MESSAGE FROM THE GOVERNOR GENERAL


Mr. SPEAKER:: I have the honour to inform the House that I have received a message from His Excellency the Governor General, signed by his own hand, reading as follows:
I have received with great pleasure the Address you have voted in reply to my Speech at the opening of parliament, and thank you for it sincerely.
Byng op Vi my.
Government House, Ottawa.



PRIVATE BILLS


[Stage Direction]
Bill No. 17, respecting the Alberta Railway and Irrigation Company-Mr. Jelliff.
Bill No. 18, respecting the Manitoba and North Western Railway Company of Canada -Mr. Stewart (Humboldt).
Bill No. 19, respecting patent of the Marconi Wireless Telegraph Company of Canada, Limited-Mr. Marler.


Right Hon. W. L. MACKENZIE KING (Prime Minister) moved:: That the following members do compose the special committee appointed to consider, jointly with Mr. Speaker, the advisability of revising the rules of this House, and to report to the House at this session, viz., Messieurs:	His Honour the Speaker, Marcil
(Bonaventure), Boivin, Euler, Gordon, Kyte, Bird, KeSlner, Thurston, Wallace, Meighen, Ryckman, Bristol and Arthurs.


[Stage Direction]
Motion agreed to.

[Stage Direction]
List of leases of wharves, piers and breakwaters, and statement of the amount of revenue and expenditure-Hon. Mr. Cardin.
Report of the Research Council-Hon. Mr. Low.

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

Mr. ARTHURS:: 1.	Has Arthur Guest been appointed, either temporary or permanent, as steward at the Stony Mountain Penitentiary ?
2.	If so, on whose recommendation was the appointment made?
Questions

3.	If so, was the position advertised in the usual way, and was the Civil Service Commission consulted about the appointment ?


Hon. Mr. LAPOINTE:: 1.	Yos permanently appointed.
2 and 3. The position was advertised in the usual way and the appointment made by the Civil Service Commission.


GENERATION OF HYDRO-ELECTRIC ENERGY
Mr. McKAY:: Hovr much hydro-electric energy, expressed in kilowatt hours and horse-power years, was generated by each of the power companies mentioned on page 404, of Hansard for February 23rd instant, (a) for export, and (b) for consumption in Canada, during the fiscal years 1919-20, to 1923-24, inclusive ?


Hon. Mr. LOW:: STA,TS,IENT showing amount of electrical energy, gas, or fluid generated or PRODUCED for EXPORT AND FOR CONSUMPTION IN CANADA, UNDER THE AUTHORITY OF THE ELECTRICITY AND FLUID EXPORTATION ACT, FOR THE YEAR ENDING 31st DAY OF MARCH, 1920
Name of Contractor and Place of Business	Units produced for export	Units produced for use in Canada	Total output of generating Station or other Source	K.W. hours	H.P. years	K.W. hours	II.P. years	K.W. hours	H.P. yearsCanadian Niagara Power Company	
Toronto Power Company	
Ontario Power Company	
Ontario and Minnesota Power Company.. Cedar Rapids Power Company	
Sherbrooke Railway and Power Company Maine and New Brunswick Power Company	
Western Canada Power Company	
British Columbia Railway Company	
West Kootenay Power Company	
Totals	203,601,550 108.237.000 319.362.000 12,043,120 282.225.000 273,696 6,122,638 14,541,734 354,780 2,997,000	31,174-04 16,517-72 48,736-25 1,838-16 43,079-70 41-78 934-34 2,169-99 54-13 457-37	371,071,450 420.628.800 674.306.800 13,182,552 222,420,500 9,890,952 369,862 103,779,986 86,650,420 143,522,600	56,523-96 64,190 08 102,902-55 2,011-69 33,942-49 1,510-17 56-45 15,837-31 12,225-39 21,906-78	574,673,000 528.865.800 993.668.800 25,225,652 504,645,500 10,164,648 6,492,500 118,321,700 87,005,200 146,519.600	87,698-00 80,707-80 151,638-80 3,869-85 77,022-19 1,551-95 990-79 18,007-30 12,279-52 22,364-15949,758,518	143,003-36	2,045,823,882	311,106-87	2,995,582,400	456,110-35ELECTRICAL ENERGY, GAS, OR FLUID GENERATED OR PRODUCED FOR EXPORT AND FOR CONSUMPTION IN CANADA, UNDER THE AUTHORITY OF THE ELECTRICITY AND FLUID EXPORTATION ACT, FOR THE YEAR ENDING MARCH 31, 1921.	Canadian Niagara Power Co	
Elect. Development Co. of Ontario, Ltd.. Ontario Power Company	
Ontario and Minnesota Power Co	
Cedar Rapids Manufacturing and Power Co	
Sherbrooke Railway and Power Company Maine and New Brunswick Power Co	
Western Canadian Power Co	
British Columbia Electric Railway Company	
West Kootenay Power and Light Company Totals	172,251,210 102.884.000 328,256,600 15,805,451 364.432.000 281,038 7,877,398 21,626,236 375,678 5,774,400	26,375-07 15,724-08 50,232-08 2,418-54 55,766-50 43-02 1,205-46 3,309-32 59-03 883-62	436,119,790 547.819.100 661.188.100 13,315,819 222.757.000 6,325,616 338,466 116,028,394 111,781,141 166.449.000	66,690-54 3.830-06 101,760-36 2,037-22 34,537-00 967-81 52-27 17,824-40 17,101-90 25,470-37	608.371.000 649,703,100 980,444,700 28,704,725 587.189.000 6,803,654 8.215,864 137,654,630 112,146,819 172,223,400	93,076-61 100,554-14 151,992-44 4,465-66 90.313-50 1,011-83 1,257-73 21,133-72 17,160-93 26,353-991,019,564,011	156,016-72	2,282,122.42G	350,271-93	3,300,456,892	507,320-55STATEMENT SHOWING AMOUNT OF ELECTRICAL ENERGY, GAS, OR FLUID GENERATED OR PRODUCED FOR EXPORT AND FOR CONSUMPTION IN CANADA, UNDER THE AUTHORITY OF THE ELECTRICITY AND FLUID EXPORTATION ACT, FOR THE YEAR ENDING 31st DAY OF MARCH, 1922.	Ontario Power Co	
Toronto Power Co	
Cedar Rapids Mfg. & Power Co	
Can. Niagara Power Co	
West Kootenay Power & Light Co	
Western Canada Power Co	
Ontario & Minnesota Power Co	
British Columbia Electric Ry. Co	
Maine & New Brunswick Electric Power Co	
Sherbrooke Ry. & Power Co	
Totals	304,244,400 102,122,000 324,193,000 82,264,000 2,084,900 24,825,300 12,729,010 419,692 8,460,291 252,200	46,453 15,629 49,592 12,590 318 3.594 1,939 64 1,296 36	483,439,300 553,463,500 310,500 393,881,000 182,384,100 82,502.380 12,254,149 133,020.093 392,463 5,391,730	73,989 81,703 40,913 60,026 27,891 12,625 1,873 2,035 61 826	7S7.662.700 635.585.500 591.493.500 476.145.000 184.469.000 107,327,6S0 24,983,159 133,439,785 8,852,754 5,663,930	119,442 97,332 90,505 73,016 28,209 16,219 3,812 2,099 1,357 862861,594,793	131,511	2,114,039,211	301.942	2,955,623,008	433,453

Questions
STATEMENT SHOWING AMOUNT OF ELECTRICAL ENERGY, GAS, OR FLUID GENERATED OR PRODUCED FOR EXPORT AND FOR CONSUMPTION IN CANADA, UNDER THE AUTHORITY OF THE ELECTRICITY AND FLUID EXPORTATION ACT, FOR THE YEAR ENDING 31st DAY OF MARCH, 1923.
Name of Contractor and Place of Business	Units produced for export	Units produced for use in Canada	Total output of generating Station or other Source	K.W. hours	H.P. years	K.W. hours	H.P. years	K.W. hours	H.P. yearsOntario Power Co	
Cedar Rapids Mfg. & Powrer Co	
Toronto Power Co	
Canadian Niagara Power Co	
West Kootenav Power & Light Co	
Western Canada Power Co	
British Columbia Electric Railway Co... Ontario & Minnesota Power Co	
Maine & New Brunswick Power Co	
Sherbrooke Railway & Power Co	
Totals	295,849,500 356,795.000 103,922,550 244,948,750 898,700 32,457,700 467,353 8,606,760 10,713.925 212.347	45,276 54.587 15,895 37,490 134 4,964 71 1,317 1,640 35	448.768.700 308.110.000 518.031.000 294,466.250 183.578.700 113,706.100 121,926,341 13,776,256 462,985 7,100,413	68,696 47,123 79,249 45,064 28,096 17,399 18,658 2,107 70 1,086	744,618,200 664.905.000 621,953,550 539.415.000 184,477,400 146,163,800 123,393,694 22.383,016 11,176,910 7,312,760	113.972 101,710 95,144 82,554 28,230 22,363 18,729 3,424 1,710 1,1211,054,872,585	161,409	2,009,926,745	307,548	3,064,799,330	468,957
STATEMENT SHOWING AMOUNT OF ELECTRICAL ENERGY, GAS, OR FLUID GENERATED OR PRODUCED FOR EXPORT AND FOR CONSUMPTION IN CANADA, UNDER THE AUTHORITY OF THE ELECTRICITY AND FLUID EXPORTATION ACT. FOR THE YEAR ENDING 31st DAY OF MARCH, 1924.


SUMMARY.
[Stage Direction]
Ontario Power Company	341,323,900	52,204	521,552,200	79,763	862,876,100	131,967Cedar Rapids Mfg. & Power Co	425,304,000	64,921	334,667,000	51,161	759,971,000	116,082Toronto Power Company	222,215,400	34,087	516,584,440	79,052	738,799,840	113,139Canadian Niagara Power Company	346,930,250	53,061	239,468,750	36,645	586,399,000	89,706West Kootenay Power and Light Company British Columbia Electric Railway Com-	545,600	84	194,117,000	29,693	194,662,600	29,777pany	754,558	116	142,273,709	21,775	143,028,267	21,891Western Power Company of Canada	40,531,531	6,200	101,942,069	15,590	142,413,600	21,790Ontario and Minnesota Power Company.. Maine and New Brunswick Electric Power	12,065,000	1,847	13,512,044	2,075	25,577,044	3,922Company, Limited	
Sherbrooke Railway and Tower Com-	10,546,701	1,609	596,699	913	11,143,400	2,522pany, Limited	14,400	2	7,925,000	1,212	7,939,400	1,214Totals	1,400,231,340	214,131	2,072,638,911	317,879	3,472,870,251	532,010

Mr. DOUCET:: 

COMBINES INVESTIGATION ACT

Hon. Mr. STEVENS:: l.	Pursuant to section 3. chapter 9. 13-14 George V. (Combines Investigation Act), has a minister of the crown been charged with the general administration of
the act?
2.	If so, what minister has been so charged?
3.	Has there been a case up to February 25. 1924, where the minister of his own motion, as empowered by section 6, chapter 9. 13-14 George V, directed the registrar to enquire whether any alleged combine exists?


Hon. Mr. KING (Kootenay):: 1.	Yes.
2.	Minister of Labour.
3.	Yes, inquiry by the registrar in several cases has been authorized.



PENSIONS TO ABENAKIS

Mr. DOUCET:: 1.	What was the total amount paid in pensions to the Aberakis. by the government, for the fiscal years of 1921-22, 1922-23, 1923-24, 1924-25?
2.	Wlint merchants of Pierreville supplied goods to the above pensioners and in what years?
3.	What was the total amount supplied by each merchant for each year?
4.	Is the government aware that said goods are supplied to the Abenakis without tenders being asked?


Hon. Mr. STEWART (Argenteuil):: 1.
1921- 22	$ 612 16
1922-	23	
1,022	101923-	24	
1,322	621924-	25	
1,497	43
Questions

2. D. & A. Laperriere, 1921-22, 1922-23, 192324, 1924-25; A. Plamondon, 1923-24; Shooner & Co., 1921-22, 1922-23, 1923-24, 1924-25.
3.	D. & A. Shooner A. Plam-
Laperriere & Co. ondon
1921- 22	$ 214 63	$397 53	....1922- 23	
734 00	288 10	....1923- 24	
1,125 50	192 11	$4 911924- 25	
1,343 32	154 11	....4.	Tenders are not called for as the purchases in each individual case are small, the relief extended amounting to $1.50 to $3 per week according to the size of the Indian's family.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Hon. Mr. MANION:: 1.	How many royal commissions have been appointed by the present government?
2.	What is their personnel?
3.	What has each cost to date?


PORK-IMPORTATIONS AND RE-EXPORTATIONS
Mr. ANDERSON:: 1.	What amount of pork was imported into Canada from the United States during the calendar years 1923 and 1924, in pounds and dollars respectively?
2.	What amount of this pork was re-exported to England and what price was received for it?
3.	How was it prepared in Canada for re-export?
4.	Is it sold in England as Canadian pork, and, if not, how is it differentiated from the Canadian product ?


MILITARY DISTRICT NO 10-COAL INQUIRY
Mr. ROSS (Kingston):: 1.	What was the total cost of the investigation lately conducted by David Campbell, K.C., of Winnipeg, into the supplies of coal and other matters affecting military district No. 10 and
2.	Have any suspensions of militia officers been made as result and if so what officers have been suspended, if any?


Mr. ARTHURS:: 1.	What was the total cost of the commission appointed by the government regarding the coal inquiry at Tuxedo barracks, Winnipeg?
2.	What amount did the commissioners receive?
3.	Has the government received any objection as to the amount paid from Winnipeg or elsewhere?


BOOTS AND SHOES-SALES, ETC.
Mr. DENIS (St. Denis):: 1.	What was the total value of boots and shoes sold in Canada during each of the years 1914, 1918, 1920, 1921, 1922, 1923 and 1924?
2.	What was the total value of said goods imported from the United States, England or other countries for the above mentioned years?
3.	What was the total value of said goods exported to the United States, England or other countries for above mentioned years?



YUKON GOVERNMENT OFFICIALS- INCOME TAX EXEMPTION

Mr. BLACK (Yukon) moved:: For a copy of all correspondence, documents, statements and communications concerning exemption or partial exemption from payment of income tax on payments or remuneration, whether paid as salary, living allowance or otherwise, by the government of Canada to officials of Yukon Territory, and showing what exemptions (if any) from income tax have been allowed to Yukon officials on amounts paid them by the government of Canada during the past seven years.
He said:	When the motion came up a
few days ago the Minister of Customs asked me to permit it to stand. I 'have not heard from the minister since that time, and I think the motion should be allowed to stand.
Motion stands.



VANCOUVER-WATERFRONT PROPERTY

George Black: For copy of all letters, telegrams, documents and correspondence, between January 1, 1922, and February 25, 1924, between R. H. Gale and any minister or official of the Dominion government; and, between R. H. Gale and the Vancouver Harbour Commission, and between Vancouver harbour commissioners and any minister or official of the Dominion government; and between any representative of the Spillers interests and the harbour commissioners, and, or any minister of the crown and official of the government, regarding the negotiations for lease or sale of certain waterfront property in the Vancouver harbour, upon which is now erected what is known as the Spillers elevator, and which property lies immediately east of the Vancouver harbour commissioners elevator No. 1. Also, copy of any letters, agreements schedules of fees, assignments, transfers, and other documents appertaining thereto.


Hon. P. J. A. CARDIN (Minister of Marine and Fisheries):: I do not rise for the purpose of making formal objection to the motion, but I am informed by the officials of the department that it is the first time that an order of the House has been requested for the production of papers or correspondence exchanged between the commission and private individuals. I am not quite clear as to whether this is the practice, and I would like to inform myself on that point. Will the hon. member let the motion stand, and I will ascertain if it has been the practice to make the correspondence between the department and individuals public property.


George Black: I have no objection to the motion standing, although I do not think the subject matter is open to objection.
Motion stands.

Currency and Credit



CURRENCY AND CREDIT


Mr. J. S. WOODSWORTH (Centre Winnipeg) moved:: That, in the opinion of this House, it is not in the interests of the country at large that the privilege of issuing currency and of controlling financial credit should be granted to private corporations.
He said: I recognize that it requires considerable temerity to bring forward a resolution of such a far-reaching character as the one I have just moved. The House has considered from year to year for a good many years the tariff question in this country. Yesterday considerable time was devoted to the alleged North Atlantic combine. And yet I venture to say that this resolution strikes at a far more fundamental problem than either of these and one which, I venture to say, will in the future of Canada occupy a much more prominent position. I call attention to the terms of the resolution. I can quite understand that it it would be in the interests of the banks or the Canadian Bankers' Association that things should remain as they are; but the question as to whether it is in the interest of the public at large is an altogether different matter. This resolution was on the order paper last year, but it was not reached. It is purposely negative in form. Many schemes might be advanced as desirable substitutes for the existing system, for example, national banks, or provincial banks, or a central reserve bank, or the development of co-operative banks, or some one of the many new financial systems which have been discussed. I am not venturing into any of those fields to-day. These schemes may be discussed at some later period or possibly to-day by other speakers. I propose to confine my remarks to an examination of the system as it now exists. It seems to me that the first step is to show the injustice and inefficiency of the existing system.
This undoubtedly involves a discussion of the question of money itself. Though technical, this is intensely practical. Every man handles more or less money, very often less, but few of us stop to think anything about it.
Modem industry and civilization are based very largely upon the exchange of surplus products. In the old days a man consumed what he himself produced. Later on, when he produced more of one commodity than he required for himself, and his neighbour produced more of another commodity than he required for himself, there was possible an exchange, and thus barter sprang up. Nowadays, this exchange is carried on by means 48
of money, and I take it that fundamentally money is a ticket system to facilitate distribution or exchange. We so frequently think in terms of money that sometimes we do not pause to remember that money in itself is not wealth: that it merely represents wealth. This is true even of gold money as money. It is not wealth as money; it simply represents wealth. We have a good deal to say with regard to production in this House. I would remind the House that after all the end of our present economic system is not essentially production, it is consumption. We work in order that we may enjoy, but unfortunately the productive end, and behind that the distributional end of our system, has gained such an ascendency that it has dominated everything else. In this country, if we looked at matters from the right angle, we would recognize that we can here produce sufficient to meet the needs of the people, we would realize that the problem essentially is one of distribution rather than one of production. As Viscount Milner says in his book, Questions of the Hour:
So long as the things themselves could be procured in adequate quantities, the counters for dealing with them would always be forthcoming.
That is coins, money, whatever form money takes, are essentially simply the counters by means of which we effect the process of distribution.


Hewitt Bostock: In justice to the hon.
gentleman, I would ask hon. members kindly to stop talking in order that his remarks may be heard.


James Shaver Woodsworth: Since money has
come to be the measure of all other commodities, the question of money, its value and control, is basic. I would suggest that in ordinary commerical life whoever controls the size or weight of the pound practically determines the value of everything that goes over the scales; that whoever has the custody of the yardstick and can extend and contract that yardstick has very effective control over all selling operations.
After the earliest primitive times, when almost any commodity might be used as money-shells, beaver skins and similar objects -the world as a whole settled down to gold as the standard, the recognized money. All our text books on economics will tell the reason why gold was found specially suitable, its rarity its even quality and so on. I need not go into that here, and the fact that we have certain subsidiary coins such as silver, need not enter into this discussion. Gold, in most civilized countries, became the standard of value, but gradually within comparatively

Currency and Credit

modern times, another kind of money was introduced, that is, bank notes. We are so accustomed to these bank notes or bills, as we ordinarily call them, that we have forgotten that their introduction is comparatively recent and that they represent an altogether new conception of money. Walker, the economist, said in one place many years ago:
Money is that money does.
Whatever performs the function of money is really money, and according to that bank notes are in reality money. We may recognize three stages through which bank notes have passed. First of all, they actually represented gold-there was as much gold as there were bank notes. Then it was found by the bankers that it was quite possible to issue a larger, quantity of paper than there was a supply of gold. It was found in practice that only a few people demand gold, and that as long as general confidence could be maintained a small reserve of gold was sufficient. That stage is what- we know as the gold basis. That is, there was on hand simply a sufficient supply of gold to meet the demand, not a sufficient supply of gold to cover all the paper that was in existence. Then we reached the third stage in Canada within the past ten years when bank notes became irredeemable. I do not think the majority of the people of Canada have yet learned that that is the case, but since the war broke out bank notes have not been redeemable. That is the present situation.
We have, however, in still more recent times, had added to the gold money and the bank note money a third kind of money, that is, cheques. Many people, perhaps, have not been inclined to think of cheques as being in reality money, and yet, some of the leading economists and bankers recognize that as being actually the case. To-day some ninety-six per cent of the business of Canada is done through the checking system. That was the statement given in the evidence offered to us two years ago in the Banking and Commerce committee. I am not putting forward this statement that cheques are money on my own authority. No less an authority than the Right Hon. Sir Reginald McKenna gave this statement:
Let me define the sense in which I shall use the word " money." I understand by it all currency in circulation among the public and all bank deposits drawable by cheque.
So that to-day, according to eminent bankers and economists, we have three kinds of money: gold money, which is almost nonexistent in Canada; paper money in the form of bank notes, and bank cheques.

We are of course still more or less in bondage to the fetish of the gold standard. In the Speech from the Throne it was foreshadowed that there might be an attempt to return to the so-called gold standard. But I would urge that if we have been able to get on without the gold standard for a period of ten years it is possible we might be able to get on without it for at least another ten years. Indeed, I am rather inclined to think, and this on the authority of some of the leading bankers of Great Britain, that it might be a decided mistake to return to the gold standard at all, a mistake, that is, in so far as the great mass of the people are concerned, though it might very well play into the hands of a comparatively small group. I would point out, taking an ordinary illustration, that it is quite conceivable that we could get along without gold as a medium of exchange. For example, the farmers in the west grow wheat; the manufacturers of Montreal make boots; is it absolutely necessary that we should send men into the wilds of northern Ontario to dig out gold and convert it into coin in order to enable the farmers of the west to exchange their wheat for the boots manufactured by the men in Montreal? As a matter of fact, even gold itself it not a fixed standard to-day. As Mr. Keynes points out, although until the war gold more or less perfectly performed the functions of a regulator, it is itself regulated to-day. I would read to the House two or three paragraphs from that very thought-provoking book of Mr. J. M. Keynes, Monetary Reform:
But the war has effected a great change. Gold itself has become a "managed" currency. The West as well as the East, has learnt to hoard gold, but the motives of the United States are not those of India. Now that most countries have abandoned the gold standard, the supply of the metal would, if the chief user of it restricted its holdings to its real needs, prove largely redundant. The United States has not been able to let gold fall to its "natural" value, because it could not face the resulting depreciation of its standard. It has been driven, therefore, to the costly policy of burying in the vaults of Washington what the miners of the Rand have laboriously brought to the surface. Consequently, gold now stands at an "artificial" value, the future course of which almost entirely depends on the policy of the Federal Reserve Board of the United States.

If the Federal Reserve Board intends to maintain the value of the dollar at a level which is irrespective of the inflow or outflow of gold, what object is there in continuing to accept at the mints gold which is not wanted, yet costs a heavy price? If the United States mints were to be closed to gold, everything, except the actual price of the metal, could continue precisely as before.
We have no ready-made standard. Experience has shown that in emergencies ministers of finance cannot

Currency and Credit
be strapped down. And-most important of all-in the modern world of paper currency and bank credit there is no escape from a "managed" currency, whether we wish it or not;-convertibility into gold will not alter the fact that the value of gold itself depends on the policy of the central banks.
One of Mr. Keynes's critics, Professor Gustav Cassel, in a paper read to the Institute of Bankers in London on June 11, 1924, makes certain far-reaching admissions. He says:
The gold standard can no longer be regarded aa an absolutely objective standard outside every political discussion. The present value of gold is very much dependent upon the purchasing power of the dollar, and this can by no means be said to be fixed objectively by the value of gold. It is easy to see that the United States, by slightly altering their monetary policy, could keep their general level of prices somewhat higher or somewhat lower, and thereby give the metal gold a lower or a higher value than that which it aotually has. In other words, there is no objective necessity in the present level of prices in the United States and neither, therefore, in the present value of gold.
Now, if money is the measure of all other commodities, what determines the value or, better, the purchasing power of money itself? What determines the purchasing power of any particular coin such as the dollar? We tried to get some statement on this matter from Sir Frederick Williams-Taylor during the inquiry before the Banking and Commerce committee two years ago. Sir Frederick did not appear to have any scientific or economic knowledge of the money situation; in fact, he himself said that he was simply a practical banker. I can understand that a practical electrician is quite capable of making ordinary repairs about a house; he can connect wires and do work of that kind. But when there is some fundamental problem confronting the city such as electrolysis, brought about by say, the operation of the street railways, we are driven to call in a scientist and try to get below the apparent difficulty in order to find out what the basic trouble really is. In other words, we must have some theory upon which to work. Let me read to the House some questions which I asked Sir Frederick during the investigation to which I have referred, together with the answers he made.
Q. What then determines the value of money itself? -A. The ability of the holder of that money to convert it into gold.
Q. Since we cannot convert it at the present time into gold, what determines its value?-A. It is accepted with confidence throughout the whole community and answers the purpose equally well. Is that your answer?
Q. It is in part; that is as to whether it has value. But it does not decide as to what its particular value is. Has the quantity anything to do with it?-A. Has the quantity of the money anything to do with the value? Not if there is a sufficiency of gold behind it.
48i
Q. But now that we are not on the gold standard, has the amount of money in circulation anything to do with its value?-A. That amount of money in circulation is in strict accordance with the requirements of the country under our very admirable currency laws.
Q. Then the amount has something to do with its value?-A. There is no excess of money in the community. Automatically the circulation of the banks is retired every day, beyond the requirements of the people who wish to carry money in their pockets.
Q. Do credit instruments such as cheques not act or function as money?-A. Yes.
Q. Then would you not say that at any given day there might be a very much larger amount of money in circulation than there had been the day previous? -A. It varies constantly, of course.
Q. Then in accordance with the variation that would lead to a change or a variation in the value? -A. According to what?
Q. According to the amount in circulation the value would be altered?-A. Not necessarily.
Q. Then if we doubled the amount, as referred to in the matter of Germany or Austria or any of the European countries, would not that affect its value?- A. Absolutely, because there they have fiat money, irredeemable.
Q. Then the quantity does affect the value?-A. The quantity affects the value in those circumstances, where there is no proper basis for the money, which is not real money but paper money.
Q. We have no gold basis to-day?-A. Yes, we have. We have a very excellent basis.
Q. A gold basis?-A. We are not on a gold basis strictly speaking at the moment.
Q. Well, on the basis on which we are, what determines its value?-A. What determines the value-of mon;>y is the confidence in that currency by the-people of the community passing it from hand to* hand without question.
Q. Supposing we should arbitrarily lessen the amount of all kinds of money in circulation, would not that affect the prices of all kinds of commodities?-A. But we are not going to do anything of that kind, are we?
Q. But if I understand you aright you say the amount of money in circulation, taking all sections of the country, does fluctuate from time to time?- A. It fluctuates in strict accordance with the requirements of the trade of the country and for no other reason.
Q. And you wmuld not say that that has a relation to the price of commodities?-A. It has only this relation, that if the prices of commodities rise, then more money is required.
Now, in contrast to these answers of Sir Frederick Williams-Taylor, I beg leave to give the quantitative theory as stated very concisely by Professor Taussig in his Principles of. Economics:
Double the quantity of money, and, other things being equal, prices will be twice as high as before and the value of money one-half. Halve the quantity of money, and, other things being equal, prices will be one-half of what they were before and the value of money double.
I do not profess to be a profound economist, Mr. Speaker; I must go to the economists for their statements of these scientific facts; but if it is true that the quantity of money has a very decided effect on the value or purchasing power of any particular piece of money, then I say it is fundamental that someone
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should control the quantity of money. How is that regulated to-day? Well, with regard to gold, it depends very largely upon the production of the gold mines. If we discover a new gold mine, or invent some improved methods of production, gold is produced in larger quantities. That is when gold was the standard, the quantity was dependent upon natural resources and upon labour. In the case of paper money, the quantity is not dependent upon labour or upon natural resources, it is entirely dependent upon the printing press, as we saw in Europe during the war. This is under the control of the government. The banks may actually issue all bills over the one and two dollar denominations, but at least the maximum amount of issue is controlled by the government itself.
But what about this third kind of money? And this shows the importance of laying our foundations correctly. Is the third kind of money which I mentioned a few moments ago, that is, credit instruments, subject to the same law of money? Some of the economists say that it is. If that is so the results are very far-reaching. The issue of credit instruments is dependent upon the banks, and the banks alone. They have a practical monopoly of the control of credit. Then we have arrived at this position. Those who control the quantity of money in circulation, whether of gold, bank notes or credit, control the value of all other things, since all other things are measured in terms of money. Need I illustrate again that if we are using scales, and somebody is able to make the pound weight weigh either fourteen ounces or eighteen ounces instead of sixteen, he is able to control the value of all the groceries that pass over the scales at the other end. Mr. John A. Todd, an economist of recognized standing, makes this statement:
One thing is clear as the result of our war experience: There is no use trying to control a country's currency system unless you can include control of its credit system. No matter how strictly controlled the currency may be, if the credit system is allowed to expand ad lib it may produce inflation just as certainly as the most unlimited expansion of the currency, as for example Germany in recent months.
That was in 1923.


Mr. FORKE:: I hardly understand what
my hon. friend means by his statement that the man who controls the pound controls all that passes over the scales. What effect will that control have on goods passing over the scales weighed by a different weight?


James Shaver Woodsworth: My illustration was this:	If I have a scale, evenly balanced,
sixteen ounces to the pound, I get sixteen

ounces of say, sugar at the other end. If I should in some way dig a hole into the pound weight so that it now weighs in reality only fourteen ounces, I would get only fourteen ounces of sugar at the other end; if, on the other hand, I should plug that hole with lead so the pound weight now weighs eighteen ounces, I would get eighteen ounces of sugar at the other end. Is that clear?


Robert Forke: Yes.


Mr. ROBB:: How would the man who
bought the sugar and resold it to you be affected?


James Shaver Woodsworth: It would surely
make considerable difference whether I was getting fourteen or eighteen ounces to the pound. In practice it means that the individual who has the dollar receives only 50 cents worth of goods, and that is precisely the difficulty to-day.
As to the evil influences of inflation and deflation, I cannot do better than quote from the evidence given by Mr. Irving Fisher before the Banking and Commerce committee two years ago. He said:
There is always someone who gets rich as a consequence of inflation or deflation, and gets rich as a parasite, off of other people. It is not his fault. You cannot help being a profiteer, when prices are rising, if you happen to be in the position of a profit taker, because the profits just fall into your lap. Of course, you may be more extortionate than other people but you may do that when prices are falling. Your nature has not changed simply because prices are rising, but your opportunity has changed. And when prices are falling, in the same way the bondholder gets an advantage, but it is not his or her fault; he is simply reaping what has been sown in the unstable dollar.
And again:
The evil then is one of social injustice, of picking the pockets of some people, to the benefit of other people. It is the same kind of economic evil as robbery is, and in appearing before a congressional committee, which is considering this same subject in Washington, and has a bill before it to stabilize the dollar in accordance with a particular plan that I have in my book, which your chairman has referred to, Professor King of the National Council of Economic International Research, who appeared in favour of that bill, said he had made a rough estimate of the actual amount of wealth which had been unjustly transferred through the change in the purchasing power of the dollar during the last few years, namely the war and the after-war period, and he believed that it was not less by any calculation that he could make, than forty billion dollars in the United States. Then he said, if there had been a forty billion dollar robbery, which would have amounted to the same thing, the people of the United States would have been considerably excited over it, but this picking of the pockets has been so slyly done that all that the person who has lost can see is that in a vague way he can identify the class that has got what he has lost, and he naturally accuses that class

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of having intended to steal it, whereas as a matter of fact it is an inanimate object, the dollar, or the price level, which has done the stealing.
Now I come to the very practical question: Who in Canada to-day regulates the quantity of money? And I use this term "money" in the sense that Sir Reginald McKenna uses it: All currency in circulation among the .public and all bank deposits drawable by cheque. I submit that the banks to-day very largely control the quantity of money. (They do so either directly through the giving or withholding of credit or in their control over government policy. We had a very interesting admission by Sir Frederick Williams-Taylor in regard to the policy of deflation. The hon. member for East Calgary (Mr. Irvine), quoting from an article which appeared in the Monetary Times of January 7, 1921, under the caption "Leading Bankers forecasted Tightening of Credit," asked Sir Frederick:
Q. This is an excerpt: "With reference to current loans in Canada your directors have felt impelled for many months past in the bank's and in the country's best interests to follow the policy found essential in every other country, and keep within bounds our advances to merchants and manufacturers. This policy is in accordance with the views of the Dominion government and it has been followed more or less closely by all the Canadian banks. Naturally enough, exception has been taken in certain quarters to such restriction, but as a rule our customers have recognized the necessity of checking over-trading and further expansion in such times as we are now facing." That is an acknowledgment of the point that I had at issue, that the bankers had taken an active part in the deflation of credit, is it not? A. That statement I think was quoted from my annual address to the shareholders in December.
Q. That is right? A. And that is strictly in accordance with the facts.


Sir HENRY DRAYTON:: What year was that?


James Shaver Woodsworth: This was in 1921.
I quote further:
Q. What effects do you think deflation of credit would have upon manufacturers, for instance, or business generally? A. The deflation of credit that took place at that time was in the interests of the manufacturers as well as of the banks and the community at large.
I think it is very generally acknowledged, Mr. Speaker, that that policy was a serious mistake and we are still suffering from the effects of it in Canada. The manufacturers, according to Sir Frederick Williams-Taylor, were quite willing that this should be done. He suggested that it was in the interests of the manufacturers, but I think that a good many of our manufacturers are coming to learn that it was decidedly not in their interests. Last year the Federation of British Industries, to which more or less our Canadian Manufacturers' Association corresponds, in its bulletin of the 30th October, 1923, considers, according to a summary which appears in the International Labour Review of January, 1924.
-that the deflationary policy in Great Britain and the consequent fall of prices during 1920-1922 were the cause of: dislocation of trade and severe losses to all holders of stocks and commodities, and to all who trade on borrowed money, that is, practically to the whole commercial and industrial community; a severe check to export trade; an increase in the burden of internal debt; and severe unemployment.
An alternate policy was suggested by the Right Hon. Reginald McKenna at the June meeting of the shareholders of the Midland Bank. This was reported in the London Times of January 26, 1924, and 4 p.m. I am glad to say was reproduced in Toronto Saturday Night, some months later. I quote:
To define monetary policy in few words I would say that it is the policy which concerns itself with regulating the quantity of money.
And again:
Gold coin is no longer minted, and additional paper currency is not issued except to meet the demands of the public	The amount of money in existence varies only with the action of the banks in increasing or diminishing deposits	Every
bank loan and every bank purchase of securities creates a deposit. . .
And again:
People often talk about money going abroad, or of foreign money coming here, but as a fact, when gold
is not in use, money is incapable of migration	
No exchange transaction, no purchase or sale of securities, no import of foreign goods or export of our own can take money out of the country or bring it here. Bank loans and their repayment, bank purchases and sales, are in substance the sole causes of variation in the amount of our money.
And again:
When national output is below productive capacity, the policy should be to let money out; when production is at a maximum, the outflow of money should be checked, and if inflationary symptoms have appeared, money should be withdrawn.
And again:
Whatever name we give to this expansion of credit, it is indispensable to the proper functioning of our commercial system, and is imperatively needed when trade is deferred and unemployment general.
I should like to quote in this connection a paragraph from Mr. J. A. Hobson which shows very clearly the connection between inflation and the war debt:
The connection between the inflation which the governments and banks conspired to produce and the magnitude and ownership of the war debt is not obscure. The " money " which the governments got by printing notes, by borrowing from banks, or by inciting banks to give credit to customers in order to increase subscriptions to war loans (all pure inflation), they spent in buying goods and services. Thus prices and profits mounted up the faster, because this easy way of getting money made governments more careless in the rates they paid for what they
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bought. The immense and rapid profits due to the expanding prices, with a lag of wages and a virtual elimination of competition-the recipients invested in wrar loans, the only authorized and available investment.
I should like particularly to direct the attention of both the Acting Minister of Finance (Mr. Robb) and the Minister of Labour (Mr. Murdock) to a very illuminating article on Bank Credit and Unemployment, published in the International Labour Review for January 1924. That publication is issued by the International Labour Office which is connected with the League of Nations. It points out:
There is a growing school of economists whose attention is mainly directed toward the possibility of stabilizing industrial activity by judicious regulation of the bank credits upon which industry is largely dependent.
.... The summarized results of all the above evidence would appear to be that banking policy should be directed toward regulating credit, not as before the war, in accordance with the amount of cash reserves held, but rather in accordance with the requirements of industry as determined by the employment index and the movement of prices.
I submit that our government is still proceeding on the theories that were prevalent and were considered to be sound before the war but that the war has made an entire change in the whole financial system and *that it is high time that we gave a little more attention to the far reaching effects of that change. I urge that the large measure of control of currency and credit, by private corporations now existing must not continue. It is not safe to leave such wide -powers in private-and, shall I say without offence- irresponsible hands, that is in the hands of those without responsibility to the people at large.
May I in a few words review the existing privileges of Canadian banks? In the first place they control and use the peoples' savings, taking them at three per cent and giving them out at eight or ten. Secondly, they have what I might call the franchise of issuing currency, which enables them to double their capital. Thirdly, they have virtually a control of credit-they can give or withhold and thus they can make or unmake any business in this country. Revelations of what went on in connection with the Home Bank have been a severe shock to the public at large, yet I think careful study will show that a great many of the practices prevalent in connection with the operation of the Home Bank, and which so shocked the public, are common with many of our banks. We are constantly meeting such instances as this-I quote from a despatch from New York dated July 23 last:

Steps to end what local newspapers describe as the " binder twine trust " were taken to-dav by Attorney General Stone at Washington, when action was begun to dissolve the Sisal Sales Corporation as a trust, in violation of the anti-trust laws. Among the defendants named in the suit besides the corporation was the Royal Bank of Canada.
This is not an isolated example by any means. These banks are engaged in business not only in Canada but in the United States and other parts of the world, and they are able to manipulate the savings of the people to their own ends. Further than that, the banks have great power, as we have pointed out on other occasions, through their interlocking directorates, as a result of which the directors of a bank are interested in a great many of the industrial and commercial enterprises of the whole country. But their really great power comes, not through the interlocking directorates, not through the issuance of currency, but essentially through their control of credit which gives the banks the power to inflate or deflate. Through this power they derive profits in both ways. The operation may be compared to the working of a pawr.-broking establishment. You bring your goods to the pawnbroker, and he may charge a very exorbitant interest on the loan. If you fail to pay his charges he retains the goods which have been pledged. Thus he has either the exorbitant charge or he has the goods. The same thing is true with regard to banks, as a good many of our western farmers are beginning to find out.
There is one other power which the banks have in Canada, and that is that they very largely do the government financing. It is not my purpose to go into this matter at this stage, but we all recognize that these great flotations are very largely made through the banks, the government fearing for some reason or another to undertake to finance direct. I should like to quote a paragraph or so from a little pamphlet which came into my hands not long ago. It is written by Mr. H. C. Cutting who states the situation with regard to credit very concisely. He says:
Now then, since our troubles are caused by the fluctuation in the value of the dollar, it stands to reason that if our system of credit issue could be changed so that the volume of available credit would be controlled by the demands of business, instead of by a board or the personal interests of the bankers, there would then be no fluctuation in the value of the dollar and the uncertainties, worries and losses that now harrass the business world would be at an end.
The report of the comptroller of the currency of
the United States shows that 99 per cent of our entire medium of exchange is bank credit. It is practically our only money. It is issued by the banker through making a loan. We speak of borrowing money at the bank, but, in reality, we do not borrow money-we borrow the bank's credit, or, rather, we

Currency and Credit
exchange our private and less known credit for the bank's better known credit.
If the banker grants the request for a loan, he gives the borrower credit for a deposit, discounts a note for him, or takes an acceptance, which are bat different ways of doing the same thing. In every case it is simply an exchange of bank credit for private credit. To illustrate: If the banker sees fit to make the loan, he takes the note and security of the borrower, gives him credit for a deposit in his passbook and on the books of the bank. The borrower uses this credit as a medium of exchange by means of a cheque. It can be turned into what we call money by cashing a cheque-but our paper money is only another form of bank credit, so that about 99 per cent of our medium of exchange is created and controlled by bank loans. The bank therefore has assumed the functions of the mint. It issues our money.
That is the essential point. We have on our statute books old laws that make coining one of the worst crimes imaginable and the penalties are very severe, and yet, to all intents and purposes, the banks to-day are doing coining-they have taken out of the hands of the government the power of issuing the great part of our money.
We have seen here in Canada, perhaps more than in most countries, the steady concentration of capital in the hands of a few. We have our bankers association, and in recent years we have had bank merger after bank merger. Why should not the government democratically control this money situation rather than allow a group of a dozen men who are not responsible to the people to do so? We have now government supervision and inspection. We have the advocacy of government guarantee of deposits. Here I quote a few sentences from the Vancouver Sun:
This bank consolidation should be followed by a government announcement that in future the security of all bank deposits will be government guaranteed, just as note circulation is to-day guaranteed. When a Canadian bank goes out of business, its note circulation starts to carry 6 per cent interest until it is fully paid. When that same bank goes out of business, the depositor starts to figure-not whether he will get 6 per cent on his deposits, but whether he will get 6 per cent of his deposits.
From all over this country demands are coming that the government should go much further than it has in the past. Why not take the next step and effectively control our currency and credit? Money itself is of the nature of a public utility. In the old days our roads were more or less controlled by private individuals. Some of us remember in childhood days passing along a road and having to stop every little while at a toll gate to pay for our use of that road. Those who constructed the roads took toll, and I presume they charged all that the traffic would bear. Now our roads are managed by the people, and they are given to the people at the cost
of service. Why not the same advance in the case of money? Here in parliament, we may pass legislation, but so long as there is economic control outside these halls our legislation will be largely nullified. Mr. Lloyd George, with whose opinions I am afraid I do not very frequently agree, made a very significant statement several months ago at the time of the issuance of the Dawes report. He said:
Agreement would never have been reached without the brusque and brutal intervention of international bankers. They swept statesmen, politicians, jurists and journalists all on one side, and issued their orders with the imperiousness of absolute monarchs who knew that there was no appeal from their ruthless decrees. This settlement is the joint ukase of king dollar and king sterling.
Thus we face the larger question as to whether or not parliament is to be sovereign, as to whether or not the people are to be sovereign, or whether we have not had our liberties filched from us without most of us .having been aware of what has taken place. Many advocate the breaking of monopoly. My thought is not that we should attempt to break this monopoly that we have to-day, this money monopoly, but rather that in some way the people themselves should assume the direction or control of the monopoly, and use it not in the interests of a few but administer it in the interests of the whole of the people of Canada.


Mr. M. N. CAMPBELL (Mackenzie):: Mr. Speaker, the Right Hon. Reginald McKenna, former Chancellor of the Exchequer of Great Britain, has said that:
Those who control credit direct the policy of governments and hold in the hollow of their hand the iestiny of the nation.
If anything were necessary to prove the truth of the above assertion, it is supplied by the effects of the drastic deflation of the currency which in the fall of 1920 was carried out concurrently in Great Britain, the United States, and Canada. The almost immediate effects were a general stagnation of business and unemployment that totalled 2,000,000 people in the British Isles and nearly 6,000,-OQO in the United States. In Canada it has resulted in the ruin of tens of thousands of farmers, business men, and manufacturers; it has been responsible for the exodus of hundreds of thousands of our best working people to another country; and it has set the clock of our country's progress back for a generation.
The masses are being told that present economic conditions are a result of the war. I often think that in their private moments of devotion members of an exploiting class must give thanks to heaven that there was a great war since they find in it such a con-
Currency and Credit

venienit means of passing responsibility from their own shoulders. It cannot be denied that the period during which the greatest inflation of the currency occurred was the two years immediately following the war. In September, 1920, the current bank loans in Canada reached the amount of $1,417,520,756 and in October, 1920, the Bank note circulation touched the highest point recorded in the history of Canada, being $249,165,000. There was a gradual incline in the current loans and the note circulation from November, 1918 the month of the armistice, until the peak of September and October 1920. This period of inflation subsequent to the armistice was responsible for a gigantic agricultural development in western Canada as is shown by the fact that the acreage under cultivation in the prairie provinces in 1918 was 30,398,000 acres, but had increased to 38,614,000 in 1921, the greatest agricultural expansion that had ever taken place in Canada in a similar period of time. The farmers were appealed to by provincial and Dominion governments, by banking, manufacturing and commercial men to increase production to the utmost limit, the ostensible Object being to pay off the war debt. Concurrently a great commercial and industrial expansion took place in eastern Canada such as this country had not previously known. There was no unemployment; manufacturers, business men, and farmers were alike prosperous. Prices were high and measured in terms of wages, of farm or factory products, the payment of our war debt offered no serious obstacle to continued prosperity.
Then in the fall of 1920, came the deflation that, according to many economists, has caused more misery and suffering and probably more actual deaths than the great war. It is contended by some of the disciples of the orthodox system that it was the deflation of business that caused the deflation of the currency, but this is not taken seriously by any economists of note.
In the three months' period from October, 1920, to January, 1921, the bank notes in circulation were reduced by $43,000,000, and by June 30, 1921, by a further $10,000,000. When it is considered that a great deal of extra money is needed to handle the crop during this period, the deflation is very much greater than is indicated by these figures. In the ordinary course of events the banks would have issued $20,000,000 extra paper as permitted by law to handle the crop, in addition to using up more of their own reserve currency. It is, therefore, reasonable to suppose that the actual deflation was in reality not less than $75,000,000. Due to the elasticity of

our credit system, the banks usually show loans to the extent of three or four times the total amount of money in existence. The skrinkage in the circulation medium of $75,000,000, would, therefore, mean the curtailing of loans to an extent probably several times $75,000,000. There was a steady shrinking of the bank note circulation from October 1920 until we reach the low water mark of January 1923. The net withdrawal from October, 1920 being $97,000,000, or two-thirds of the total bank note circulation.
I have here a report of the Bureau of Statistics which shows the estimated wealth of Canada at the close of the year of 1920 and also for 1921.
These figures would indicate that nearly $300,000,000 of our national wealth disappeared during this period. It does not mean a disappearance of actual goods, but a lowering of value based on money value. What really happened was that by the simple method of deflation the value of money was increased and the holder of government bonds, farm mortgages or businessmen's notes was in a position to compel the delivery of more goods or services for the same amount of money. The net result was a drastic increase of all debts both public and private to the benefit of an interest-earning class.
In reality the effect constituted a capital levy on the manufacturers, business men and farmers, and a direct transference of wealth from the active to the inactive portions of the population.
The same report shows the national income of Canada in 1920 to be $3,682,000,000, but only $2,728,000,000 for 1921, a lowering of the national income of nearly one billion dollars in the short period of one year.
Dividing our population up into families of five, these figures show a direct cut in the annual income per family of $525. A further direct result of the financial policy referred to. Some of these facts are so obvious as to be beyond the necessity of argument.
It would appear that the United States financiers realizing that the deflation had been too drastic adopted a measure of inflation in 1922 which was reflected in a period of considerable industrial activity and the elimination of unemployment.
France and Belgium are two countries which refused to deflate in 1920 in conjunction with Great Britain and the United States. The currency of these countries is still on a depreciated basis, which means that debts contracted during the inflation period still bear the same relation to wages and value of products as when they were contracted. The

Currency and Credit
common opinion that a currency below par value ia indicative of national weakness does not necessarily follow. It simply means that money is of low value and the holder of money securities is in a position to demand less in goods and services than he would be if the currency were contracted to bring it to a par value. In fact, the low value of money means a lessening of the burden of taxation on industry and labour. I wish to quote a press despatch which appeared in a western paper some few weeks ago, in which the former Finance minister (Sir Henry Drayton) who had just returned from France was quoted as saying that the people of France were remarkably prosperous. There was no unemployment and. the people, he said, seemed to be saving money. I think he said that France had absorbed about 1,500,000 immigrants since the war and had jobs for all of them, and that she was still absorbing immigrants at the rate of 5,000 per week. Of course, the ex-Minister of Finance attributes this to protection, but I do not think he expects us all to take him very seriously. I think he and, indeed, any other hon. gentleman will admit that France to-day would not be in that prosperous condition had she deflated, in conjunction with Great Britain, the United States and Canada in the fall of 1920. The recovery of France after the close of the war of 1870 and the facility with which she paid off the enormous burden laid upon her by Germany, belied the predictions of the economists of that day, who believed she was destined to become a province of Germany. The financial policy of France to-day is very similar to what it was subsequently to 1870. All countries inflate their currency during the war period, and France was no exception to this rule during the war of 1870; but instead of drastic deflation immediately at the close of that war, through the action of the French government, there was an inflation, just shortly after the close of the war, to the amount of about 250,000,000 paper francs. This had the effect of stimulating business, but unhealthy speculation was prevented by heavy taxation. When deflation came in France, it came very gradually, being spread over a long period of years, and France emerged from that dark and difficult period a sound and safe nation, industrially, commercially and financially. I think there is something that we might learn from this today.
It is useless to blame our individual banking institutions. The unit 'bank can no more help itself than a single pulley can help revolving with the whole machine. The system
itself is wrong, and the power that is to-day vested in the hands of about seven men in the city of Montreal, should be vested in the people of Canada.
It will always be necessary to inflate and deflate currency under certain conditions, but our complaint is that what was done drastically in the course of a few months in the fall of 1920, should have been spread over a period of five or six years; or as one economist expressed it, our financiers used the expedient of stopping the express train by the opening of a switch rather than by the application of the air-brakes; or as a banking authority puts it, there was no necessity for throwing us out of a ten storey window when we could have been led down a fire escape. What the financial interests did to the nations in 1920, no government with full responsibility for the control of financial policy on its shoulders would have dared to do. It seems to me just as logical, as sensible, as reasonable, that we should hand' over the control of the policy of national defence, of fleets and armies, to private corporations, as to leave them with power to create at will periods Of unhealthy speculation on the one hand and depression with business insolvency, unemployment, and the lowest depths of poverty, misery and suffering, on the other.
One of the greatest obstacles in the way of monetary reform is the fear of a system, the ramifications of which touch every man, woman and child in the nation. The business man or politician who dares to lay unholy hands on the hitherto inviolable Ark of the Covenant called finance, is considered extremely venturesome. In this connection, I should like to quote the late President Wilson, who said:
Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of somebody, are afraid of something. They know there is a power somewhere so organised, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it.
Henry George said:
There is danger in radical change, but far greater danger in blind conservatism.
We may evade the demands of common sense to-day, but that public control of credit will eventually come is just as predictable as sunrise and sunset. The government of the day may evade the responsibility of action and shift the burden on to another generation; but, to do so, is to face the dangers of national bankruptcy and is an admission to posterity that this generation is bankrupt in imagination, vision and statesmanship.
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James Alexander Robb: Mr. Speaker, the resolution of the
hon. member for Centre Winnipeg (Mr. Woodsworth), as it appears on the order paper, reads:
That, in the opinion of this House, it is not in the interests of the country at large that the privilege of issuing currency and of controlling financial credit should be granted to private corporations.
I have listened very carefully to the speech of my hon. friend and also to that of the hon. member (Mr. Campbell), who seconded the resolution, and I cannot understand that my hon. friend's speech has very much to do with the resolution as it appears on the order paper. He has gone carefully into the merits of credit and the value of currency. He has repeated a speech that, I think, we have heard before in this House, that if there was a more plentiful supply of money, the products of labour, whether they be in cereals or in manufactured goods, would consequently advance.


James Shaver Woodsworth: Would the minister point out where I urged a more abundant supply of money? I am not aware of having done so.


James Alexander Robb: That was the inference I
gathered from my hon. friend's speech. I am going to read that speech over carefully, because I observe that he must have prepared it with some care. I must be dense, because I really cannot understand) anything in the speech of my hon. friend unless it is that he wants Canada to adopt the methods which were tried out in Russia and which were a failure. My hon. friend seemed to go out of his way to bring in as a witness Sir Frederick Williams-Taylor, general manager of the Bank of Montreal, and he rather tried-at least I gathered that opinion-to create in this House the impression -that at least my hon. friend believed that Sir Frederick knew very little about the banking system.


Mr. GARLAND (Bow River):: Hear, hear.


James Alexander Robb: My hon. friend concurs by
saying, "hear, hear." Having the responsibility, temporarily, of providing at certain seasons of the year for the money to move the crops of the northwest, I am bound to say that I do not always accept the advice of Sir Frederick Williams-Taylor upon questions of finance. I am inclined to think, however, that the man who grows the wheat in western Canada and wants real money for it, would prefer that I should take the advice of Sir Frederick Williams-Taylor to that of my hon. friend.


Mr. IRVINE:: What does the minister
mean by "real money?"


James Alexander Robb: I mean money that will be
worth something in any part of the world.
My hon. friend who seconded the resolution made a reference to bank mergers and to the control of banks by a group of seven men in Montreal. If there is one thing more than another that will lead to bank mergers-and we do not want any more bank mergers in Canada-it is this continual attack upon our banking system in this parliament. It makes it very hard sledding for the small bank, it creates distrust in the mind of the depositor, and consequently it renders it difficult for the smaller banks to compete with the larger institutions. There is no such thing as the control of the money situation in Canada by any group of seven men in Montreal; the banking system of Canada is controlled by two hundred and thirty-five men in this parliament. At the close of the ten-year period the Bank Act was revised; it was gone over last year; and while every man's opinions did not prevail the views of the majority did. And that is the real basis of sound government.


William Irvine: If the banks have good
money why should it unsettle them to have subjects of this kind discussed in the House?


James Shaver Woodsworth: May I ask the minister a question at the same time? Does the minister suggest that this parliament has any control over the issuance of erecjit by the
banks?


James Alexander Robb: I say that this parliament gives the banks their charter.


James Shaver Woodsworth: That was not the
question.


James Alexander Robb: 
Mr. SPENCER:: Was that the case with
the Home Bank? Was that institution penalized when it did this?


James Alexander Robb: We may go into that question later on. At present I am discussing the general situation as it is. The third penalty is this:	That there is a tax of 1 per cent
paid to the government on the maximum of its monthly note issue. Giving the banks this privilege of issuing notes has meant a profit to the Canadian people of $15,857,631.32 between the year 1914 and February 20, 1925. The greatest profit in any one year was in 1921, when it was $3,644,056.72. But that i3 not all. The bank also pays income tax on its income. Previous to 1922 the amount paid in circulation tax was deducted from the amount of its income tax. In 1922 the Income Tax Act was amended so as to take away this privilege.
The banks, under section 64 of the Bank Act, are required to deposit with the minister 5 per cent of the average amount of their notes in circulation to form a circulation redemption fund. This fund bears interest at 3 per cent. Owing to the fact that the population ds spread over a territory three thousand miles in length, different conditions may exist in the different provinces simultaneously. To provide for the financing of industries in each of these provinces, Canadian financiers have developed a branch bank system, and at is in connection with this system that the greatest benefit in regard to note circulation arises. Reference has been made by an hon. gentleman to Sir Frederick Williams-Taylor, but I notice that hon. gentlemen were careful not to quote Sir Edmund Walker who appeared before the Banking and Commerce committee in 1923. Sir Edmund Stated at that time that the right to issue notes permitted the banks to open many offices which could not possibly be kept open otherwise, partly because of the till money
and partly because of the profit on note issue. It will therefore be seen that the right granted to the banks is of great practical value to the people of Canada, inasmuch as it enables these institutions to open branches where they are required in order to assist in carrying on the affairs of the country.


Edward Joseph Garland: If the
privilege of issuing notes is so profitable as to enable Sir Edmund Walker to declare that branch banks can be opened up in consequence, would not the same thing be true if the government controlled the banks?


James Alexander Robb: As to the government controlling all banks, my hon. friends 'have not advocated that.


Edward Joseph Garland: I am not
referring to that just now.


James Alexander Robb: Let me answer my hon. friend this way. Suppose the Dominion government should have the exclusive right of issuing currency, this would mean that approximately $300,000,000 worth of currency would be put into circulation. It would to a great extent mean that much of the circulation would be unsupported by gold backing, for practically all of t'he gold in the possession of the Minister of Finance at the present time to protect the outstanding issue has been received from the banks in exchange for Dominion notes and in reality belongs to the banks. In some countries, of course, the right to issue notes is a monopoly given to one bank.


Milton Neil Campbell: Does the minister say
that there is gold behind the bank note circulation to-day?


James Alexander Robb: I have already stated the
amount of gold in reserve at the present time, and there are many bankers in Canada who think that we should work upon a gold basis. The fact remains, however, that the Canadian dollar to-day is worth one hundred cents on any market in the world.


Mr. LEWIS:: Would not the same be true if currency were issued by the government?


James Alexander Robb: If I can follow correctly the
speech of the hon. member who moved the resolution (Mr. Woodsworth) and the speech of the gentleman who seconded it (Mr. Campbell), they want us to go back and adopt such a system as was tried in Germany, where it failed, as it failed in Austria and in Soviet Russia.


James Shaver Woodsworth: I hope the minister will accept my word for it that I had nothing of the kind in view. I did not say such a
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thing, nor can it be reasonably inferred from my remarks.


Milton Neil Campbell: If the minister was not listening when I was speaking, he will find on reference to my speech in Hansard to-morrow that the same is true of the very thing I have been complaining of, the inflation in the past, inflation that led to a lot of unhealthy speculation in this country, which speculation was assisted by the opening of all these branch banks.


James Alexander Robb: Well, it ill-becomes my hon.
friend to find fault with the opening of branch banks, because I have in mind a gentleman who sits right near the hon. member (Mr. Campbell) who attacked the banking system prevailing in western Canada, and yet he came to me and pleaded that I Should request the directorate of one of our chartered banks not to close a branch bank in his constituency.


Milton Neil Campbell: Would the minister
suggest that it is necessary to have six branch banks in a town of six or seven thousand people? Is it any more necessary than to have six post offices or six railways stations?


James Alexander Robb: No, I quite agree with my
hon. friend, that the branch bank system may have been overdone, I will go that far with him; but I would remind him that we have revised our banking system, we discussed it again last session, and I submit that the banking system of Canada to-day is meeting pretty well the requirements of the people. That banking system has prevailed for a hundred years, and I think we would be wise to let well enough alone. I have said enough to indicate to my hon. friend' (Mr. Woods-worth) that I am not in sympathy with his resolution. I am not sure whether he intends to press it to a conclusion, but I would ask him that, having presented his views to the House-and possibly other hon. members will also present their views-the resolution might be withdrawn.


William Irvine: The minister has dealt
with the issue of currency and bank notes by the banks, which amount to about four per cent of the money used in Canada. Has he anything to say about the ninety-six per cent which is put into operation through checking?


James Alexander Robb: The checking system is a very great convenience to the business people of this country, and it is the recognized system of doing business throughout the world where-ever the national currency is on as sound a basis as the currency of Canada.


William Irvine: Has the government control of that now?


Hewitt Bostock: Order.


Henry Elvins Spencer: I should like to repeat the question asked by the hon. member for East Calgary (Mr. Irvine):	Has the government
control of the checking system of Canada, or is it in the hands of the chartered banks?


James Alexander Robb: If I presented a cheque to a
bank without any funds, I do not think the government would be called upon to go in and make good the loss.


Henry Elvins Spencer: That does not answer the
question.


Mr. W. C. GOOD (Brant):: Mr. Speaker,
I do not know that I have seen anything more tragic and pitiable since I have been a member of this House than the empty benches opposite during the course of this vitally important discussion. Nor have I heard anything which revealed such an utter inability to understand the point of view of the hon. member for Centre Winnipeg (Mr. Woodsworth) as the speech of the Acting Minister of Finance (Mr. Robb).


Some hon. MEMBERS:: Order.


James Alexander Robb: That is all right; it does not hurt me.


William Charles Good: It was not meant to be offensive at all; I have a very high regard for the hon. minister personally. Now, Mr. Speaker, although the supporters and the members of the government apparently know nothing and care less about this matter-


Some hon. MEMBERS:: Order.


William Charles Good: Well, Mr. Speaker, if they
cared they would have been here.


Some hon. MEMBERS:: Withdraw.


Hewitt Bostock: Order.


William Charles Good: Although this indifference has been only too abundantly indicated and is very patent to everyone of us here, I maintain that there is no public question of greater importance to the masses of this and other countries.


James Alexander Robb: I will admit that.


William Charles Good: I am told by one of my
friends on this side that because the people in the country do not understand this question and have never made any demands in respect to it, because no political party has a plank in its platform dealing with the matter, therefore we should be silent in this House with regard to it. But I will not be

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silent so long as I believe that this is a vitally important matter; I shall do my best to arouse public interest in it. That is my answer to my hon. friend on this side.
Although the Acting Minister of Finance may object to the principle of the resolution, and although he may call upon his followers to vote it down, yet he has admitted, his government has admitted, and nearly every government in every civilized country has admitted, the principle of this resolution,-[DOT] but they are very far from attempting to carry it out effectively. Now, it is our purpose to show, first that the principle of public control over our financial system is absolutely sound, and also that there is a crying need for the further and more effective application of the principle than has generally been admitted. The application of this principle of public, democratic control over finance has been shown in many countries through the development .of co-operative banks and their various federations. I have mentioned this matter on previous occasions, and I do not wish to delay the House now by going into details again, but anyone who cares to look up the literature on the subject of cooperative banking will realize that through that particular method the democracies of the world, the people who need to use credit and currency have asserted their right of control. Not only so, but every government-and the Acting Minister of Finance has admitted this -exercises a certain amount of authority over all banks and financial institutions. We have it perhaps carried to a much further extent in some other countries than in Canada: witness the creation of the federal reserve system in the United States, of the Commonwealth Bank in Australia, and of other similar institutions.
Now, Mr. Speaker, the need is to make effective the public control that is to-day implied but so lamely and inadequately exercised. I think the hon. member who moved the resolution (Mr. Woodsworth) has presented the case in outline in a most admirable way and has covered the whole field. I propose therefore merely to refer as briefly as I can to some particular aspects of the case which he presented.
Hon. members will recall the situation that developed in 1920, 1921 and 1922 with respect to the deflation, throughout Canada and the United States. This deflation affected agriculture in particular, and the government of the United States was much more prompt in instituting an inquiry than the government and parliament of Canada. And I would like to emphasize the promptness and
effectiveness of the movement that was begun by the United States in the early part of 1921. There was then instituted a joint committee of agricultural inquiry which presented its report in four volumes. I have here one-the smallest of the four-on Credit which I shall refer to again. In addition to that they published in detail the evidence taken at a number of hearings. I have under my hand the hearing before this joint committee of agricultural inquiry held at Washington between August 2 and August 11, 1921, dealing specifically with the relation between the policy of the federal reserve system or board in the United States and the terrible industrial condition of the country that developed in those years. I should like to refer briefly to one or two passages from addresses delivered by a gentleman who appeared before our Banking and Commerce committee last year, and who had been for some years previously the Comptroller of Currency in the United States. I refer to the Hon. John
S.	Williams, who was ex-officio a member of the Federal Reserve Board and who took a very prominent part in objecting publicly and privately to the financial policy which, he maintained, was an ill-advised one and which prevailed in the latter part of 1920 and 1921. I want to get right down to facts, because I know there is a disposition on the part of many hon. members to say, "Oh, this is all a discussion of mere academic theories." The practical man-at least, the man who prides himself on being practical-is inclined to scoff at the stuff that he calls theory, and so on. I should like to, suggest in passing that after all the most practical man is the man who sees farthest. Unfortunately we often hold, in practice if not in theory, that the practical man is the man who sees nothing but what is directly in front of his eyes: he can see neither to one side nor to the other, neither backward nor forward; all that comes within his observation is what is immediately before his eyes, in place or time. But the really practical man is the man with vision, who knows history, who knows what is going on in the world and who thereby can interpret what has been passing and can, as it were, project himself into the future. After all, that is the genius, I take it, of prophecy; and there is an element of prediction about it.
Coming to the passages I referred to a moment ago, I will read from one of Mr. Williams' addresses given in the United States and in which he made reference to the federal reserve system in that country. I
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may say again that the federal reserve banks of the United States were created for a definite purpose and the Federal Reserve Board was put in charge of those banks in order that the government or the people of the United States might exercise a greater measure of control over their financial policy than had1 been exercised previously. I am free to admit that that control may not have been exercised as it should have been, but in any event, in the very creation of a Federal Reserve Board there was an ad-5 p.m. mission of a need for public control. There was indeed, a recognition of the very principle that we are debating to-day and to which the Acting Minister of Finance (Mr. Robb) says he objects. I hope he will withdraw from that very untenable position before it is too late. I read, then as follows:
A primary purpose of the reserve system is to provide for the ebb, flow, and distribution of the country's supply of money to meet the legitimate needs of the people and of commerce. Generally,' that purpose has been fulfilled admirably. Sometimes it has been impeded or prevented and troubles have ensued in consequence. For instance, when abnormally high rates for money for speculative or other purposes have been made and maintained in New York, the natural result has been to draw money from sections where it was needed for productive and constructive work to where it could earn extraordinary profits from the necessities of speculators and promoters.
Let me pause here, Mr. Speaker, to direct the attention of the Acting Minister of Finance to what has been revealed in connection with the Home Rank. Was money not diverted from productive enterprise, the saving of poor people all through this country, and devoted to speculative ventures and the activities of promoters? This is not theory; this is fact.


Mr. MACLEAN (York):: May I ask the
hon. member this question: Is it not the case that if we had a federal reserve system in this country and the Home Bank had to go to the federal reserve bank for currency, as all member banks have to do tin the United States, would the things that occurred in connection with the Home Bank not have been discovered by that system?


William Charles Good: I think it would depend not so much upon the mere existence of a federal reserve system as upon the existence of an efficient system of inspection. That, of course, is or ought to be very closely linked up in practice with a federal reserve system.


William Findlay Maclean: With my hon.
friend's permission, may I ask this:	Under
a federal reserve system by which control

would be exercised over member banks- and the Home Bank would be a member bank-would not the misconduct, if it was misconduct, have been discovered early in the history of the bank?


William Charles Good: The evidence that was given
before the Banking committee last year proved that no system of that sort could be safely operated without a very effective system of inspection connected therewith. But the discovery of a rotten condition would depend more on adequate inspection than upon the mere existence of a federal reserve system.


James Alexander Robb: Will my hon. friend allow
me, then, to ask another question following that of the hon. member for South York (Mr. Maclean) ? The hon. member is a student of this financial situation: If the theory advanced by the hon. member for South York is correct, what is the explanation for the large number of bank failures in the United States in the last two years?


William Findlay Maclean: Were they member banks?


William Charles Good: 
Robert Forke: Not as bad as gambling on race courses, surely?


William Charles Good: Much worse. I may say, in
passing, that I have never contended that gambling on race courses is the worst kind of gambling. I should like to make that very plain. Now I continue:
The official reports also show that in addition to the money which the New York banks were lending on call in New York for account of their correspondents and customers, the national banks of New York city this time last year had on deposit to. the credit of their correspondent banks in all parts of the country approximately $900,000,000 more, while the total sura which the New York national banks were lending, directly and indirectly, to all other banks throughout the country was considerably less than one-fourth of that sum.
The important thing is to find and apply proper
remedies.
May I repeat that statement here. I think the principle is beyond question:	The important thing is to find and apply proper remedies. To continue the quotation:
Perhaps there has never been a tjme when the business and industrial interests of the country were more deeply dependent upon a sound, wise, and courageous administration of our banking and financial system than at the present moment.
Perhaps I should not take up the time of the House too much, but there is one other extract I should like to read, from an address delivered by Mr. Williams before the Augusta
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Board of Commerce and Georgia Press Association at Augusta, Georgia, July 14, 1921:
Yet while this orgy of usury and speculation was raging in New York many of you here had the experience of going to your local banks for money with which to pick or hold your cotton or to carry your paper through the dull season, and of being told of the difficulty of getting money through the reserve bank, and of the limitation being put on the small borrowers. Seeing these things as I do, nobody on earth can convince me that there is not something wrong, a perversion of purpose somewhere. I do not mean to suggest that the New York banks, for instance, were handed out money without security. I do mean that they could and should have been admonished and restrained by the federal reserve administrators precisely as the village man or the country farmer, even with ample assets, is advised and restrained by village and small-town bankers when showing a disposition to be too speculative or extravagant. These things, as all of you know, occur every day.
I heard much talk while I was a member of the Federal Reserve Board about forcing the farmer to sell his wheat, or the cotton planter his cotton, or the cattle raiser his live stock, the wholesaler or retailer their stocks of goods, but I must tell you frankly that I do not recall a single occasion during the past year or two of deflation when the board ever discussed seriously the importance or desirability of requiring the big banks in New York city, some of which were lending millions of dollars to their owm executive officials on highly speculative securities and to big syndicates in which these officials were actively interested and which those banks had been carrying for months and sometimes for years, to liquidate a portion of these loans, in order that by so doing those banks might have more money to supply the legitimate use of trade and commerce.
Now, Mr. Speaker, I quote these extracts in order to show hon. members of this House if I can, that this is a matter which touches very vitally and closely the interests of every business man and producer in this country. If we had a little more omniscience than we have, and if we could see the inside and the ramifications of all the various activities of our financial system during the last three years, hon. members on the other side of the House, and some on this side, would not show the indifference they are showing to-day.
I desire now to refer briefly to one or two paragraphs of this report of the joint committee of Agricultural Inquiry. I am referring here, not to the statements made by the excontroller of the currency, whose opinion and judgment you might question, whom you might accuse of being an interested party, but to a report of the commission of inquiry made after a. full examination of the evidence, part of which I referred to a few moments ago. I read two paragraphs from the summary at the beginning of this section of the report referring more particularly to the situation that faced the fanners of the continent in 1921:
The debacle of prices in 1920 and 1921 reduced the farmer to a condition worse than he has suffered under

for 30 years. Prices of farm products are relatively far below the prices of other groups of commodities. The products the farmer has to sell will buy less of the products the farmer has to buy to-day than at any time in the last two decades. Farm indebtedness has doubled in the last 10 years, and the drop in prices has the effect of again doubling this indebtedness. Farmers are having the greatest difficulty in paying the debts incurred in producing the crops of 1920 and in securing credit necessary for the new production.
And now listen to this:
The commission believes that these difficulties are due in a measure to the credit restrictions and limitations of the past eighteen months, and in part to the fact that the banking machinery of the country is not adequately adapted to the farmer's requirements.
I desire to comment at this point. This is the considered report of the joint committee of the Senate and the House of Representatives in the United States, and they have here asserted most definitely that financial policy was a factor in that most terrible disaster. We are claiming to-day-and I desire to claim again and most emphatically- that financial policy ought not to be left to a few individuals or to a few private corporations. It is something that must be retained by the people at large, exercised through their proper representatives; even then we shall have lots of mistakes, for I presume there are many mistakes made in this parliament, no matter how good our intentions may be. The Federal Reserve Board, according to Mr. Williams' allegation, was party to a very ill-advised policy. Let us put it in this way: They lent themselves, in his judgment, to the speculative interests in the United States at the expense of the real interests of the farmers and the workers throughout that vast country. I am not asserting, and I do not think anybody would be so foolish as to assert, that this ill-advised financial policy was the sole cause of the disaster. There was a number of other factors which entered into the situation, but the best evidence we can get indicates beyond all controversy that it was a factor and an important one. Our contention is that owing to the situation which has developed under modem conditions the control of financial policy, the issue of currency and the control of credits ought to be in the hands of the people. That is all the resolution says. I am positively amazed that the Acting Minister of Finance (Mr. Robb) objects to the resolution when he admits that this Canadian parliament has authority over our banks. All we want is to assert that authority and make it more effective.


Robert Forke: The resolution is in negative form. It simply says it is not in the interests of the country that it should be in pri-

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vate hands. It does not give any statement as to where it should be.


William Charles Good: Then all the better for my
case. What does it mean when it says it should not be in private hands? The converse must be true, namely that it should be under the control of the public. I was simply interpreting the resolution in a slightly different way. I want to refer now to one or two statements made a few moments ago by the Acting Minister of Finance (Mr. Robb). He says the banking situation is now controlled by 235 men in this parliament. So it should be. But we want more than control. We want intelligent control. And' we cannot get intelligent control if those benches on the other side of the House are empty.


Mr. CALDWELL:: To whom would the
hon. gentleman propose to give the control?


William Charles Good: I do not propose to give the control to any other than to parliament, the representatives of the people. But what I have in mind is the indifference shown by the hon. members of this House to this most important question, as indicated by the empty benches, and if they do not - give attention to these matters, how can we have intelligent control?
I desire next to refer to a matter which I brought to the attention of the House last year.


Mr. MILLAR:: Before the hon. gentleman
leaves the matter, may I interrupt? My difficulty is this; it would seem to me that the inflation and the deflation which has caused so much trouble are in the hands of governments. Is the Finance minister not responsible for the inflation and deflation?


William Charles Good: I am free to admit that there may be a very considerable element of truth in what my hon. friend says. In the report which I had in my hands a few minutes ago there is a very free and frank admission that what we will call the national financial policy of the United States in war-time had a great deal to do with inflation. I think that is absolutely true, but it does not touch the question at issue at all. I have already admitted that representatives of the people, if they have control over financial institutions, will make mistakes. But it is far better to have control, to make mistakes, and to learn from those mistakes, than not to have control. Just let me elaborate that thought a little. Would it not be better in this country to have a democracy, even if it be very inefficient, than to have a dictatorship? We might say: As long as we have a benevolent dictator or 49
autocrat, we would all be better governed than we are now. Possibly we would, but we would not be satisfied with that particular type of government. We want to have the privilege of making our mistakes and learning from them, and the only way by which we are going to learn is by making mistakes under a democratic form of government. The analogy holds in this particular field, that if the private corporations who control our financial policy are all-wise and all benevolent, well and good; but you cannot assume that is so, and the evidence that Mr. Williams adduces shows that when the power to rob and to exploit the public is in the hands of the few, they very often exercise that power and the public suffer.
Continuing, I want to refer to a matter that I brought to the attention of the House last year. I have heard it stated that the Canadian Bankers Association is the most powerful organization in this country. That may be quite true. I referred last year to the expenditures for lobbying and so on made by that association during the revision of the Bank Act in 1923, amounting in all to $96,646.50, irrespective of what they paid their secretary who was the only representative of the association who was visible and who had credentials. I have heard it said in connection with the question of public ownership of railways-and I should! like some of my Quebec friends to bear this in mind-that if we did not have public ownership >of railways, we were going to have railway ownership of the public, of the government. If we do not have public control over finance, we are going to have control of the public by financiers. We can take our choice.
I have in my hand some correspondence which was exchanged between Professor Irving Fisher who was here two years ago, the Right Hon. Sir Reginald McKenna, one of the great English bankers, Professor Gustav Cassel of Sweden, one of the most prominent economists and a certain Mr. Bellerby who was connected with the International Labour office at Geneva, Switzerland, dealing with the question of the stabilization of our currency. I want to read a few extracts from a letter written by Professor Irving Fisher to Sir Reginald McKenna, as follows:
A recent letter from Prof. Cassel says:	"With
regard to your paper on the Stabilisation of Europe, I must say that it is nothing less than a scandal that nations should go on being ruled by ignorant politicians completely incapable of grasping the most elementary truths at the bottom of the world's present difficulties. The American opinion that a solution must be handed over to economic experts is all right, but people should not be led to believe that the problem is a simple question of arithmetic."

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Prof. Cassel and I both feel that instead of concentrating on the problem of stabilising paper relatively to gold, we would probably make greater progress and certainly be more fundamental if we could first stabilise the money unit in gold standard countries.
I do not wish, at the present time, to go into details concerning the stabilization of currency, and I have very little further to say on this present occasion. May I repeat this however that unless the people of Canada and the people of other countries take means to secure a more effective control over financial policy and financial systems, they are practically doomed, because there is not any force, any influence, more potent for good or ill at the present time than the money influence? I have therefore, great pleasure in supporting the resolution moved by the hon. member for Centre Winnipeg (Mr. Woodsworth).


Hon.   S@: Mr. Speaker, I am afraid I shall have to burden the House for a few minutes in saying something upon this issue. It is a matter I did not expect to speak on, but a good deal has been said as to what has happened in the past in connection with deflation policies and the like. The whole subject is interesting. I like to hear it discussed, but much more than hearing it discussed, I should like to get one ray of light as to the future, as to something practical, from the gentlemen who delight to discuss it.


William Charles Good: I will give it to the hon. member later.


Henry Lumley Drayton: I shall be delighted to get it. So far I have not been able to get it. To-day we have had complaints all around. There is a complaint if you go to the right. There is a complaint if you go to the left. There is the complaint of inflation by the banks. There is the complaint of deflation and the like. There is the complaint of government inflation. There is the complaint against rapacious financiers. Then, there is the plaintive complaint voiced by the hon. member for Brant (Mr. Good) as to ignorant politicians having anything to do with financial matters. I believe many economic thinkers will agree with my hon. friend. I wonder if, after all, we cannot get somewhere with these complaints.
I wonder if we cannot possibly clear the ground just enough to begin to appreciate the difficulties of the situation. Everybody should want to endeavour to improve the situation where any avenue of improvement is opened up, and I think that is the desire of everybody. The trouble is that we have

so much talk, and what the Acting Minister of Finance (Mr. Robb) says is perfectly true. If we have any interest in the smaller banks, one of the worst disservices we can do them and the public generally is to create suspicion in the public mind as to our banking system. It is well to criticize these institutions if by so doing we can accomplish anything useful, if we have some concrete, sensible proposition which will advance their interests instead of hurting them. But in the absence of such a proposition I want to endorse entirely what the Acting Minister of Finance has said.
Hon. gentlemen say that the previous government were to blame for deflation. Following that out, they would have to say that the present government is to blame for continuing the same policy. There has been no change. Everything is the same. Many questions have been asked to-day and I am going to put a question. What step did the former government take, or what step has this government ever taken, to force upon Canada deflation? Not one. There was never a governmental action taken in this country calculated to create a position of artificial, forced deflation.


John Millar: Was currency withdrawn from circulation in 1920? And if so, how much, and by whom?


Henry Lumley Drayton: I wonder if
the hon. gentleman really thinks that any government or bank, or anybody else, can expect to feed out dollars in this way and keep it up? Is there anybody to-day who does not realize that the issuance of money means interest and that the people holding money which they cannot use return it in order to avoid the burden of that interest? Can anjmne be in ignorance of that fact?
What governmental step was ever taken, either by the present or by the past government, to bring about sudden deflation? There never was such a thing.


William Irvine: Did anyone m,ake that
charge to-day?


Henry Lumley Drayton: Yes, I have
heard it to-day.


Milton Neil Campbell: Not from this section.


Henry Lumley Drayton: Yes, from that section. Some hon. gentleman, I cannot remember who, read some report or other of Sir Frederick Williams-Taylor in which the statement was made that, agreeable to the policy of the government, or words to that

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effect, something was being done. I did not quite get it, but I remember having heard something of the kind. But my point is that there never was anything done in Canada, either by the former government or by this government, which would have anything at all to do with price levels.


William Irvine: But should not something
be done?


Henry Lumley Drayton: There we are
getting on to something else. But there is no difficulty about that point.


James Shaver Woodsworth: I think the hon.
gentleman is referring to a quotation which was submitted to the House this afternoon from the evidence given by Sir Frederick Williams-Taylor before the Banking and Commerce committee.


Henry Lumley Drayton: I thank the
hon. gentleman for the information. There is no mystery about the matter at all. By one of those strange accidents of fortune, it happened that price levels were affected just through one of those vehicles which some hon. gentlemen think the government should adopt. Now, what is it that has to do with price levels? Commodities, is it not?-commodities and the outside market for commodities. Canada has no special supply market of her own for raw commodities.


William Irvine: Does the hon. member
mean to say that the only thing that affects prices is commodities?


Henry Lumley Drayton: There we are
getting into an academic discussion that would afford us room for discussion all day long. But let us keep to one thing at a time. Does the hon. member suggest that inflation is a condition which is not mirrored in an inflated value of commodities?


William Irvine: I would ask another question. Does my hon. friend mean to say that the inflation from which Canada suffered during the war was caused by commodities?


Henry Lumley Drayton: temerity to suggest that any government in Canada either did, or .could, do anything to hurt the price of wheat?


Robert Forke: Why was it that wheat and
other agricultural products deflated so much more rapidly than any other commodities?


Henry Lumley Drayton: That is one thing that is really unfortunate. Wheat was affected more quickly than any other product. The transfer of wheat is so immediate, the stages of manufacture are so short, that in the past it always has felt an upward movement, a movement of inflation, quicker than anything else. But unfortunately it also feels the return quicker than anything else. It is more sensitive, it takes the benefit of the up curve first; but it also takes the detriment of the down-curve, if not first, certainly as soon as anything, and, I think, first.
But I pause again for an answer, Mr. Speaker. Has any hon. gentleman the temerity to suggest there was anything that any government in Canada did or could have done to injuriously affect the price of wheat? Well, of course no one can suggest it. Everyone knows that if any hon. member did suggest it, his thinking constituents would look upon him as a fit inmate for an asylum. And yet what hurts this country more than anything else in case of deflation is that very article, wheat. And it is coming up again. Why did it go down? Its decline certainly had nothing to do with currency deflation, not a single thing. As every hon. gentleman knows, the price of wheat rests, not upon any artificial basis, currency inflation or credit, or anything else that we have here, or that the States has, or that the Mother Country has; it rests upon the purchasing power of the wheaDconsum-'ing countries of Europe on the one hand and the amount of visible supply of wheat on the other.


Henry Elvins Spencer: Would the hon. member
explain how the bankers had nothing to do with bringing about deflation in this country in 1921-22?	'


Henry Lumley Drayton: Is there any
doubt that the particular item of deflation which hurts this country more than any other item, namely wheat, is something which we had absolutely nothing to do with, and which our banks had absolutely nothing to do with, it being dependent entirely upon the purchasing capacity and power of the wheat-importing nations on the one hand, and the visible supply of wheat on the other? Again I pause for a question?


William Charles Good: Will the hon. gentleman say
whether or not the fluctuation in the volume

of money, or purchasing power, of the countries of Europe were not to some extent at least determinable by public policy in those countries, and therefore affected the price of wheat here-according to his own theory?


Henry Lumley Drayton: But, Mr. Speaker, the hon. gentleman will see if he thinks the matter over

and he is thoughtful, he is trying to get somewhere-that he has a choice of all kinds of things in Europe; he has his choice of stable currencies-gold currencies-inflated currencies, and everything else. Take for example, Spain at the end of the war.


William Irvine: Why go to Europe?


Henry Lumley Drayton: Well, it is big
enough for the moment, and I go there particularly at the invitation of the hon. member for Brant (Mr. Good). He could go to Spain, entirely upon a gold basis after the war; or he could go to Germany, without any basis at all; or he could go to Switzerland or Holland, each on the gold basis,- I do mot care where he might go, he would find exactly the same condition, he would find that the particular kind of counters- currencies-would moit help him at all. He would find it coming right back in the last analysis to this:	Have the people the purchasing power necessary?-whether they get that purchasing power from gold itself, or from their own labour, or from commodities.


William Charles Good: Does not the deploring by
Sir Reginald McKenna of the deflation policy in Great Britain indicate that there might have been a larger amount of purchasing power in that country for Canadian products if the policy that was followed there had not been followed?


Henry Lumley Drayton: I think that
to some extent, certainly to an infinitely greater extent than we could arrest it, it is possible that Great Britain might have arrested the deflation. I do not know how far they could have done so.


Henry Elvins Spencer: Through the government or through the banks?


Henry Lumley Drayton: Entirely through the government.


Henry Elvins Spencer: Why could we not do
the same?


Henry Lumley Drayton: If my hon.
friend will take the trouble to look up the blue books to see the influence our trade would have on these commodities, bearing in mind my answer to the hon. gentleman that

Currency and Credit
Great Britain could have arrested deflation to a larger extent than we could-but not absolutely, that was quite impossible-he will see the reason of my answer. The whole thing is relative. But I am inclined to think, Mr. Speaker, that if you have as large a consumer of raw materials as the United States, absolutely embarked upon a policy of deflation, it would have been very hard for any other country in the world to have kept up an artificial standard in the same raw commodity.


William Charles Good: Has anybody denied that?


Henry Lumley Drayton: Ah, but the hon. gentleman's question, when he asked me whether Great Britain would not have been able to buy much more if she had not deflated, of itself must affirm that proposition. I point out to him that that is one of the reasons why it would have been extremely difficult for Great Britain to have done it. Now, the hon. gentleman (Mr. Evans) had a question?


Mr. EVANS:: Does the hon. gentleman imply that the withholding of credit by the banks here to the farmers has nothing to do with the price of wheat by forcing it on the market for the want of credit?


Henry Lumley Drayton: I was going on
to that in a few moments. Much can be said as to the wisdom on the one hand of holding back an annual production, such as wheat, in the hope of raising our market or, on the other, of selling at once. Sometimes one method is successful, sometimes the other; it depends upon the year. Sometimes the man who holds back his wheat makes a lot of money. This year he would have done so. Sometimes the man who sells his wheat without delay, taking into consideration his carrying costs and all that sort of thing, gets the advantage.


John Evans: The hon. gentleman has
not got my question. Through the want of credit the grower has been forced to put his wheat on the market, and thereby the price has been lowered.


Henry Lumley Drayton: Well, Mr. Speaker, I do not think that the grower loses so much in that way as by the fact that he is not able to reap the benefit of a better price in case the market goes up later on. I think that really is the point. But after all the great thing in connection with the movement of grain is the ability to finance it properly, and I am going to say something to hon. members upon that score in connection with inflation. That is, inflation of currency which has taken place in this country, having that very aim and object and end in view. It is something in ease of some of the arguments of the hon. member for Centre Winnipeg. We have had in Canada what was in effect currency based upon a commodity, not on gold at all, just for the purpose of moving the western grain crop. At one time advances were made-I am speaking now from memory -of as high as $128,000,000. That was under the Finance Act in 1914; and it was just for the purpose of enabling the farmers' grain to be properly and economically financed and taken over to the British market.


Henry Elvins Spencer: Did I understand the
hon. member to say that the British government, but not the British banks, could have stopped inflation?


Henry Lumley Drayton: I did not say
they could have; I said they could have a little more than we could.


Henry Elvins Spencer: Why could not the Canadian government exercise the same right?


Henry Lumley Drayton: I thought I had answered that, but I will answer it again for my hon. friend's benefit, because I am sure he wants to know. The hon. member will see that if any given country has control of say five per cent of a certain commodity, it would be difficult for that country to stabilize the price of that commodity. I think I carry my hon. friend's judgment with me to that point. If another country held, say, twenty-five per cent of the visible supply of that commodity, then that country would be just that much more able to stabilize the price. That is the reference I made as between Canada and Great Britain. I do not think Great Britain could have done it, but she could have done it to a greater extent than we could. I am not giving the exact proportion ; I do not say whether it is a question of five to twenty-five or not.


William Charles Good: It is a question of degree.


Henry Lumley Drayton: The hon. member has the point exactly; it is entirely a question of degree. If you own enough of anything you can always stabilize the price.


John Millar: I do not think we have a
direct answer to the question that has been asked twice. Without considering whether it had the effect of deflation or inflation, did the government of which my hon. friend was a member withdraw any money from circulation in 1920?


Henry Lumley Drayton: Again, I thought I had stated what the situation was. We
Currency and Credit

took no action whatever toward withdrawing money at any time, and I do not believe any government has ever done so or could very well do so. If circulation is out, it is out; but the hon. gentleman will see that there is a string on that circulation-it is the excess that always comes back. At one time we had an excess of $131,000,000, the whole of which bore interest at five per cent. Just so long as the banks can hold that out at the five per cent rate and make some money on it, they are going to do so, but the moment the money becomes idle with them and they are penalized to the extent of five per cent, back that money goes. Six o'clock, Mr. Speaker.


Mr. BROWN:: Just for my own information, may I say that the statement was made to me the other day-I give it only as made to me-that at that time the government offered the banks the option of increasing their capital or of withdrawing their amounts in circulation. Can that be answered?


Henry Lumley Drayton: Very easily; it is the first I have heard of it.


John Livingstone Brown: That is the statement as made to me.


Henry Lumley Drayton: Many strange statements are made. This is the first time I have heard it.


John Livingstone Brown: That is satisfactory.
At six o'clock the House adjourned, without question being put, pursuant to rule.
Thursday, March 5, 1925