canada, there has been all the difference in the world.
I want to point out three respects in which our banking legislation differs from his. The first is that the government now owns 51 per cent of the stock, and thereby assumes voting control. The second is this: Under his administration the directors were selected by the shareholders. Now the majority of the directors is nominated by the government, and the arrangement is such that at all times the government directors have a complete majority over the other directors, and the governor and deputy governor of the bank. So that the bank is at all times under the control of the government appointed directors. That is the second respect-


Richard Bedford Bennett: That is the theory of it.


James Lorimer Ilsley: -by which control has
passed from privately selected directors to government selected directors. The third respect is most important, because the right hon. gentleman pointed out the other night that the decisions of directors and the executive committee have been and are subject to the veto of the governor. That is an important section of the act. I have it before me, and so that there may be no misunderstanding I shall read it. The section in the original act was in these words:
14. No action or decision of the board of directors, or of the executive committee, shall have any effect unless the same is concurred in by the governor, or in his absence or incapacity, by the deputy governor.


Charles Avery Dunning: That was the wording in the original act.


James Lorimer Ilsley: Yes. We changed that so as to subject the veto of the governor to revision and, if necessary, to reversal, by the governor in council. That is the most vital change to be considered, when one talks about control of the bank. Because of its importance I shall read the new section 14:
14. (1) The governor, or in the event of his absence or incapacity the deputy governor only, shall have power to veto any action or decision of the board of directors or of the executive
[Mr. Ilsley.l
committee, and if this veto power be exercised, the governor or deputy governor, as the case may be, shall within seven days inform the minister in writing of the circumstances and the minister shall submit the veto to the governor in council who may confii'm or disallow the veto.
(2) Any director or member of the executive committee may inform the minister in writing of his view of the action or decision in question, which view shall also be transmitted to the governor in council.
So as a result of this, the institution is now, what it was not before, publicly controlled.


Richard Bedford Bennett: Has the power of veto ever been exercised?


James Lorimer Ilsley: No; it has never been
reversed, and I do not think it has ever been exercised.


Charles Avery Dunning: The governor has not
exercised the veto power, up to date.


James Lorimer Ilsley: The right hon. gentleman dealt with the Exchange Fund Act the other night, and asked what had happened to the $63,000,000. The most curious thing is that when one comes to read the Exchange Fund Act, he will find that he cannot tell anybody what happened to that 863,000,000.


Richard Bedford Bennett: That section has never been proclaimed. The administration of the stabilization fund comes into effect only by proclamation of the governor in council, and that proclamation has never been made. Certainly the minister can tell me where the 863,000,000 is.


James Lorimer Ilsley: Under paragraph 2 of section 4 of the Exchange Fund Act it is definitely provided that the provisions of the Consolidated Revenue and Audit Act are not to apply to the exchange fund account. Among other things, this means that it is not to appear in the public accounts during the period of its operation. Section 9 of the act provides that an annual audit of the account shall be made by the auditor general in such manner as he thinks proper, with a view to ascertaining whether the transactions in connection with the account have been in accordance with the provisions of this act.


Richard Bedford Bennett: I do not wish to interrupt the minister, but may I point out that the exchange stabilization fund has never come into being. There is none. The government has never availed itself of the provision by making a proclamation that it is in force.


Charles Avery Dunning: That is quite right, but the $63,000,000 is in existence.


Richard Bedford Bennett: We have a right to know about it. The audit act applied only to stabil-

Niagara Falls Bridge
ization, and at the government's initiation, so that if an operation were carried on the auditor general would know. The minister has assumed that this provision is in force, but it is not.


James Lorimer Ilsley: The right hon. gentleman was told the other night that the $63,000,000 is in existence.


Richard Bedford Bennett: I want to know where it is.


Charles Avery Dunning: You did not want to know where it was.


Richard Bedford Bennett: I want to know what it has been used for.


James Lorimer Ilsley: It is in the hands of the government.


Richard Bedford Bennett: Where?


James Lorimer Ilsley: And it is intact.


Richard Bedford Bennett: I never questioned its intactness. I want to know if it is available for purposes of accounting, or if it is in the consolidated revenue fund, or where it is.


Charles Avery Dunning: Under the law it must be in the bank.


Richard Bedford Bennett: The Bank of Canada?


Charles Avery Dunning: Yes. The law has been followed in every particular.


Richard Bedford Bennett: We put that provision there, at any rate, and I remember the Minister of National Defence (Mr. Mackenzie) making an observation on that occasion.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.



PRIVATE BILLS


[Stage Direction]
Bill 39, respecting the Dominion Association of Chartered Accountants.-Mr. Plaxton.
Bill No. 54, for the relief of Mary Lorraine Ward Williamson.-Mr. Plaxton.
Bill No. 55, for the relief of Lyall Gibson Hodges.-Mr. Bothwell.
Bill No. 56, for the relief of Esther Lazaro-vitch Cohen.-Mr. Jacobs.
Bill No. 57, for the relief of Dorothy Reaves McMartin.-Mr. Jacobs.
Bill No. 58, for the relief of Mary Dorothy Picard Whitcombe.-Mr. Plaxton.
Bill No. 59, for the relief of Emil Kastus.- Mr. Jacobs.
Bill No. 60, for the relief of Eva Fleming Hislop.-Mr. Betts.
B:ll No. 61, for the relief of Sigmund Oravec.

Mr. Walsh.
Bill No. 62, for the relief of Robert Parry.- Mr. Jacobs.
Bill No. 63, for the relief of Nacha Ferzt Klajner (otherwise known as Nora Firstenfeld Klein).-Mr. Walsh.
Bill No. 64, for the relief of Leonora May Howard.-Mr. Walsh.
Bill No.. 68, for the relief of Annie Elizabeth Climie Adams.-Mr. Jacobs.
Bill No. 69, for the relief of Margaret Alice Mizener.-Mr. Walsh.
Bill No. 70, for the relief of Frances Dorothy Scott Skinner.-Mr. Emmerson.
Bill No. 71, for the relief of Esther Rotman Resnick.-Mr. Jacobs.
Bill No. 72, for the relief of Dorothy MacFie Safford Dale.-Mr. Jacobs.
Bill No. 73, for the relief of Alice Temple Jamieson Adair.-Mr. White.
Bill No. 74, for the relief of Gladys Kathleen Crook O'Sullivan.-Mr. Emmerson.
Bill No. 75, for the relief of Geraldine Estelle Bamford.-Mr. Jacobs.
Bill No. 76, for the relief of Charles Marie.- Mr. Ross (St. Paul's).
Bill No. 77, for the relief of Rosamond Cheriton Stoyle Macdonald.-Mr. Jacobs.

[Stage Direction]
The house resumed from Friday, March 25, consideration in committee of Bill No. 15, to incorporate The Niagara Falls Observation Bridge Company-Mr Damude-Mr. Sanderson in the chair.
On section 8-Power to construct bridge.
Mr. CHURCH:: Mr. Chairman, while perhaps it would be better for me to make my observations on the third reading of this bill, I shall take only four or five minutes tonight. The principle of this bill has been before the house on nine different occasions, from 1923 to 1935 when other bridge bills were before us. I am not opposing the principle of this bill. I am in favour of the principle of public ownership of bridges of this kind between the state of New York and the province of Ontario. They should be publicly owned and publicly controlled. When the Sarnia bridge bill came before the house, Sir Henry Thornton was represented before the committee and proposed that the Canadian National Railways should have the ownership and control of all such international undertakings as feeders for this railway. The
Niagara Falls Bridge

Niagara district is one of our great tourist districts, and that great park of the Niagara parks commission stretching from lake Erie to lake Ontario, with all the future bridges between the state of New York and the province of Ontario, should be publicly owned and controlled, and free of tolls as a gesture of good will and an aid toward friendly relations. It is a great credit to the government of Sir Oliver Mowat that started that great park; that he bought all that land and developed it as a park, and under the chairmanship of the late Mr. P. W. Ellis the parks commission went ahead and did a great development work for many years, now extended very well by the present government.
I should like to hear from the sponsor of this bill whether there will be any variation from the principle I have described of public ownership in connection with this bridge. I attended a meeting of the railway committee and there was considerable discussion over this bill. Notwithstanding what was said the day before in this house about a lobby, I saw the biggest lobby I have ever seen before the committee when this bill was being considered. I should like to know if the principle of public ownership is going to be preserved in connection with this bridge or will the bridge be handed over or leased later on to somebody else? Will the government have absolute control over the rates and tolls? For fifteen years I have contended for public ownership of all these bridges in connection with the nine similar bills that have been before this house. The tourist traffic in the Niagara district is becoming so great, with a continual flow of motor cars crossing, that I do not know how it is going to be handled. I admit that the present Ontario government deserve credit for the way in which they have developed that area, and the Conservative government before them did some good work under Mr. Ellis, as chairman of the parks commission, so there is enough credit to go all around.
I do not like the hide-and-go-seek features of this bill. We had several bills for bridges across the St. Lawrence at various places, and one at Sarnia, and another at Windsor, and in my opinion it would be far better if New York state and the Ontario government built this bridge, and owned, controlled and operated it. When one sees the cars lined up at the Peace bridge, waiting to pass the customs and immigration inspectors, would it not be better if this new bridge would be free of tolls? It is different with the tourist traffic at Lewiston and Queenston on the steamer Cayuga, because the passengers can pass through Lewiston or

Queenston in a minute or two, but the congestion on the Peace bridge is intolerable from inspection of customs and immigration officers. Both governments should cooperate in building and owning and controlling this bridge, and free it of tolls. It affords the greatest opportunity that I know of for a demonstration of good will between the two countries. The government of Ontario have spent a lot of money well and some foolishly, but undoubtedly on the whole they have done very good work in the Niagara Falls district, and the Niagara parks commission deserves great credit. The promoter of this bill has no doubt given a great deal of study to the question, and I should like to know from him whether this property will be handed over for construction and operation to the Niagara parks commission and whether the rights of the city of Niagara will be preserved, so that there will be no abuse of this legislation.
On the other bills to which I made reference earlier in my remarks were Bill No. 42, to-incorporate the Port Huron-Sarnia bridge in 1928; Bill No. 79, incorporating the Niagara Falls memorial bridge in 1927, and Bill No. 22 of the same year, I took the same stand, and by the way I might say that some of the other bridge franchises were peddled all over the north American continent, and in Wall street and among the banks, the franchises were for sale after they had been secured from parliament. All Ontario governments of both parties have done splendid work in connection with the development of the Niagara park area since it was created by the government of Sir Oliver Mowat in the late eighties. The tourist traffic is going to develop by leaps and bounds with the-popularity of the motor car, and in my opinion there should be no tolls at all on the bridge. Tolls are just a relic of the ox-cart days. The bridge should be publicly owned and controlled in the interests of the people. This parliament has control of all bridges that are international, interprovincial, or that affect navigation. If we have all the necessary safeguards now in the bill, I shall not oppose it.
We cannot visualize the future traffic that will go over that bridge with the development of the motor bus. The steamboat business is not what it used to be; they have only one boat the Cayuga, on that river; at the-other end of lake Erie conditions are a little better. I should like to hear from the sponsor of the bill and from the Minister of Railways-what is the policy of the government. What is the policy of the Minister of Railways on behalf of the government with regard to thia bill? He sat on the committee, at the head?

Niagara Falls Bridge
of the table; he may not have been asked for his opinion. But I asked the same question in the railway committee, of which I was a member when nine other bills were up. Will the result of this legislation be to interfere with the traffic of the national railways or its assembly of traffic there? Will it affect the future development of the national railways if they go into the motor bus and motor truck business? How does the minister's policy coordinate with the principle of public ownership and control of this bridge as proposed by the Ontario government? I think we should know, because the railways are interested in this matter and represent, with their main and branch lines, an important investment in the Niagara district. They have a railway and a steamboat running from Toronto right to the edge of the falls by Port Dalhousie within a few yards of the site of the bridge. What is the policy of the government? Will it interfere with the Niagara, St. Catharines and Toronto railway, virtually a bankrupt concern with a lot of old boats running across the lake? I should like to know what is going to be done if this bill is passed? Are we going to see this bridge sublet or leased to some outside body later? Shall we have real ownership, such as I proposed in connection with the nine bills twelve or thirteen years ago? If the Ontario government policy is along that line, I am in favour of it; if not, I am opposed to it. I should like to hear from the Minister of Railways.


Clarence Decatur Howe: I have a letter from the minister of highways of Ontario advising me definitely that this is a bridge of the Ontario government. As far as interfering with any railroad plans, it does not affect them in the slightest. I am entirely in favour of the passage of the bill.


John Ritchie MacNicol: May I ask the minister if the parks commission itself could not apply for a permit to build the bridge?


Clarence Decatur Howe: I am advised that the crown in the right of the dominion cannot issue a permit to the crown in the right of a province. I believe the Minister of Justice has ruled to that effect. I understand that the way in which projects of this kind, where governments are interested, are usually undertaken, is by a private bill to individuals under the fathership of the province.


John Ritchie MacNicol: The incorporators or
directors under the private bill have, then, to surrender their rights to either the Niagara parks commission or the local government, have they?


Clarence Decatur Howe: I have the assurance of the minister of highways that that will be done; that these men have agreed with the Ontario government that they will surrender their rights to the province at the proper time.


John Ritchie MacNicol: Well, then, the province would be in possession.


Clarence Decatur Howe: Yes.


Mr. DAMUDE:: The minister has dealt with most of the points brought forward by the hon. member for Broadview, but there are one or two other matters that probably it would be well for me to mention at this time. With respect to the authority of the bridge committee, I understand it is provided that there will be a six member authority set up by the province of Ontario and likewise six members of a commission nominated by the state of New York to operate the bridge; and the men whose names appear have, as the minister has stated, assigned their interests to the Niagara parks commission.
Another question that was raised by the hon. member is covered in clause 20. If he will turn to that clause, he will find that provision is made there for the transfer of the bridge to the state of New York and the province of Ontario when the bonds and debentures are retired.
The other evening the leader of the opposition raised a point in connection with the terms of the bill which provide for the construction in the state of New York. In that regard I would refer to chapter 59 of 1933, an act to incorporate The Sarnia-Port Huron Vehicular Tunnel Company, the wording of which is similar to the wording of this bill; also to chapter 55 of 1930, an act incorporating The Cornwall Bridge Company; to chapter 58 of 1928, an act to incorporate The Detroit River Canadian Bridge Company; to chapter 64, an act to incorporate the St. Clair Transit Company; and to chapter 65, an act to incorporate the St. Lawrence River Bridge Company. The powers given by the Canadian act and the United States act are only complete when both have been passed by the parliament of Canada and the assembly of the state of New York. Probably this will clear up the matter raised by the leader of the opposition.


John Ritchie MacNicol: Is the bridge to be tax
free?


Arthur Byron Damude: I understand that as far as taxation is concerned, it is a provincial and municipal matter; that there is no provision in the bill whereby the government have any authority to designate any taxation. I am given to understand that if the bridge were
Niagara Falls Bridge

built by the province of Ontario and the state of New York, it would probably be impossible to have it assessed; but under present circumstances the position is similar, indeed practically identical, with the authority issued to operate the bridge across the Niagara river between Buffalo and Fort Erie. In that case the assessment of Fort Erie has been on a sliding scale; as the bonds are retired the assessment is reduced. The Fort Erie bridge paid Fort Erie the sum of $50,000; during the last ten years it has been reduced to the amount of 835,000, and I understand it will be further reduced as the bonds are retired. So that so far as the city of Niagara Falls is concerned, the province of Ontario, I am assured, will have no objection and will see that that municipality receives an assessment on this property.


Richard Bedford Bennett: I am bound to say that I believe the hon. gentleman will find that, we are doing something for which we have no legal warrant. I am perfectly aware of what he has pointed out with respect to other companies and what has been done with them. One related to a tunnel, the other three to bridges. We had occasion to point out to some of the gentlemen who were interested that they would have some difficulty in dealing with this; and if the hon. gentleman will look at the preamble of the bill-it has not yet been passed, but I may be permitted to refer to it-they have prayed for the right to construct and maintain and operate a bridge across the Niagara river into the city of Niagara Falls in the state of New York. It is perfectly clear and does not require any argument from a lawyer to point out that this parliament cannot give anyone power to build a bridge in New York state. The second point is that section 8 in its terms purports . to do that very thing. That is the section now under consideration.
8. The company may construct, maintain and operate a bridge across the Niagara river-
After it gets to the centre of the stream it is in the United States territory.
-for the passage of pedestrians, vehicles, carriages, electric cars, street cars and other like purposes with all necessary approaches, roads and works, from a point between a point north of the present Upper Steel arch bridge and the north limit of Bender street in the city of Niagara Falls, in the county of Welland, in the province of Ontario, to a point in the city of Niagara Falls in the state of New York, one of the United States of America, north of the present upper steel arch bridge, and may purchase, acquire and hold such real estate, including lands for sidings and bridge heads and other equipment required for the convenient working of traffic to, from and over the said bridge as the company thinks neces-

sary for any of the said purposes; but the company shall not commence the actual construction of the said bridge nor exercise any of the powers hereunder, until an act of congress of the United States or other competent authority in the United States of America has been passed authorizing or approving such bridging of the said river, but the company may, in the meantime acquire the lands, submit their plans to the governor in council and do all things authorized by this act.
I submit to the Minister of Justice that it is quite clearly beyond our powers here; and all the others have been in exactly the same position. I can clearly recall the authorities, but I am not going to weary the committee with discussions of that sort. Surely, however, we must not endeavour to exceed our legislative jurisdiction with respect to an international matter. When, in 1935, the time for completion of the Sarnia bridge was being extended, the language used was quite clear:
The construction of the said subway or tunnel shall be commenced within one year after the governor in council and the executive of the United States of America have approved . . .
Under this measure the governor in council is to approve the plans, and that is all. But how can the governor in council approve plans for the state of New York? The matter should be faced frankly. There is no getting away from it that we are exceeding our legislative jurisdiction in what we are doing, and it will be only a nullity when it is encountered in reality.


Mr. McLARTY:: Does my right hon. friend not think there might be properly drawn a distinction, which is apparently drawn by this bill, between the attempt, on the one hand, to create an extraterritorial right and, on the other, to clothe the corporation with capacity to take advantage of such extraterritorial right as the foreign country might allow it to avail itself of?


Richard Bedford Bennett: There would be no difficulty if that were the position, but that is not it. If the hon. member will turn to section 8, and to the preamble as well, he will find that the real difficulty lies in the fact that we are not incorporating a company to build within our jurisdiction; we are authorizing the building of a 'bridge outside Canada.


Norman Alexander McLarty: Are we not clothing a corporation with capacity to construct a bridge rather than to build extraterritorially?


Richard Bedford Bennett: The distinction that the hon. member has made is quite clear, and it is one that is well recognized, the distinction between capacity to do a thing and the authority to do it.

Niagara Falls Bridge
182?


Norman Alexander McLarty: The right to do it.


Richard Bedford Bennett: I use the word "authority" as meaning right-the right to do it, yes. Unfortunately, however, section 8, with which we are now dealing, purports to authorize this company not only to have capacity to build but also to have the right to exercise that capacity.


Norman Alexander McLarty: I do not want to interrupt my right hon. friend, but does he not think that the whole section is qualified by the words in the last eight or nine lines which provide that the company shall not commence construction without the appropriate consent from the other side?


Richard Bedford Bennett: That is quite clear, but it is a grant the condition of which nullifies the power of the grant.


Norman Alexander McLarty: Except that the word "may" is used.


Richard Bedford Bennett: We undertake to give them the power to construct a bridge across a river, only a part of which is ours. We may confer upon them capacity to do something and that capacity can be exercised only if, as and when some other authority gives them power to exercise it. But that is not the case here, for this parliament cannot clothe any body that it creates with the power to do something in another country. It may give it capacity to acquire and hold, but cannot confer upon it capacity to do; and we are undertaking to clothe it with capacity to do.


Norman Alexander McLarty: I suggest it is more a right to do it, a capacity to do it subject to appropriate consent being given by the foreign jurisdiction that has power to give it. As regards the right to do it, we are not conferring that in this bill except to the extent that that right may be exercised in conjunction with the legislative authority of another country. In other words, we are merely clothing the corporation with capacity.


Richard Bedford Bennett: I merely point out that in this case, whether we intend to do it or not, we are saying that this parliament of Canada is going to exercise its powers conditionally upon someone else permitting it to do so; and that somebody else is outside the country.


Mr. BERTRAND (Laurier):: What does the right hon. gentleman suggest-that we build half the bridge?


Richard Bedford Bennett: I suggest to the hon. gentleman that it will serve no purpose for him to become facetious.


Ernest Bertrand: We want to know what the right hon. gentleman has in mind.


Richard Bedford Bennett: What I have in mind it would be difficult to explain to the hon. gentleman, but I may express it in this way. We can exercise to the full our jurisdiction, which is to create a company with power to construct a bridge to the full extent of our territorial jurisdiction; the state of New York will do the same with respect to its part of the bridge, and the two under the provisions of the act will amalgamate into a bridge company.


Ernest Bertrand: That is probably what will happen, but there is nothing wrong in this parliament incorporating a company with the right to go to New York and ask for permission to build a bridge there. That is all the bill says.


Richard Bedford Bennett: If that were all it said, I would not be standing in my place. Perhaps the hon. gentleman will do me the justice to look at section 9. It is provided that the bridge "shall be constructed and located under, and be subject to, such regulations as the governor in council prescribes". In the case of the Sarnia bridge it was made clear that it was subject to the joint approval of the United States authorities on the one side and the Canadian authorities on the other. Does the hon. gentleman think the legislature of the state of New York would ever become a party to the governor in council authorizing or empowering any body to determine plans for erecting a bridge in that territory?


Ernest Bertrand: In the state of New York there might be another corporation incorporated to act in conjunction with this one, but it is not necessary that the company in New York be authorized to build a bridge to the middle of the river and that our corporation should build the other half of it. These are only possible powers, and if the right hon. gentleman wants to insert the word "joint '-because that is what he means -for my part I would be agreeable. I only wanted to know what he had in mind.


Richard Bedford Bennett: I am not going to spend my time and effort in doing more than point out the situation as I see it. I am not concerned about the matter except to do my duty, and having done that, my responsibility as a member of parliament rests. I have no responsibility for nor interest in the bridge, but I have an interest in all legislation that goes through the house; and the legislation to which my hon. friend referred a
Niagara Falls Bridge

moment ago is, I still say, not legislation that this parliament can validly pass. I do not know who is responsible- for the legal side of this matter, but it should have been provided that there should be joint action on the part of the executive of the United States on the one hand, and of Canada on the other. This bill provides in terms the exact opposite, makes the plans subject to the approval of the governor in council, and provides that the bridge shall land in the state of New York. We would not tolerate the erection in our country of a bridge the plans of which were to be approved by the United States authorities. Equally they will not approve of something that is to be done here without reference to them. The language of the bill introduced by the hon. member for Lambton West (Mr. Gray) made provision that there should be a recognition at once of the limit upon our jurisdiction. I have never had any doubt about the question of our capacity. For instance, we have created companies time out of mind with power to own a Peru coal mine, if there be such a thing. The capacity to own something in a foreign- country is, of course, subject to the laws of that country. We have recognized those laws. But this bill is for the incorporation of a company to build a bridge entirely across the river, and that power can be exercised only by some other body granting a similar power with respect to its part of the territory. All that is necessary with respect to these measures is to say that they may do so and so within the territorial boundaries of Canada.


Mr. YIEN:: But we did. The very same words are used in three statutes that we have already passed.


Richard Bedford Bennett: That we passed years
ago.


Thomas Vien: In 1928. In the state of New York when a similar bill was being introduced they used the very same language, and no exception was taken either in this house or in the state of New York.


Richard Bedford Bennett: I assure my hon. friend I have not raised the question for the first time. I assure him further that the fact that the question has not -been raised does not in any case indicate validity. For twenty-five years the Lemieux act stood undisturbed; then it was challenged in the courts, and fell. I am only pointing out that this parliament has no jurisdiction to confer upon a corporation which it creates a right to be exercised beyond the territorial boundaries of Canada. It has power to create a corporation with

capacity to hold and to own subject to the laws of the country in which it exercises those powers, and this bill provides for that. But it does not recognize the fact that we have no power to create and construct beyond our territorial jurisdiction.


Mr. DUPUIS:: Was there not an international bridge commenced or completed during the previous regime, between 1930 and 1935?


Richard Bedford Bennett: There was one authorized. It was not completed.


Mr. McCANN:: Would this parliament be competent to pass this bill if the legislative body of the state of New York had already passed a bill giving its permission?


Richard Bedford Bennett: It would depend upon the terms of that act. Also, the form would not be what it now is.


James Joseph McCann: The reason I ask is that I think it was contemplated that before this private bill reached this parliament, the legislative assembly and the senate of New York state would already have passed a bill similar to this giving its permission.


Mr. LOCKHART:: In trying to listen to the observations of some previous speakers, I found it sometimes difficult to follow them because of noise in the chamber. But I have a few observations to make regarding this bill. I asked some questions in the standing committee regarding clause 8-and I believe the leader of the opposition has dealt with that and the point has been fairly well covered -that is, the right to construct not only in the province of Ontario but also in the state of New York. That is one feature of the bill which I could not understand.
The bill deals with a bridge to cross the international boundary. We have been told both in the standing committee and here that the New York state assembly passed a bill similar to this, but the senate threw it out. We are also told that the New York state assembly will probably not convene again this year, although there were some witnesses before the standing committee who said that it might be possible to convene a session next fall.
Clause 8 gives almost unlimited powers to those seeking this charter. But turning to the evidence given in the standing committee, I want to refer to this remark that was made by the hon. member for Welland (Mr. Damude):
This bill appears in my name, and is situate in the constituency I represent. I am very much interested in the passing of the bill, because I feel it is very much in the public

Niagara Falls Bridge
interest. We are now in the position where there is a difference between a public authority and the owners of the old structure; therefore I would move that the bill be recommended.
I do not want the hon. member for Welland to feel that these remarks of mine have any personal reference, because I have known the hon. member for a long time and I believe he is presenting this bill in the form in which it has been prepared for him. But there are some phases and some ramifications which I think have been overlooked. I recall that in the standing committee the Hon. Mr. McQuesten pointed out that a resolution had been passed by the council of Niagara Falls, Ontario, authorizing the erection of a publicly owned bridge. I hope that anything I have to say will not be misconstrued as indicating that I am either a friend or a foe of public ownership. I think anyone who lives in the Niagara peninsula will realize that public ownership if properly managed is one of the greatest assets that this country can possess, so long as political interference does not enter in. Let me read again the authority which was read by the Hon. Mr. McQuesten. It was printed in the newspapers of my constituency and in all the press of the Niagara peninsula, and it says:
On January 31 the city council passed the following motion, presented by Alderman George Inglis and Alderman Grant Donald:
"Be it therefore resolved that this council petition the government of the Dominion of Canada to grant a charter to the Niagara Falls Observation Bridge Company in accordance with the application which the Niagara Falls Observation Bridge Company now has before the parliament of Canada, as soon as same can properly be done, so that construction of a new bridge can be proceeded with and an extreme condition remedied as soon as possible."
That was passed on January 31 of this year. When this bill was presented to this house and the committee began to work on it, I commenced to receive inquiries, when I went home for the week end, asking what was developing in connection with this bill. In the same press report His Worship Mayor Hanniwell of Niagara Falls is quoted as questioning the advisability of endorsing any company's application for a bridge. The report states that the sponsors of the motion contended that it did not commit the city to support of any particular company. The motive behind the resolution, it states, was merely to facilitate the early erection of a bridge. The report goes on:
"I think Hon. McQuesten is reading into that resolution a meaning that was never intended." his worship said. Reiterating the statement he has made several times since the Falls View bridge collapsed, Mayor Hanniwell said he didn't care who builds the bridge, so long
as it is erected as quickly as possible, and this city receives taxation from the span and its property.
That is the part to which I should like to direct the attention of this committee. I also find that one of the newspapers on the United States side, the Niagara Falls Gazette, in its issue of March 22 says:
The fate of the bridge bill at Albany is but another example of what happens when government essays to do business for the people.
I shall not read it all, but it concludes in this way:
The New York legislature adjourned without action. It is likely the Canadian provincial parliament will do likewise. Meanwhile business men on the Canadian and American sides of the river will anxiously await the reconstruction of the Falls View bridge and the resumption of international traffic which meant so much to them.
That is the part on which I want to place particular emphasis, and it is largely on this that I want to base my remarks. These reports, I think, represent the opinions of the people at large in the constituency which I represent and in the city of Niagara Falls. In another press report, with which I shall not burden the committee, the question was asked, "What about the meeting on March 26?" I raised that question also in the committee, and the only answer I received-I think it was from a member representing one of the York constituencies-was that it had no bearing on the matter. When I was home the last week end, I made it my business to inquire into the situation there, following the deliberations of the committee during that week. I found that these press reports represent the views of a great many citizens of Niagara Falls. This meeting on March 26 was to have been attended by the chamber of commerce, the mayor and aldermen of the city of Niagara Falls, Ontario, representatives of the International Bridge Company, representatives of the Niagara parks commission, Hon. Mr. Houck and the hon. member for Welland. I can quite understand that the citizens of Niagara Falls would desire some such meeting to be called, but for some mysterious reason the meeting was put off. 1 cannot understand this; perhaps the hon. member for Welland could throw more light on the matter, but according to the press of March 24, Hon. Mr. Houck telephoned the mayor stating that he had important business in Toronto and could not attend the meeting. The other interested parties were very much concerned as to why that meeting was not held.
I happen to reside in the adjoining municipality, and I recall that a few years ago the
Niagara Falls Bridge

finance commissioner of the city of St. Catharines was called to Niagara Falls to act on a board to assist a municipality which was in financial difficulties. I have served as mayor of my own city, and I know something of the difficulties that confronted Niagara Falls. I also know that a great many home owners had lost their homes, and more were likely to do so. Some may ask what this has to do with the power to construct a bridge. If hon. gentlemen will bear with me for a moment, I should like to give one or two reasons why it has a great deal to do with it. As the mayor of Niagara Falls said, he was quite willing to deliberate, but he wanted the city to receive taxation from the span and the properties involved. As I have said, our finance commissioner was called to Niagara Falls, and he had a good deal to do with assisting the city manager and a number of others who were able to help the city out of its difficulties.
I have neeeived one letter which states that because I object to this bill passing in its present form, I am an opponent of public ownership. I do not want that interpretation to be placed on anything I may say, and probably my views in that respect are fairly well known. I know many of these home owners who have been practically crucified by high taxation. I am informed that revenue of $10,000 or $12,000 was derived from the original International Railway Company by way of taxation, to the benefit of the property owners of Niagara Falls. We were told in committee that the amount of $7,500,000 in the original bill could be reduced to $4,000,000, possibly because the bill in New York state was something along that line. The amount was $7,500,000 in our original bill, but it has now gone down to $4,000,000. We are told by the Hon. Mr. McQuesten, in committee, that $2,000,000 is for the bridge and $2,000,000 for right of way and buildings.
I should like to speak for a moment or two respecting the section giving power to construct the bridge. In this connection I hope the hon. member for Lambton West (Mr. Gray) will correct me if I make any misstatement in connection with the Sarnia bridge. I am told that the buildings at the end of that bridge, in the state of Michigan, are costing approximately $85,000. I am also told, on good authority, that the buildings at the Canadian end of the bridge are costing about $125,000. I assume the hon. member will be able to confirm or to challenge this statement, but I must point out that this information has been given me on good authority.

According to the statement of the Hon. Mr. McQuesten, $2,000,000 is to be spent on buildings and right of way, in the present instance.


Mr. YOUNG:: Is the hon. member quite sure that that is what the minister of highways for Ontario did say? As a member of the committee I did not understand that statement to be made.


Norman James Macdonald Lockhart: He divided it into $2,000,000 each way-$2,000,000 for the bridge and $2,000,000 for the right of way and buildings. He pointed that out definitely.


Alexander MacGillivray Young: I did not understand that.


Norman James Macdonald Lockhart: Let us double the
amount for the buildings at Niagara Falls. We shall concede that Niagara Falls is probably a more important point than Sarnia.


Mr. GRAY:: I shall not concede that.


Norman James Macdonald Lockhart: 
Arthur Byron Damude: Does the hon. member
suggest that this bill deprives the municipality of taxation?


Norman James Macdonald Lockhart: I am just pointing out some of the possibilities. In the first place, it would not be logical to erect two bridges. I have pointed out that 81,750,000 is to be spent on right of way, and that there is a great possibility that a great deal of money will be taken away from the taxpayers of Niagara Falls. I cannot find anything in the bill indicating that the taxpayers are being protected, and that is why I rise in my place to-night and make my objection.
I have other letters from citizens of Niagara Falls, but I shall not read them at this time. I want to protest particularly against the passage of section 8, which empowers the company to do something which I do not think it can legally do. I protest that no further action be taken until all interested parties are brought together, as was proposed at the meeting which was postponed to March 26. That seems to be of paramount importance to the ratepayers of Niagara Falls. I do not want to see the bill pass until a clause is inserted which will give a guarantee to the taxpayers of Niagara Falls, and which will be something more than the word of the hon. member for Welland-although I am content to take his word. I do not wish to see the bill pass until the taxpayers are protected. I am firmly convinced that I represent the views of a large proportion of the home owners in the city of Niagara Falls, Ontario, who have watched the development of the bill, and who have seen it hurriedly forced through the committee.


Mr. HANSON:: I do not think parliament in this connection, has anything to do with municipal taxation.


Mr. STEWART:: Who said it had.


Norman James Macdonald Lockhart: The provincial government can take away large amounts of taxation. If the House of Commons would like me to enlarge upon the point, I could give definite information.


Mr. SPENCE:: Give it to them.


Some hon. MEMBERS:: Nine o'clock:


Norman James Macdonald Lockhart: I shall give it at some later date.
Progress reported.

use op Canada's financial resources for



ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE AND SUBAMENDMENT OF MR. BENNETT

[Stage Direction]
The house resumed consideration of the motion of Mr. Dunning for committee of supply, the amendment thereto of Mr. Blackmore, and the amendment to the amendment thereto of Mr. Bennett.
James Lorimer Ilsley: Mr. Speaker, I hope to be able
to conclude my remarks in a very few moments. Before the dinner recess the Exchange Fund Act was mentioned, and a question arose as to whether or not the act is really in force at the present time. I have looked at it and find that it is in force, and that section 6 of the act alone requires to be proclaimed.


Richard Bedford Bennett: Yes, and that establishes the operation of the stabilization fund.


James Lorimer Ilsley: For one purpose only:
For the purpose of endeavouring to control the external value of the Canadian monetary unit or, of checking undue fluctuations in its exchange value the minister may directly or through such agencies as he may designate cause any balances in the special account to be invested in-
Certain ways. Subsection (3) states:
This section shall not come into force until a date to be fixed by proclamation of the governor in council, published in the Canada Gazette.
That proclamation has not been made. But the point I bring to the attention of the house is this: The other sections of the, act relate not wholly to the operations under section 6, but to the account itself which is in existence.


Richard Bedford Bennett: The creation of the account by the realization of the gold.


James Lorimer Ilsley: The account is already
created.


Richard Bedford Bennett: Exactly.


James Lorimer Ilsley: And the manner in which the account is administered and has been administered since the gold was taken over is subject to certain sections the clear intent and purpose of which is to prevent public discussion of the operation of the account. Subsection 2 of section 4 says:
The provisions of the Consolidated Revenue and Audit Act, 1931, shall not apply to the said special account during the period of its operation.

Use of Canada's Financial Resources


Richard Bedford Bennett: During the period of its operation, and it has never been operated.


James Lorimer Ilsley: That is not what it means at all. The account is there. Let us take section 9:
An annual audit of the special account shall be made by the auditor general in such manner as he thinks proper, with a view to ascertaining whether the transactions in connection with the account have been in accordance with the provisions of this act, and he shall certify to the House of Commons that in his opinion, having regard to the examination, the transactions in connection with the account have or have not been in accordance with the provisions of this act, and that the records of the said account do or do not show truly and clearly the state of the said account.
And section 10 provides:
No person employed in the service of His Majesty or of the Bank of Canada shall communicate or allow to be communicated to any person not legally entitled thereto under the provisions of this act or by direction of the minister, any information with respect to the operation of the said special account, or allow any such person to inspect or have access to any written statement with respect to the said account.
And a penalty is provided for the violation of the provisions of that section.


Richard Bedford Bennett: Section 7 is also a relevant section.


James Lorimer Ilsley: I think it is quite proper for the right hon. gentleman to ask the government whether the money is there, whether it is available, and so on, and whether an order in council has been passed proclaiming it, but it is the clear intent and purpose of this act that anything else relating to the account is not to be made public.


Richard Bedford Bennett: Sections 7 and 8 deal with two phases, one with the investment of the account, and the other with the winding of it up.


James Lorimer Ilsley: I do not think I shall enter into a discussion of the meaning of those sections, because the matter is not of sufficient importance, and I think the right hon. gentleman is satisfied with the information that has been given.


Charles Hazlitt Cahan: Would the minister explain about section 6? Until section 6 is brought into force, the section can have no force or effect whatsoever. I understand the minister to admit that a proclamation of the governor in council with respect to bringing into force section 6 has never been published in the Canada Gazette.


James Lorimer Ilsley: That is right.


Charles Hazlitt Cahan: Therefore section 6 is not in force.
[Mr. Ilsley.l


James Lorimer Ilsley: That is true.


Charles Hazlitt Cahan: And therefore any other sections which deal directly with section 6 cannot be in force, because, unless section 6 is brought into force for all purposes, it can serve no purpose whatsoever.


James Lorimer Ilsley: The answer to the hon. gentleman's suggestion is this, that there is a special account apart altogether from the method of operation of the account under section 6. Section 6 provides that the balance in the said account may be applied to certain uses. But the existence of the special account does not depend upon section 6. This special account is there; it has been there right along, and the sections I have read, section 4, subsection 2, and sections 9 and 10, apply to that special account whether it has been put to these special uses or not, because the account is there.


Richard Bedford Bennett: That was neither the intention nor the fact when the act was passed.


Charles Avery Dunning: At all events the auditor general has so proceeded ever since the act was passed.


James Lorimer Ilsley: I do not know what either of my hon. friends is saying, and so I shall pass on.
I wish to refer to two statements of the Minister of Finance that were challenged by the social credit group. I do not want to enter into the intricacies of the social credit controversy with the members of that group, because I am sure they would be able to involve me beyond my depth before I got very far; but I want to make some observations on the suggestion that the Minister of Finance in certain statements which he made in his speech was, as it were, merely setting up a man of straw and then knocking him down again.


John Charles Landeryou: I do not think he
even knocked him down.


James Lorimer Ilsley: The first statement I want to refer to has to do with our old friend the A plus B theorem. The Minister of Finance in his speech on March 8 said, at page 1155 of Hansard:
In other words, the whole theory is based on a false premise, and the whole program which derives from that theory is unsound and pernicious.
Then he proceeded to state what he said was the basis of the whole theory, and to state the premise he was referring to, and he stated the A plus B theorem I think very fairly and fully. I do not think anybody

Use of Canada's Financial Resources
can have any objection to the manner in which he stated that theorem. He was followed by the member for Red Deer (Mr. Poole), who said this, referring to the Minister of Finance:
I want to ask him if he did not make a mistake when he said that our theory was that the system did not supply a sufficiency of purchasing power at any one time. That is not the premise of our argument at all. . . . Why raise a false premise?
I want now to quote from a celebrated authority on social credit, no less than Major Douglas himself, and I shall give the reference to his work. This is what he says in his book Social Credit, revised edition, chapter 2, page 94:
In the foregoing chapter rve have endeavoured to establish two important propositions in generalized terms. The first of these is:
(1) That the collective prices of the goods available for sale at any moment in a given community, if they have been produced by ordinary commercial methods, cannot be met by the money available through the channels of wages, salaries, and dividends, at one and the same time.
That is what the Minister of Finance said, and that is the statement which was challenged by the hon. member for Red Deer.


Eric Joseph Poole: The Minister of Finance did not make that statement. I should like the hon. gentleman to quote just what the Minister of Finance did say.


James Lorimer Ilsley: I refer the hon. member for Red Deer to his own statement. He said, referring to the Minister of Finance:
I want to ask him if he did not make a mistake when he said that our theory was that the system did not supply a sufficiency of purchasing power at any one time. That is not the premise of our argument at all. . . . Why raise a false premise?
I now quote from the Monopoly of Credit by Major Douglas, pages 106 and 107:
A factory or other productive organization has besides its economic function as a producer of goods, a financial aspect-it may be regarded on the one hand as a device for the distribution of purchasing power to individuals, through the media of wages, salaries, and dividends; and on the other hand as a manufactory of prices-financial values.
From this standpoint its payments may be divided into two groups:
Group A-All payments made to individuals (wages, salaries, and dividends).
Group B-All payments made to other organizations (raw materials, bank charges, and other external costs).
Now the rate of flow of purchasing power to individuals is represented by A, but since all payments go into prices, the rate of flow of prices cannot be less than A plus B. Since A will not purchase A plus B, a proportion of the product at least equivalent to B must be distributed by a form of pur-51952-116-
chasing power which is not comprised in the description grouped under A.
I am merely placing on record these extracts from the writings of Major Douglas. I shall leave it to any member of this house, if he will read the speech of the Minister of Finance, and then read this, as to whether the minister did not accurately, precisely, fairly and fully state Major Douglas' A plus B theorem. I shall go further, although I shall never convince some hon. members. It is all right if hon. gentlemen opposite are abandoning the A plus B theorem-and I believe there is a little tendency on their part to do so-but if they are, it would be interesting if they would rise in their places in the house and say so.


Mr. QUELCH:: May I point out that in Major Douglas' book, The New and Old Economics-


James Lorimer Ilsley: I shall permit a question, but I cannot consent to the hon. member making a speech.


Victor Quelch: The book has been referred to.


Some hon. MEMBERS:: Order.


James Lorimer Ilsley: I shall try to answer questions, but not -to- permit these little speeches in the meantime. This is heavy enough sledding for me.


Victor Quelch: The minister asked if we had abandoned the A plus B theorem, and I was going to answer that question.


An hon. MEMBER:: Read Douglas again.


James Lorimer Ilsley: If hon. members are
generally interested in the A plus B theorem and the basis of the social credit doctrine. I would recommend -that they read the speech of the Minister of Finance and the way in which he completely demolished the A plus B theorem.


An hon. MEMBER:: We did read it.


John Charles Landeryou: Can the minister tell us whether Douglas has stated that his whole doctrine rests on the soundness of the A plus B theorem?


James Lorimer Ilsley: What does the hon. member say about it?


Victor Quelch: Mr. Speaker-


Some hon. MEMBERS:: Order.


Victor Quelch: The minister has asked whether we have abandoned the A plus B theorem. I pointed out that in his book, The New and Old Economics, Major Douglas, in reply to that, pointed out that by far the



Use of Canada's Financial Resources
simplest way to deal with the matter was to divide it into five main heads.


Some hon. MEMBERS:: Sit down.


James Lorimer Ilsley: The next statement of the Minister of Finance which was challenged by the hon. gentlemen-


John Charles Landeryou: Mr. Speaker, I ask that we 'be permitted to reply.


Some hon. MEMBERS:: Sit down.


An hon. MEMBER:: Take your medicine.


James Lorimer Ilsley: The next question I shall read from the speech of the Minister of Finance will be found on page 1157 of Hansard:
But the main part of the program as expounded by Major Douglas does seek to avoid inflation by providing for a reduction of prices by a certain proportion by government decree.
And later on in the column:
It is evident that the total amount of these credits or subsidies given to producers involves a huge total; for they are designed to make up for the shortage between the cost value of total consumption and the money value of total production of the country during a given eriod, say one year, and the estimates made y social crediters indicate that only from two-fifths to one-ninth of the total production of a given period is consumed. It is apparent, therefore, that the new purchasing power thrown into the monetary system would be of colossal proportions.
The hon. member for Lethbridge (Mr. Blackmore), the leader of the social credit group, seemed stirred by the use of those fractions, two-fifths and one-ninth. He wanted to know where the minister got his figures. The figures were taken from, and the immediate basis for the quotation is a statement by H. T. M. Gaitskell, an Oxford professor, in his chapter on social credit in G. D. H. Cole's book, What Everybody Wants to Know about Money. Gaitskell's statement was as follows:
But the estimates of Major Douglas and his followers range from two-fifths to one-quarter and even to one-ninth.
That is to say, they believe that only two-fifths or one-ninth of the total production of a given period is consumed.


Victor Quelch: Mr. Speaker, I would challenge the hon. gentleman to show me where Douglas has made this admission.


James Lorimer Ilsley: This Oxford professor-


Victor Quelch: He is not a social crediter.


James Lorimer Ilsley: The Oxford professor who wrote this had been reading social credit works and was purporting to make a summary of what he had read; and this being merely IMr. Quelch.J
hearsay, so to speak, and coming from second hand, was immediately challenged.


Charles Avery Dunning: They quoted from the same book themselves.


James Lorimer Ilsley: That proposition was immediately challenged by a member of the social credit group. The hon. member for Lethbridge repeatedly quoted Cole's book. What Everybody Wants to Know about Money-I myself heard him do so more than once-but I have here the references in the social credit works themselves which bear out the statement I have made.


Victor Quelch: Let us hear them.


James Lorimer Ilsley: All right. I shall give the hon. member one now. There is an appendix to Major Douglas's book on Credit Power and Democracy, published by Major Douglas and, of course, put out with his sanction and authority. In this appendix is a draft of the social credit scheme for the mining industry of England prepared by Major Douglas, and a commentary on the scheme by A. A. Orage. Hon. members will recall that he is a prominent social crediter.


An hon. MEMBER:: He is dead.


James Lorimer Ilsley: If hon. members want the "hearsay" traced back to the original source, I am prepared to do so, not only with this quotation but with a number of others.


Richard Bedford Bennett: One of the writers is dead.


James Lorimer Ilsley: As a matter of fact they vary from two-fifths to one-ninth. Orage, after assuming that the rate of production to consumption is 4 to 1, proceeds by application of the formula for determining just price to show that "price must be one-quarter of cost"-"The ratio of total production to total consumption being as 4 is to 1, cost and price are to each other as 4 is to 1; or again, price must be a quarter of cost." There is the quarter.
It would take some time to go into these others, but I shall give hon. gentlemen the references and they can look them up themselves.


Victor Quelch: I would point out that there is a big difference between one-quarter and one-ninth.


Some hon. MEMBERS:: Order.


James Lorimer Ilsley: The references are: Economic Democracy, by Major Douglas, pages 65 and 66; Major Douglas's The Monopoly of Credit, page 36; the appendix to Major Douglas's Social Credit, pages 208 and 209, which includes his draft social credit scheme for Scotland; page 36 of the pamphlet of

H.M.M. entitled An Outline of Social Credit, published by the Credit Research Bureau, London, with an approving foreword by Major Douglas; and a pamphlet entitled The Nation's Credit, a precis of Major C. H. Douglas's proposals, by C.G.M., published for the credit study group of London, at page 13. That is all I have, and none of these will expressly say two-fifths to one-ninth, but they range between; the estimates range from two-fifths to one-ninth.


Victor Quelch: So far the minister has only quoted one-quarter.


James Lorimer Ilsley: I gave the quotations of the Oxford professor, published in G. D. H. Cole's book, which is quoted freely in this house by hon. gentlemen in that corner. I do not think I shall go further. I merely wanted to dispel the impression that when the Minister of Finance attacked certain positions, those positions were never taken by hon. gentlemen.
May I conclude with one word which I consider important. The public, it seems to me, is interested not so much in the organization of the Bank of Canada as in its policy and its record. Once more let me emphasize, as the Minister of Finance did, the fact that the bank has not pursued a policy of deflation. On the contrary, the policy of the bank has been what one might call reflationary. All one needs to do is to take the cash reserves and Canadian deposits of the commercial banks of Canada at three dates and compare them. The Minister of Finance gave them, but in different parts of his speech. I wish to put them together. These are the cash reserves and Canadian deposits:
Cash	Canadian
reserves	deposits
December 31, 1929.. $228,000,000 $2,270,000,000 March 31, 1935.. ..	200,600,000 2,033,600,000
December 31, 1937..	250,000,000 2,387,000,000
In other words, Canadian deposits on December 31, 1937, were $117,000,000 higher than they were at the end of December, 1929, and $350,000,000 higher than they were when the bank started operations in March, 1935. These figures speak for themselves and utterly destroy the charges against the government and the bank, that they have pursued a policy of deflation. On the contrary, there has been a notable increase of money and credit since the bank started operations-as great an expansion, in our opinion, as would be consistent with the best interests of the Canadian people.


Mr. JOSEPH NEEDHAM (The Battle-fords):: Mr. Speaker, we have had an
interesting discussion on this motion since it first began. I do not know how instructive it has been, but certainly it has been quite
51952-116J
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interesting. It was particularly interesting, the last time the motion was under discussion and this afternoon as well, to see and hear the members of the government and the leader of the opposition as well expressing: their views with regard to the functions of the central bank and the chartered banks. In this debate so far certain statements have-been made-or rather, I should say acknowledgments-which a few years ago would have been laughed at by the general public and would have been regarded as unbelievable, coming from the ministers who have taken part in the debate. The admission that loans create deposits, the admission that banks can create money-these are indeed startling. To follow the intricacies of discussions on the banks' operations by the ministers would lead one to believe that the cat had been let out of the bag and that an effort was being, made to catch it again.
Anyone coming into the house to-day and' listening to the discussion that we have been hearing would wonder what was the question before the house, and therefore I think it would be just as well to read again the motion presented by the hon. member for Lethbridge (Mr. Blackmore):
That all the words in the motion after the word "that" be struck out and the following substituted therefore: "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."
It is that motion which I want to discuss for a short while this evening. I am satisfied that the motion is timely and that it is for the government to prove that they are meeting the requirements of the Canadian people. This resolution no doubt springs out of the promises which were made by the present government prior to the election. I take it that every citizen of Canada has around him the evidence to satisfy himself whether those pledges have been carried out and whether this resolution is timely or not. I believe I am safe in saying that a large majority of the Canadian people believe there is something wrong with the present situation, which has produced the condition in which we find, ourselves to-day. The evidence is manifest; throughout the country. Some of us cart go back a number of years and compare conditions, say thirty years ago, with conditions to-day. Thirty years ago there was a song of joy and gladness everywhere in the country; optimism characterized the people who went, to build homes for themselves and their little ones, and to establish a future for the dominion. Compare that with the condition in which we

Use of Canada's Financial Resources
:are at the present time-and we have passed through some prosperous years in that period. Ask the unemployed, those on relief, or the youth of the country. Consider the debts that are owed in Canada to-day, municipally, provincially and federally as well as individually, and the picture is not a very encouraging one.
Over the radio two weeks ago on Sunday night the ex-president of the board of trade speaking from Montreal with regard to the funded debt of Canada said that it was around eight billion dollars. That means for each person a debt of S800. At confederation that per capita debt stood at $21.87. I ask you, sir, whether there is not something seriously wrong with a system which creates a condition like that in these few years. In the speech by the Minister of Finance (Mr. Dunning) in response to that of the hon. member for Lethbridge, he said that this government had control sufficient for the needs of the people. I quote his words, as found at page 1146 of Hansard:
Canada's financial machinery is now adequate to enable the government to cause effective action to be taken in the field of monetary policy to the extent that monetary methods may be appropriate to solve our problems.
That is quite an acknowledgment to make. The government recognizes that it has at the present time the machinery to solve the country's problems. That is what this resolution calls upon the government to do. The question is, Is there evidence that they are doing it? The Minister of Finance said also:
It should be noted also that Canadian deposits -and, mark you, these represent the credit which does ninety to ninety-five per cent of the money work of Canada-are now at a level nearly twenty-two per cent above the figure for October 31, 1932, and over $117,000,000 higher than at the end of the boom year 1929.
Again he said, as reported on page 1148:
TFinally, chartered bank deposits with the central bank and their holdings of Bank of Canada notes have risen by $41,000,000. This latter total is the increase in bank cash which has made possible an expansion of over $350,000,000 in Canadian bank deposits or Canadian credit during that period of two and three-quarter years.
What I am concerned about is, Where is this credit, and is it available for the use of the people of this dominion? Is there any manifestation of its being used? It is useless to create additional credit and leave it in the bank; it is doing no good there. It is a matter of policy if it is not being put to work. There is something wrong with the system that has created the position in which we find ourselves. Since confederation our debt has been enormously increased. If my recol-

lection is correct, $273,000,000 was the federal debt at confederation. Now it has reached over $3,000,000,000. There has been either mismanagement or bad policy. I cannot think this situation is due to mismanagement by the ministers who have been in office since that time; I am inclined to think it is due to the policy that has been followed. There have been both Conservative and Liberal administrations, and in point of time it is about fifty-fifty between them. It could not have been any nearer had it been arranged, and perhaps it was. But it has made little or no difference which party was in power; the results have been the same, because they have both been following the same policy. Lord Salisbury said, "The commonest error in politics is sticking to the carcasses of dead policies."


Richard Bedford Bennett: That is good Conservative doctrine.


Joseph Needham: Analyse the situation
as it is to-day, a bonded debt of around $8,000,000,000 with the policy that has been in vogue since confederation, and tell me if there is any hope for the future by following the same policy.
We heard a great deal this afternoon about debt, interest and the accumulation of debt. The statement has been made in the house that 63 cents out of every dollar paid in taxes goes to pay interest. What is going to happen when it takes the whole dollar? That will not be very long, at the rate the debt is increasing. Something will happen then; I do not know what. I am wondering why some people are so anxious to keep the same policy in vogue. If we ask ourselves who they are who are fighting so mightily at the present time to prevent any change in the policy of governments in this country, we shall find that they are those to whom the present system has been very kind.
We heard a good deal this afternoon about loans and bonds. I say with all seriousness that if the credit of this country is good for a dollar bond, it is just as good for a dollar bill. If the credit of the country is good to float a loan of $100,000,000 through financial institutions, it should be just as good to float that loan by the government itself. It seems to me that where we and other parties differ is in regard to the issue and control of the currency and credit of the dominion. I and thousands more in this dominion want to know why the credit of this country in the floating of loans or bond issues must go through financial institutions, so that the people have to be taxed not only for the loan but for the interest that goes with it.

Use of Canada's Financial Resources


Richard Bedford Bennett: All ours go through the Bank of Canada now, and we get the benefit.


Joseph Needham: The year book for 1936 tells me that the floating of loans in 1936 cost over $3,000,000.


Richard Bedford Bennett: I do not wish to interrupt my hon. friend, but he will find that under this statute the Bank of Canada has become the fiscal agent of the Dominion of Canada. All our national loans are floated through that institution, and the moneys thus derived by the Bank of Canada are made available to this dominion. That is not so in discharging our fiscal obligations in London. Those are conducted by one of the chartered banks, because we have no Bank of Canada there.


Joseph Needham: I am just taking the figures from the year book.


Richard Bedford Bennett: That has nothing to do with floating the loans of the Dominion of Canada. That is probably the printing of the bonds, renewals, and matters of that kind, which run into a very large sum.


Joseph Needham: It is given here as the cost of flotations.


Richard Bedford Bennett: That would be advertising, possibly, and the printing of the bonds. It has nothing to do with the payment of fees to financial institutions. So far as I know, since the Bank of Canada began to do business on behalf of the dominion there has been no issue that has not been floated through the channel provided by the statute, namely the Bank of Canada.


Joseph Needham: There is the interest on the debt; it has made no difference there. There is the debt and the interest, just the same as before.


Richard Bedford Bennett: Yes.


Joseph Needham: Then it does not matter. It is a financial institution which is costing the country some money just the same.


Richard Bedford Bennett: The banks are compelled by statute to cash the coupons at par. The interest is a charge paid by the Dominion of Canada, and the banks cash the coupons.


Joseph Needham: It is still debt and interest.


Richard Bedford Bennett: Quite.


Joseph Needham: Just as it was before. There has been no change there, and that is where, as I see it, the whole difference lies. We claim that the floating of loans, the issuing of bonds, should not carry interest whereby the people are burdened with this debt and interest which are growing by leaps and bounds year after year. I have yet to meet one person who holds out any hope at all that our national debt will ever be paid. I should like anyone in the house to tell me if he has any hope that we shall ever pay our national debt, which is growing so rapidly.


Richard Bedford Bennett: If an annuity were provided, as was provided by statute at one time in Ontario, and if we had been able to escape the depression, an annuity established would have been sufficient to wipe out the debt in the course of about a hundred years; that is, if we had been able to give effect to it.


Joseph Needham: Why could it not be done?


Richard Bedford Bennett: Depression.


Joseph Needham: What caused the depression? War. What caused the war?


Richard Bedford Bennett: I think probably social credit.


Joseph Needham: And so it goes on, just one continual round, chasing in a circle. That is just what it amounts to. It is the same to-day; we have the same problems we have had right along. What were the problems facing Canada in 1930? They were unemployment, absence of purchasing power and heavy taxation. What are they in 1938? They are just the same, only we are worse off because our debt and interest have almost doubled in these last few years; not quite doubled, but at least grown very rapidly.


Richard Bedford Bennett: No; the conversions had the effect of lowering the interest charge very greatly. One transaction saved $14,000,000 in one year.


Joseph Needham: Yes; but that is only a fleabite, and the increase in the debt just about makes up for that. Then the government ask us to have confidence in their policies and to look forward to better times. I have jotted down this statement, referring to unemployment and so on: Idle men willing to work are a disgrace to any government. Idle machines are a serious reflection on our system, and idle money is the greatest curse of all, money which should be in circulation but which is tied up in bank vaults and so on. It should be the most serious concern of the government at this time to find the proper application of men, machines and money to the welfare of mankind in this country. If this government can find that proper application, it will solve the problem. There is a proper application, but I am satisfied that it is out of adjustment at the present
1$38	COMMONS
Use of Canada's Financial Resources
time. None of the three are working in the right proportion for the prosperity and welfare of Canada. It is all a matter of adjustment, and at present this government has the responsibility of making that adjustment.
There is no greater tragedy than to see men and women who have lost heart, who feel that they have no place in the scheme of things, in the society in which they move at the present time. There are thousands who have lost heart and many others who are on the border line at the present time. Think of the youth, as compared with the youth of thirty or forty years ago. Think of the outlook we had as boys; compare it with the outlook before the youth of to-day. We planned and worked and studied in order that when we built our homes and raised our families, we might leave them a better heritage than we received. The fathers and mothers are seriously concerned at the present time and are looking to this government for some solution. That is what is dealt with in the Tesolution we are discussing to-night. It is still true, as in former years, that Lazarus waits for the crumbs that fall from the rich man's table.
There are two classes on relief in this dominion. One class has been drawing relief since confederation. When a government does mot balance its budget, so that it must borrow more and more to meet deficits, it is certainly paying relief to the lenders in increasing volume. They are just as surely on relief as any other class, and we have been keeping them on relief ever since confederation. The other class are the recipients of direct relief in these days, the unemployed, and so on.
. I have a sentence about which I should like hon. members to think seriously. I say that the consumer should be the measuring stick . of all values. The day will come in this and every other country when the consumer will be the boss, because he has the franchise, and any government which neglects to look after the best interests of each and every consumer is not fulfilling its function as a government. The consumer, may I repeat, should be the measuring stick, and if we look to his welfare we are looking to the welfare of each and every one, and the prosperity of the country as a whole.
I ask myself: Why are the banks in such good financial condition, when most businesses are just tottering on the brink of bankruptcy and financial distress? There is a reason for that.


Richard Bedford Bennett: They have reduced their dividends by nearly fifty per cent.


Joseph Needham: Out of the consumer.
IMr. Needham.]


Richard Bedford Bennett: They reduced their dividends by nearly fifty per cent, while the banks in England maintained theirs, during the crisis.


Joseph Needham: That is possible.


Richard Bedford Bennett: It is not only possible; it was done.


Joseph Needham: There were smiles on the faces of hon. members opposite when the hon. member for Lethbridge, when asked what he would do, said, "I would call in the bankers." I take it that when this government took office it did call in the bankers, and I believe it took their advice. I wonder if it called in the manufacturers, and asked them whether they would like more orders for their factories. I wonder whether it called in the retailers and asked them if they would like to sell more goods. I wonder if it called in labour, and asked them if they would like to go to work. I wonder if it called in the farmers and asked them if they would like a market for their produce. I wonder if it called in the unemployed and asked them what they thought of the situation. I wonder if it called in the housewives vrho, I see, are now organizing, and asked their opinions. Had the government got the advice of these parties, I think some different action would have been taken.
When the hon. member for Lethbridge was speaking, the hon. member for Melfort (Mr. McLean) asked: "Can you give us any evidence of where anything of this nature has been tried and proved a success?" I should like to refer to New Zealand. Some hon. members may say, "Yes, but New Zealand has not a social credit government." I am informed that social credit candidates did not take part in the campaign of 1936 in New Zealand, but that in most constituencies the candidate was pledged to social credit principles. After the election it was discovered that on the government side there was a majority of social credit pledged members. So, while it is called a labour government, it is government pledged to social credit principles, and one which has worked along that particular line.


Mr. DONNELLY:: Are they giving $25 a month?


Joseph Needham: The same criticism was made in New Zealand that has been made in this chamber. In 1935, prior to the election in that country, the same game was played. Here are some choice pieces of invective which were thrown at the labour party there: "Savings would be wiped out; insurance policies would be worthless; wages would be worthless." " If given power, the labour

Use of Canada's Financial Resources
party would wreck the banks and institutions to which you have entrusted your savings." " Their reckless experiment of creating credit would make all money worthless." " Why waste time talking about wages, pensions and spending power when wages would not be worth the paper they were printed on"? "Labour's talk about using public credit, to issue sufficient money to meet the needs of the nation, and the promise to mint and print it means only one thing-worthless money." " A hundred pounds would eventually be worth less than a hundred pence." " Savings, bank balances, and insurance policies would be wiped out."
But the people of New Zealand considered it was time to take a chance, and they got this result: Sixty-five thousand unemployed found work, and there are now $30,000,000 more in the savings banks than there were at the time these stupid words were spoken. Have not these same words been used in Canada? We are all familiar with the political mind which cannot rise above the traditions of the past, and which imagines the world would go to pieces if the people got a decent living.
The following is a newspaper article dealing with the situation in Australia:
Premier Savage, head of the first Labour government of New Zealand, had been tackled by the leader of the opposition on the subject of his declared intention to make use of the public credit. This term, his opponent, Adam Hamilton, professed to be unable to understand, which, by the way, is a failing that is also familiar to Canadians.
"My statements," replied Mr. Savage, "mean that we are going to use the public credit instead of going around by London or some other place. If we came in here to pursue the bad old ways, we would not be justifying the confidence the people placed in us at the last election. We are going to do the job the people asked us to do."
The method that had been adopted in the past, the premier said, had been to float loans on the London market. "We never got the money. Sometimes we got goods that we didn't particularly want. But we did get a huge national debt. To-day we are instituting a new method. We are going to use the public credit direct. We are going to carry our own obligations.
If the leader of the opposition cannot distinguish between a lending institution which the people own and one which is owned by somebody else I pity him. The difference is between pledging the public credit in order to produce upon it and pledging the public credit to raise debts upon it."
On the question of production Mr. Savage pointed out that New Zealand had had production before but it had seldom had prosperity. What good is production, he asked, if the benefit does not reach the producer?
"It is no use creating wealth unless the people have access to it. The money incomes of the people must equal the value of their production."
In the ten years preceding 1930 the farmers had doubled their production, yet their incomes remained the same. "But in the last twelve months during which the government has been guiding the industry, the national income has gone up by 20,000,000 pounds.


Mr. HANSELL:: That sounds like social credit.


Joseph Needham: That is in New Zealand, in the first year of operation. Then, we hav6 another statement from New Zealand, which is as follows:
The practicability of the New Zealand program is confirmed by the best of all tests and yardsticks-the immediate effect on consumer goods business volume, on which depend ultimately all capital goods activity, export trade, wage paying ability, dividend paying ability and tax paying ability.
In this connection it is interesting to note that in the newT government's first twelve months of office, their national production was up 18 per cent, industrial production 13J per cent, wages 13J per cent; building 24 per cent, savings deposits 15 per cent, and unemployment was down 32 per cent, to mention only a few of the evidences of steady improvement. Practically no woman is unemployed, and large numbers have left factories, shops and offices to get married.
The only way to cure our problem is to tackle it according to the best democratic plan available and then correct our mistakes, if any, as we proceed. The greatest mistake is to do nothing.
I should like to give in concrete form a few of the things which the government of New Zealand have done in one year of office. They nationalized their central bank one hundred per cent. Compare that with what Canada has done. The elections in Canada and New Zealand were held in the same year, 1935. Our present Prime Minister (Mr. Mackenzie King) during the compaign promised the people of this country that if he were returned to power he would nationalize the central bank and restore to government the control of currency and credit, to be issued in terms of public need. He said that before the election. Premier Savage said it after he was elected, and that makes quite a difference.
Here are a few other things that were done by the New Zealand government within its first year of office. All classes of pensions were increased ; wages were restored to the 1931 level; a forty-hour working week was made universal with a few exceptions; wage scales are adjusted twice a year to the cost of living index; the price of dairy products is fixed by the government ; the 1937 program includes a comprehensive plan of health insurance and national superannuation.
The other achievements of the New Zealand government are maximum education possibilities for all children; balanced imports and

Use of Canada's Financial Resources
exports; the price of wheat, flour and bread has been stabilized; increased old age pensions, with women receiving the pension at sixty instead of sixty-five, and income, not property, is the deciding factor in determining the amount of pension paid; invalid pensions on a sliding scale; widows' pensions increased, and so on. I am sure that if any member wants to read a summary of the work of the first labour government, he will find it very interesting.


Charles Avery Dunning: They are not a social
credit government.


Joseph Needham: I said a labour government. If the Minister of Finance (Mr. Dunning) had been in a little while ago, he would have heard the explanation regarding the government's connection with social credit.


Charles Avery Dunning: I know their Minister
of Finance very well, and he is not a social crediter.


Joseph Needham: He is doing the work
we are pleading for.
In conclusion, I think this debate has been interesting and instructive for the Canadian people. This government is on trial at the present time before the people, before the unemployed, before the youth, of Canada, and, above all, on trial before the court of human justice.


Mr. ANGUS MacINNIS (Vancouver East):: Mr. Speaker, although this debate has gone on for quite a few days, the only thing that seems to have been definitely settled so far is that every loan creates a deposit. However, I am doubtful of the efficacy of that conclusion to get us out of our difficulties. From my point of view I think it is about as useful a matter to discuss as which came first, the hen or the egg. At all events we have come to one conclusion.
I am glad that I am following the hon. member for The Battlefords (Mr. Needham), particularly because of the subject with which he concluded his speech, as it is along that line I am going to speak to-night. I wish to show that a socialist government must inevitably follow a capitalist government if democracy is going to continue.
The government of New Zealand, as the Minister of Finance (Mr. Dunning) has pointed out, is not a social credit government. It is a labour or socialist government, carrying out within the limits of its power those things which socialists would do to rectify the faults of the present system.
When the hon. member for Lethbridge (Mr. Blackmore) moved his amendment, he

took occasion to deliver a lecture on social credit. I am not finding fault with my hon. friend for so doing. He and those sitting around him were sent here to give voice in this house to very definite ideas which they hold in regard to economic and social problems and the way in which they can be solved. He was only doing his duty in bringing that matter to the attention of the house in the way in which he did. Whether or not we agree with the theory of social credit, the debate has served a useful purpose. It has drawn to the attention of the house once again through the speeches of several members the tremendous inequality in the distribution of income in this country.
In the few words I am going to say to-night I am not going to take the position that there is no merit in the claims made by my hon. friends to my left. I suppose there is a modicum of truth and some error in all philosophies and in all social and economic creeds. I noticed, during the course of the speech of the hon. member for Lethbridge, that when he was asked specifically what his party would do, he invariably replied that they would call in the experts. That is a good answer under ordinary or even extraordinary circumstances, but in this case it is not satisfactory. It is not satisfactory because in the matter of the operation of social credit there are no experts to be called in.
If the hon. member for Lethbridge wanted to construct a road or a bridge or a house and wanted it well built, he would send for a man who had built roads or bridges or houses, depending upon what he wanted done. In other words, he would call in an experienced builder. He would not call in to build a house a man who had just written about building houses but had never built one. This, of course, is not to say that social credit is not feasible or easy of operation. But it does say that there are no social credit experts, because social credit is nothing but a theory. Major C. H. Douglas is not and could not be an expert in social credit, because there is no social credit system in operation anywhere where Major Douglas or anyone else could acquire the necessary experience to become an expert. No one knows that better than Major Douglas. That is why he keeps at a safe distance from the fields of actual operation.


Victor Quelch: They might put him in gaol.


Angus MacInnis: 
Angus MacInnis: Not necessarily? That is what usually happens. Let me add that these debts can never be repaid, because they cannot be paid except with the property of those to whom we owe the debts.
I do not think we can have a clear understanding of the reason for the economic difficulties in which the world finds itself to-day unless we realize, as I have said, the real nature of capitalism; unless we realize that the purpose of capitalism is to produce more and more capital and not to provide for human wants. It does provide for human needs incidentally; but that is not its purpose, which is to create more and more capital. In order to explain the point I quote from a speech made a year or two ago by the Right Hon. Walter Elliot, former Minister of Agriculture in the British government; I think he is now Secretary for Scotland. Referring to the difficulties that the world was getting into at the time, he made this statement:
But these factors, the power of science to make anything anywhere, the determination of men to try everything everywhere, and a growing doubt as to whether foreign loans in many parts of the world are not simply free gifts which we should do as well to keep for ourselves, have produced and are producing a change so fundamental in our outlook that it
might almost be described as the third stage of the industrial revolution. The first stage was, so to speak, the drilling of a borehole and the tapping of a great subterranean source of power by the people who made this venture. The second, which we have just lived through, was the piping of that power to undeveloped nations as capital development, financed by unrepaid loans. The third stage is the check and flood-back as the bore holes in other countries strike oil in their turn, and the pipes begin to fill up from the far end also.
I do not see how the situation could be put much clearer than that. Let me explain briefly those stages. The first stage was the industrial revolution, beginning in England less than two hundred years ago, with the advent of motive power and machine production. The first result was to build up the capital structure of Great Britain: home industries. The second stage was the development of new countries, countries like North and South America, Australia and New Zealand. The third stage is where Mr. Elliot says that they have struck oil in the new countries and that there is a flood-back as the bore-holes fill up from the other end. So that in those countries into which, when capitalism was young, the older countries were putting their surplus investments, they now have surplus capital themselves and are look- [DOT] ing for a place to invest it. That is the world's condition at the present time, and it is a condition which the world is not going to get over under its present form of production and distribution.
I read what seemed to me a rather significant article in the January issue of Canadian Business, which I think is the official organ of the Canadian chamber of commerce. The author of this article is Courtland Elliott, described by the publishers as one of Canada's brilliant young economists. He says:
The periods of greatest prosperity in Canada have coincided with an inward flow of foreign capital. Such capital has been invested directly in Canadian enterprises or in securities, the proceeds of which have been used largely for construction or expansion. In either case the funds have resulted in the manufacture of capital goods and the employment of labour at good wages.
There are those who contend that Canada already has enough capital equipment for tho volume of business that is being done and for the size of the population we have to sustain. In the light of present conditions and shortterm realities that statement is probably true. Faced with restricted markets on the one hand and improved industrial technique on the other, it is evident that our existing capital equipment has not been unduly pressed in the recent period of recovery. Indeed the fact that new capital financing for industrial purposes in 1937 was lower than in many years, and Canada has not been a net borrower of outside capital for three years, might indicate

Use oj Canada's Financial Resources
either a lack of need or a lack of profitable employment for foreign and domestic capital in Canada.
If such a condition is permanent we would probably have to reconcile ourselves to a lower standard of living, a withering production organization, a rising tide of social dependency and financial instability.
I do not agree that it is necessary for us to do that. To me it seems amazing that at a time when the people of Canada along with the people of the rest of the world have in a way reached the position for which mankind has been striving all down through the ages, that is, economic security; when we have everything necessary to produce the things we need, we should say that because we cannot get markets; because we cannot use them for this and that, we must prepare for enduring misery and poverty. It is beyond my comprehension that intelligent people should agree to that. I claim it is not necessary, if we use the equipment for social ends; that is, building homes and in other ways improving the living conditions of our people.
Let me say that I am supporting the amendment. I am supporting it because in my opinion this government has not even tried to make the resources of the country and the machinery of production operate in the interests of the people.


Charles Avery Dunning: My hon. friend is speaking on the subamendment?


Angus MacInnis: No; I am speaking on both.


Charles Avery Dunning: My hon. friend must be speaking on the subamendment, of the leader of the opposition (Mr. Bennett), because that is the only thing before the house. He is supporting that?


Angus MacInnis: Yes; I am supporting both. I shall have to vote for both because both are still before the house.


Charles Avery Dunning: The hon. member is a little mixed.


Angus MacInnis: No; I am quite clear in my point of view. About five years ago the present Prime Minister, speaking in this house, outlined a comprehensive program of social reform, which he pledged that the Liberal party would put into effect if returned to office. I maintain that that pledge has not been kept. On that occasion he said, as reported at page 2508 of Hansard of 1933:
It has been said by some hon. members of the Progressive group that there should be a new motive in industry. May I say that I entirely agree with that.

That is the present Prime Minister speaking.
I believe that once the different groups in industry are represented in the control of industry we shall come to have a very different conception of industry generally. The conception that we have to-day is too largely that industry is primarily a source of revenue; the means whereby private gains may be reaped.
We had been pointing that out for years. At that time the Prime Minister accepted our point of view. But what has he done since he came into office to change the purpose of industry, or as he said himself, to give it a new purpose? I claim that he has done absolutely nothing.
In the same speech he went on to say, at page 2510:
The system of distribution of products needs overhauling. Distribution should be on a service at cost basis. The spread in price is too great, as any comparison of prices paid to producers with prices consumers have to pay will make self-evident.
Again I ask, What has the Liberal party done to reduce this spread? Again the answer is nothing. Then on the same page, 2510, he says:
Industry has been adversely affected by the control exercised over industry, not by industrial managers so much as by promoters and financiers. We believe the interlocking of directorates is one of the factors which, on the one hand, enables bankers to control industries-
I should like my hon. friends over here to listen to this:
-and on the other hand, enables industrialists to_ control the banks. It is our view that in this connection there is room for much in the way of reform.
There is still room for much in the way of reform, but I doubt very much that we shall see any reform in this direction on the part of this government. I think it was our view, before the Prime Minister took it as the view of the Liberal party. But what has this government done to break the control of the bankers and industrialists over the economic life of this country? Again the answer must be, Nothing. I quote now from the message given by the Prime Minister to the people of Canada on October 14, 1935, the evening of the last election day. Part of his message at that time was:
We take up at once as our supreme task the endeavour to end poverty in the midst of plenty, starvation and unnecessary suffering in a land of abundance, discontent and distress in a country more blessed by providence than any other on the face of the globe, and gain for individual lives, and for the nation as a whole that "health and peace, and sweet content" which is the rightful heritage of all.

Use oj Canada's Financial Resources
We still have poverty in the midst of plenty. We still have starvation and unnecessary suffering in a land of abundance. We still have discontent and distress in a country more blessed by providence than any other on the face of the globe, and we are still waiting for that "health and peace, and sweet content," which the Liberal party promised us on the day of their victory in 1935. What is more to the point, there is no indication that the government has any plan by which these desirable things mentioned by the Prime Minister may be brought about.
As a final word may I say that until some government takes definite and decisive action to bring our industries under social control and make them function for the welfare of the people instead of being used for their exploitation, as they are to-day, the difficulties we are now experiencing are going to remain with us.


Mr. J. J. KINLEY (Queens-Lunenburg):: Mr. Speaker, the amendment moved by the hon. member for Lethbridge (Mr. Blackmore) is very general in its terms, and is something that one might expect at any time from an opposition member, especially in that corner of the house. But, as the hon. member explained in the course of his remarks, he confined his attack upon the government to the monetary system, and suggested that his so-called monetary system, social credit, would bring to this country prosperity and relieve us from debt, and that unemployment would fade away. Otherwise he was most complimentary. I should like to quote from his remarks as they appear in Hansard:
The government has tried everything but money reform. I am ready to say what I have said in a hundred places in this country, both on the platform and elsewhere, that as far as I can judge the government in power to-day has done everything it could possibly conceive of under the present system to improve the condition of our people. It is my judgment that the ministers are as energetic, as honourable and as earnest as men could possibly be. It is my belief that the members are ready to do their utmost. They disagree among themselves with regard to high and low tariffs and with regard to the advantages of trade with this and that country, but as far as they can see and come to agreement, they are doing the best they can. I do not hesitate one moment to say that.
Coming from a member of the opposition, this is a high tribute, and it does not seem to me that tributes of this kind come very frequently even from our own most ardent supporters. But we are told that the Liberal party is a marching force, always advancing, never arriving and never satisfied. So we
think that perhaps when the budget comes down and the three-way trade agreement is completed, we shall have made another step forward and shall have again advanced a little further with our ideas of better trade relations. Hon. members will note that the hon, gentleman, who is the leader of his group and who comes from the prairie provinces, thinks the government has made a pretty good job of its tariff so far.
On the other hand the right hon. leader of the opposition (Mr. Bennett) feels that at present the Liberal party is injuring this country by lowering tariffs. This is the first we have heard of this complaint from the right hon. gentleman for some time. I can remember him only a year ago stating that the Liberal party had not lowered the tariff to any extent.
The right hon. gentleman spoke of duties and dumping duties, and as it is nearly eleven o'clock I wish to refer for a moment or two to one of those dumping duties. I am glad that dumping duties are passing from our customs rulings and that the customs authorities do not invoke them as they were invoked in the days of the previous administration. I believe dumping duties are dangerous, because they affect the whole fabric of our export trade. Canadian manufacturers should be against dumping duties except as a last resort, because a manufacturer who takes advantage of the drawbacks in duty and ships abroad, may be said to be dumping. So, when someone in a foreign country says that products are sent to that country at less than the cost in the country of origin, the manufacturer can hardly complain. At present in my part of Canada we hear a great deal about the dumping duty on sugar. That is something which affects my people. We feel that we should do a better trade with the republic of Cuba, whose tariff laws are very fair in that they say that if a country buys fifty per cent of its requirements from them, they will give that country the minimum tariff. In view of the fact that this is a potential market for our primary products, and because of the primaiy products Cuba can ship to us, I think the continuance of the dumping duty to the island of Cuba under present conditions is promoting an economic injustice.
The other day the Minister of Labour (Mr. Rogers) told us what was in the speech from the throne in Nova Scotia, and he pointed out that in that province those on relief had been reduced from 75,000 to a little more than
6,000,	and that this was a record not equalled anywhere else in Canada. This is not because we have greater wealth in Nova Scotia;

Questions
the fact is that the per capita wealth in that province is only SI,514, as against a per capita wealth in Ontario of $2,468. It is due, rather, to the independence and individualism of our people. They do not like to submit to the indignities of being supported by the state. The municipal councils in our towns and municipalities guard against giving relief, where it is possible to avoid doing so, and they see to it that an honest day's work is given for the money spent on any of the projects carried on in the province.
On motion of Mr. Kinley the debate was adjourned.



SUPPLEMENTARY ESTIMATES, 1937-38

[Stage Direction]
A message from His Excellency the Governor General transmitting further supplementary estimates for the fiscal year ending March 31, 1938, was presented by Hon. Charles A. Dunning (Minister of Finance), read by Mr. Speaker to the house, and referred to the committee of supply.
On motion of Mr. Lapointe (Quebec East) the house adjourned at 10.58 p.m.
Wednesday, March 30, 1938