[Stage Direction]
Second report of the standing committe on banking and commerce-Mr. Moore.

[Stage Direction]
(Questions answered orally are indicated by an asterisk.)
0MER N0LET
Mr. WERMENLINGER:: 1.	Was one Omer Nolet, of Beauport, Quebec
county, employed by the Marine department at Quebec ?	,
2.	If so, on what date did he enter the service of the department?
3.	On what date was he dismissed?
4.	Upon whose request?
5.	For what reasons?


Mr. HOWE:: 1.	Yes.
2.	May 1, 1934, as a temporary employee.
3.	May 4, 1936.
4.	Wilfrid Lacroix, M.P.
5.	Political partisanship.



GRAND FALLS, NS., MAIL CONTRACT

Mr. BROOKS:: 1.	Has a contract been let for the carrying of mail between the Grand Falls post office [Mr. Dunning.}
and the Canadian Pacific railway station at Grand Falls, New Brunswick?
2.	If so, who was the successful tenderer?
3.	What other tenders were received, and what was the 'amount of each tender?
4.	Were arrangements made with Frank K.
St. Amand to perform this service until such time as the contract was let?
5.	If so, when was this temporary arrangement cancelled, and why?


Mr. ELLIOTT (Middlesex):: 1.	Yes.
2.	Johnny Berube.
3.	Frank R. St. Amand, Grand Falls, S275; Johnny Berube, Grand Falls, S330; Arthur E. McCluskey, Grand Falls, $360; Alfred D. Levesque, Grand Falls, $450. Notice was sent the district director of postal services, Saint John, that Frank R. St. Amand was the lowest tenderer. A report from the district director was received in the department stating that Mr. Frank R. St. Amand was not considered qualified to undertake the conveyance of his [DOT] majesty's mail, and the contract was awarded to Johnny Berube, next lowest tenderer.
4.	Mr. Frank R. St. Amand was allowed to continue at the old rate until a temporary arrangement was made with Mr. Johnny Berube to continue the service until such time as the contract could be executed.
5.	On March 26, 1936, department received an offer from Mr. Johnny Berube to perform service temporarily at $330 per annum instead of $450 per annum as previously authorized with Mr. F. R. St. Amand.



ELK ISLAND PARK

Mr. HAYHURST:: 1.	How many head of the following animals were in the Elk Island park as at April 30, 1935, and as at April 30, 1936 (a) moose;
(b)	deer; (c) elk; (dj buffalo?
2.	What number of each class of these animals was slaughtered in the years (a) 1934-1935; (b) 1935-36?
3.	What quantity of various kinds of feed
was used during (a)	1934-1935;	(b)	1935-
1936?


Mr. CRERAR:: It is impossible to obtain an accurate count of wild animals in a forested area. All figures are therefore necessarily estimated. The 1936 figures are probably more accurate than are those for 1935 as a round-up took place in the fall of 1935-
1.	As at April 30, 1935-
(a)	Moose, 360.
(b)	Deer, 231.
(c)	Elk, 489.
(d)	Buffalo, 1,999.
As at April 30, 1936-
(a)	Moose, 740.
(b)	Deer, 246.
(c)	Elk, 1,978.
(b) Buffalo, 1.905.

Questions as Orders for Returns
2.	(a) 1934-35, none.
(b)	1935-36, 512 buffalo.
3.	(a) 1934-35, 316 tons hay.
(b) 1935-36, 529 tons feed, mostly hay, but includes small quantity of straw.



DOMINION HOUSING ACT

Mr. MacNEIL:: 1.	How many loans have been approved to date under the Dominion Housing Act of 1935 in the province of British Columbia?
2.	What is the total amount of such loans approved in the province of British Columbia?
3.	How many loans have been approved in (a) urban centres; (b) suburban areas?


Mr. DUNNING:: 1.	One.
2.	$2,700.
3.	(a) One.
(b) None.



CANADIAN PACIFIC RAILWAY-LOANS AND GUARANTEES

Mr. POULIOT:: 1.	Did order in council P.C. 2490 of November 29, 1933, provide for any date of maturity for the repayment of the whole or any part of the $60,000,000 Canadian Pacific Railway loan which was guaranteed by the dominion government?
2.	If so, what payment was to be made at each date of maturity?
3.	Was another arrangement in that connection made on June 20, 1934?
4.	If so, what was it?
5.	What payments were made by the Canadian Pacific Railway to the banks (a) on the capital, and (b) on the interest; (1) in 1934, and (2) in 1935?
6.	Did the president of the Canadian Pacific Railway Company advise the Minister of Finance this year that arrangements had been made to pay off the balance of $36,000,000 on May 1, 1936?
7.	If so, on what date?
8.	Was the Minister of Finance advised by the chartered banks that the principal amount of the loan together with interest thereon, had been paid on May 1st?


Mr. DUNNING:: 1.	Yes.
2.	$35,000,000 due June 22, 1938, and $25,000,000 due December 1, 1938.
3.	Payment was made prior to the maturity dates referred to.
4.	Answered by 3.
5.	(a) 1934-812,000,000.
1935-none.
(b) No record.
6.	Yes.
7.	April 27, 1936.
8.	Yes.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. POULIOT:: 1.	On what date did the general manager of the Bank of Montreal notify the Prime Minister's office that the banks had advanced $35,000,000 to the Canadian Pacific Railway Company on the guarantee of the letter signed by the Right Hon. R. B. Bennett, then Prime Minister, and dated May 31, 1933?
2.	On what date was an order in council passed to ratify said guarantee given by the said Right Hon. R. B. Bennett?
3.	When and where was it made public for the first time?


Mr. POULIOT:: Did the statement made by the Secretary of State on June 3, 1936 (Hansard, p. 3349), that sessional paper No. 150-E, "a copy of all correspondence exchanged between the Canadian government and any of the Canadian banks regarding the guarantee given for the loan of $60,000,000 for the Canadian Pacific Railway," was tabled on March 19, 1934, by the Right Hon. R. B. Bennett, then Prime Minister, and not by the then Secretary of State, indicate prima facie that no other department than the Prime Minister's had exchanged correspondence in that connection with any of the Canadian banks ?


Mr. RINFRET:: Return tabled herewith.


Mr. POULIOT:: 1.	Referring to sessional paper No. 150-E of 1934, are the original letters, sent to the Prime Minister or the Acting Prime Minister by the following gentlemen:	(1) Mr. W. A. Bog,
feneral manager of the Bank of Montreal, une 7, 1933; August 17, 1933; September 25, 1933; (2) Mr. Jackson Dodds, general manager of the Bank of Montreal, September 2, 1933; November 28, 1933; December 5, 1933;	(3)
Sir Charles B. Gordon, president of the Bank of Montreal, December 1, 1933, on file in the Prime Minister's office and have they always been on file in that office since they have been received by that office?
2.	Were those letters of an official and public nature?


Louis Édouard Fernand Rinfret: Return tabled herewith.


Mr. POULIOT:: 1.	Referring to sessional paper No. 150-D of March 19, 1934, "copy of all correspondence between government of Canada and Canadian Pacific Railway in regard to guarantee given by the government for a loan of $60,000,000 to Canadian Pacific Railway," which contained (a) one letter from the then Prime Minister to W. H. Curie, Esq., K.C., general counsel of the Canadian Pacific Railway, dated November 3, 1933, and (b) a "list of payments made in discharge of maturing obligations since May 31,	1933. as mentioned in letter of
November 28, 1933, from Jackson Dodds, Esq., general manager of the Bank of Montreal, to the Right Hon. R. B. Bennett, P.C., K.C., Prime Minister of Canada," from May 31, 1933, to October 23, 1935, was there any other corre-

3578	COMMONS
Questions as Orders jor Returns
spondence exchanged between the Canadian Pacific Railway Company with regard to the said guarantee?
2.	If so, from whom, to whom and on what dates
3.	Was that correspondence of public or confidential nature?
4.	Why were the letter and list above mentioned in paragraph 1 also tabled on the same day, March 19, 1934, in another return, sessional paper No. 150-E of 1934, " a copy of all correspondence exchanged between Canadian government and any of the Canadian banks regarding the guarantee given for the $60,000,000 loan to the Canadian Pacific Railway?"
5.	Was the above mentioned list sent by Mr. Dodds to the Right Hon. R. B. Bennett apparently on November 28, 1933, to the same effect as the document asknowledged by the Right Hon. R. B. Bennett to Mr. Curie on November 3, 1933, and did it replace it in sessional paper No. 150-D of 1934?
6.	Was the said return 150-D of 1934 tabled by the then Prime Minister or the then Secretary of State?


Louis Édouard Fernand Rinfret: Return tabled herewith.


Mr. POULIOT:: 1.	Was the letter dated August 31, 1933, and addressed to W. A. Bog, Esq., general manager of the Bank of Montreal, about a "proposed order in council regarding a loan to the Canadian Pacific Railway Company," -a copy of which has been tabled in sessional
Saper No. 150-E of 1934-signed by the Right [on. Sir George H. Perley in his capacity as Acting Prime Minister?
2.	If so, was that letter a public and official document?
3.	If so, was the "draft of the proposed order in council regarding a loan to the Canadian Pacific Railway Company" therein mentioned and attached to it, also a public and official document?
4.	If so, were there original copies (a) of said letter; (b) of said draft of the proposed order in council always kept on file in the Prime Minister's office?
5.	If not, why?


Louis Édouard Fernand Rinfret: Return tabled! herewith. Mr. POULIOT:
According to the record, was the "draft of the proposed order in council regarding a loan to the Canadian Pacific Railway Company and forwarded by the Acting Prime Minister to the general manager of the Bank of Montreal on August 31, 1933," submitted to the privy council before being sent outside of Ottawa on that date?


Jean-François Pouliot: In the minutes and records of the privy council, did the signatures of the Honourable E. N. Rhodes, then Minister of Finance, and of the Honourable W. A. Gordon, then Minister of Labour, appear for the first time in matters ertaining to the dominion guarantee of the 60,000,000 Canadian Pacific Railway loan, in memorandum of November 28, 1933, to His Excellency the Governor General in Council, for P.C. 2490?
[Mr Pouliot.l



PRIVY COUNCIL SITTING

Jean-François Pouliot: Was there a sitting of the privy council,
a) on May 31, 1933; (b) on August 31, 1933;
c) on June 20, 1934?



CANADIAN PACIFIC RAILWAY DEBENTURE STOCK

Mr. POULIOT:: 1.	On June 20, 1934, was the Right Hon. R. B. Bennett, then Prime Minister, also acting: Minister of Finance and acting Minister of Labour?
2.	If not, who were the minister or the ministers for those departments on that date?
3.	On the same date, did the said Right Hon. R. B. Bennett submit a memorandum to His Excellency the Governor General in Council to recommend that consent be given on behalf of the dominion government to the surrender to the Canadian Pacific Railway by the banks of one-fifth in the amount of the perpetual consolidated debenture stock of the railway company so held as security by such bank?
4.	If so, by whom was it signed and on behalf of whom?
5.	In the latter case, did the person whn signed it have any authority to sign it on behalf of others?
6.	If so, what was such authority?
7.	Are ministers of the crown allowed to give powers of attorney to any one of their colleagues to act on their behalf in their official capacity as ministers of the crown?
8.	If so, what is the form of such powers of attorney and before whom are they passed?
9.	Were there any powers of attorney attached to said memorandum?
10.	If so, from whom, to whom, and before whom were they passed?
11.	Are there any initials on the first page of the said memorandum?
12.	If so, what are they and what do they mean?
13.	Does it appear on the face of the said memorandum that it has been approved?
14.	If so, by whom?
15.	Was there in the form of agreement between the crown and the banks contained in P.C. 2490 of November 28, 1933, any provision to the same effect as the recommendation to council above mentioned in paragraph 3?
16.	Did the House of Commons sit on June 20, 1934?
17.	On what exact date did the then Prime Minister notify the railway company and the banks that such recommendation had been thus approved ?
18.	When was an order in council passed to ratify such recommendation?
19.	When and where was first public notice given of such order in council?



ACTING PRIME MINISTER, AUGUST 31, 1933

Mr. POULIOT:: 1.	On August 31, 1933, was the then Acting Prime Minister (the Right Hon. Sir George if Perley), also acting Minister of Finance and Railways and Canals?
2.	If not, who were the minister or ministers for those departments on that date?

Motions for Papers



MOTIONS FOR PAPERS


Mr. MacNEIL:: For a copy of all correspondence, requests for investigation and evidence given, and also of any departmental reports relating to the dismissal of Mr. C. R. Purvey of the staff of the fisheries department in district No. 3.



CANADIAN PACIFIC RAILWAY-LOANS AND GUARANTEES

Jean-François Pouliot: For a copy (a) of the document furnished by W. H. Curie, Esq., K.C., general counsel of Canadian Pacific Railway Company (law department) to the then Prime Minister, and which was acknowledged by the latter on November 3, 1933, according to sessional paper No. 150-D of 1934, and (b) of the letter or memorandum from the said Mr. Curie to the said then Prime Minister and to which was attached said document.


Mr. MACKENZIE KING:: Mr. Speaker, I am not at all sure whether any of the documents mentioned are to be found in any of the departments of the government; if they are, there is no objection to having them brought down.


Jean-François Pouliot: Thank you.


Jean-François Pouliot: For a copy of all correspondence exchanged between the then Prime Minister or the then Acting Prime Minister, on one hand, and any bank, banker, railway company or railway officer or official, from December 5, 1933, to October 23, 1935, inclusive, with regard to the dominion guarantee of the Canadian Pacific Railway loan.


William Lyon Mackenzie King: Mr. Speaker, I make the same remark with reference to this order as I made on the previous one.


Jean-François Pouliot: Thank you.



LOAN OF $750,000,000

[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved that the house go into committee at the next sitting to consider the following resolution:
That the governor in council be authorized to raise by way of loan under the provisions of the Consolidated Revenue and Audit Act, 1931, an amount not to exceed in the whole the sum of seven hundred and fifty million dollars for paying or redeeming the whole or any portion of loans or obligations of Canada and also for purchasing and withdrawing from circulation unmatured securities of Canada and for public works and general purposes.
He said:	His Excellency the Governor
General, having been made acquainted with the subject matter of this resolution', recommends it to the favourable consideration of the house.
Motion agreed to.
12739-228 J


[Stage Direction]
Hon. NORMAN McL. ROGERS (Minister of Labour) moved that the house go into committee at the next sitting to consider the following resolution:
That it is expedient to bring in a measure to amend section four of the Unemployment Relief and Assistance Act, 1936, being chapter fifteen of the statutes of 1936, to empower the governor in council to grant financial assistance to any province by way of loan, advance or guarantee to an amount not exceeding the amount payable by the province for its share of the cost of unemployment relief and undertakings during February and March, 1936, and under any agreement between the dominion and the province entered into under the authority of the said act.
He said: His Excellency the Governor General, having been made acquainted with the subject matter of this resolution, recommends it to the favourable consideration of the house.
Motion agreed to.


[Stage Direction]
On the orders of the day:
Mr. T. L. CHURCH (Broadview):: I draw the attention of the government to to-day's Mail and Empire, in which it is reported that St. James' Cathedral has presented fifteen acres of land to the city of Toronto for the purposes of a slum clearance housing plan. I ask the government whether any legislation is to be brought down this session for slum clearance and reconstruction under which this offer may be dealt with.


William Lyon Mackenzie King: I have already indicated
to the house the extent of the legislation which it is proposed to bring down at this session, and it does not include legislation of the kind mentioned by my hon. friend. The subject is one which by legislation of this session has already been referred for consideration to the national employment commission.



CANADIAN NATIONAL RAILWAYS


[Stage Direction]
On the orders of the day:
Right Hon. R. B. BENNETT (Leader of the Opposition):: Mr. Speaker, I should like
Bank of Canada

i o direct the attention of the Minister of Railways and Canals (Mr. Howe) to a matter which I consider to be of some importance. From a source which I have always found reliable I have been advised that the Canadian National Railways are taking on additional men for maintenance of way work at Belleville, and that every person employed has had to produce a certificate of good standing in the local Liberal association. X ask the minister to look into the matter for the purpose of satisfying himself whether that is or is not true. I think it is highly desirable that he should satisfy himself concerning it one way or the other, as reports to this effect have been circulated.


Hon. C. D. HOWE (Minister of Railways and Canals):: Mr. Speaker, this is a most
extraordinary charge. I have kept a very close eye on these matters and I have never heard of a case of that kind. I may say further that if I find that the statement of the right hon. gentleman is correct, steps will be taken.


Richard Bedford Bennett: Thank you.



BANK OF CANADA


[Stage Direction]
The house resumed from Tuesday, June 9, consideration in committee of Bill No. 82, to amend the Bank of Canada Act-Mr. Dunning -Mr. Sanderson in the chair.
On section 6-Directors.
Mr. CAHAN:: I am sure the house has enjoyed the several addresses given by the hon. member for Vancouver-Burrard (Mr. McGeer). They indicate that for some time he has made a study, more or less careful, of the pronouncements of leading economic authorities; he must have given a great deal of time to a collection of the statutes dealing with coinage and other matters relating to monetary policy, and he has coloured his addresses with an eloquence and profusion of language, in some cases extravagant language, but such as those members who were present have thoroughly enjoyed. The results, however, clearly show that during the course of his addresses he has succeeded to a certain degree in convincing himself that his original addresses were based upon entirely erroneous deductions. I suggest that the magnitude of his researches has not left him time for due reflection, and that, as the months go by, after the activities which he must undertake in connection with the centenary celebrations at Vancouver are over, if he will retire to some quiet place where he can again reflect upon
IMv. Beunett.l
the data which he has collected, we shall have next session expressions from him which will be in accord with the sane and sound standards of economic policy. For instance, the hon. gentleman suggested in an address on June 8 that the government of Canada by appropriate legislative enactment had created some millions of dollars of currency by imposing its stamp upon certain bronze and silver coins. The hon. gentleman suggested that if he had a million dollars in bronze coins marked as cents he would be able to change it into current coin of the realm and use it for certain purposes. He stated:
Mr. McGeer: A five cent nickel coin containing seventy grains of nickel has a bullion value of about three mills, but by law it is, given a money value of fifty mills.- A one cent bronze coin has a bullion value of less than one mill, but parliament, by law, gives it a money value of ten mills. There is nothing behind or supporting the money value that the coin possesses, and it is not convertible into anything. Once a government issues it, it goes into circulation as the media of exchange of the nation and functions to serve all the purposes of money and all the purposes of legal tender money, up to the point it is made legal tender money.
Mr. Cahan: But for petty cash only.
Mr. McGeer: It does not make any difference whether or not it is petty cash; if you had a million dollars worth of copper cents you would have a million dollars.
Mr. Cahan: That is just where you are wrong; you would not.
Mr. McGeer: I would be very glad to take them from my hon. friend if he would give them to me. I would very soon convert the million dollars worth of copper coins in my possession into a million dollars worth of bank money.
Upon reflection, however, and perhaps upon further examination of the statute, the hon. gentleman found that copper coin in cents was legal tender to the extent of only tvonty-five cents in any single transaction. I have made a computation, and I find that if the hon. gentleman were possessed of a million dollars in bronze cents, and by active endeavour on his part in the course of a day he secured a hundred different persons who were willing to accept twenty-five cents in copper coins, the disposition of his million dollars as legal tender would require forty thousand days or something like one hundred years. So, after reflection, in his second address the hon. gentleman no longer emphasized that particular contention.


Mr. McGEER:: Would the hon. gentleman permit a question?


Charles Hazlitt Cahan: I am not going to allow interruptions for the present, if you please. The hon. gentleman will have another forty minutes shortly.

Bank of Canada


Gerald Grattan McGeer: I was very glad to extend that privilege to the hon. gentleman when I was speaking.


Charles Hazlitt Cahan: I would have no particular objection to interruptions by the hon. gentleman, but this is a more serious matter than he seems to contemplate. Again, in the course of the discussion the hon. gentleman suggested that the bank note issue, the dominion note issue or the Bank of Canada note issue, could be reasonably well extended to the amount of $724,000,000, and that this amount of legal tender could be used for important public services. I asked him how he would use it:
Mr. Cahan: Supposing the hon. member were Prime Minister; supposing he had complete control of the currency and were czar and dictator of Canada, what would he do with the money?
Mr. McGeer: I would put the people to work.
Mr. Cahan: With what?
Mr. McGeer: With that money.
Mr. Cahan: You would pay out that money
in wages?
At that time I understood, though perhaps I was wrong, that this was the contention of the hon. gentleman, but when he resumed his address on the following day he suggested that he was not really advocating an increase in the dominion note issue or in the Bank of Canada note issue for the purpose of paying out that income in wages. He said:
During the course of my remarks yesterday the hon. member for St. Lawrence-St. George (Mr. Cahan) asked this question: What would you do with the $724,000,000 that the Bank of Canada now has the power under the act to issue; would you issue that money as a means of putting people to work?
Then in answer, made after due reflection during the intervening twenty-four hours, he said:
In answer to that, I should like to say that if proper control were established in the Bank of Canada it should be such control that the government, the Bank of Canada, the chartered banks and the financial institutions could get together to create the means of financing those sound public works, national, provincial and municipal, which would be the means of eliminating unemployment and putting people to work at work that is needed to be done. Of course, you would not use the legal tender currency of the Bank of Canada; you would be able to make arrangements with the chartered banks and the financial institutions by which short term treasury bills at minimum cost would be issued to carry on this work.
I ask the hon. gentleman to consider the budget statement of the Minister of Finance (Mr. Dunning). At page 20 of the pamphlet which has been issued containing that speech he will find that that is the policy which previous governments and this government
have followed to a certain extent. He will find that as of the date when that speech was made there were outstanding $125,000,000 in treasury bills at interest of from -999 per cent to 1 [DOT] 15 per cent, which $125,000,000 had been or was being used in connection with the public services of Canada.
During the election campaign, whether or not the hon. gentleman was correctly reported, he made speeches which led me at least, from the newspaper reports, to assume that he was advocating a further issue of dominion notes or of Bank of Canada notes, and that the extra issues should be used for the public services of Canada. From that I assumed, perhaps improperly, that he was advocating simply a measure of inflation. I find now, however, that all that has been repudiated by the hon. gentleman in the statement I have just read and that in a few hours he has converted himself to a comparatively sane and sound position with regard to monetary policy.


Gerald Grattan McGeer: Without desiring to interrupt, Mr. Chairman, I might say that the statements I made in this house were the statements I made on the platform, and I give my hon. friend my assurance that there has been no change in my position.


Charles Hazlitt Cahan: Well I must accept that statement. But I suggest that any hon. member who quietly reads the first address which the hon. gentleman made in committee on the resolution introducing this bill, and the later addresses which he made, will see that the hon. gentleman, perhaps subconsciously, unknown to himself, has converted himself by his own eloquent addresses to a saner point of view.
The hon. member for Winnipeg North Centre (Mr. Woodsworth) also referred last evening to an address which I made before the Canadian Club in Toronto on November 13, 1933, and which, I believe, was republished by that club. That address was delivered prior to the issue of the report of the Royal Commission on Banking and Currency in Canada. I was endeavouring in that address to state to a public gathering of the Canadian club what were the issues which were then being considered by the royal commission, and the possibilities of definite decisions thereon in one way or the other. As a matter of fact I regarded that address as of so slight importance that I did not retain a printed copy of it, but this morning I ascertained that a copy could be procured from the library of parliament, and that copy I have procured and now have in my hand. I do not wish to retract anything which I said on that occasion.

Bank of Canada
It was a sincere expression of opinion, and I dlo not think anything has occurred to cause me to reform the opinions which I then expressed. But I say this-and I say it not only to the leader of the Cooperative Commonwealth Federation (Mr. Woodsworth) but to the leader of the Social Credit party (Mr, Blackmore)-that they will never get very far by merely making scrap-books of petty extracts from speeches delivered either by members of this house or by others who are delivering lectures or addresses, or from books on economic policy. If they would reflect upon the data which they accumulate, and form their own opinions therefrom, I am sure their expressions of opinion would be more influential not only in this house but upon the whole body politic.
Credit is the warp and woof of the commercial and industrial life of Canada. But credit is not limited to banking credit. I remember in the country village in which I was born and brought up the grocer at the crossroads gave credit to those who went to his store to purchase supplies. Sometimes that credit was extended beyond a month or even two months. In the towns to which I had access -the country merchants, whether wholesale or retail, gave credit to those in whom they had confidence, having regard not only to their financial resources but to their general reliability. Credit was extended by the country store. Credit was again extended from the stores in the country town. Credit was extended by the manufacturer. Credit was extended by the wholesale dealer. If hon. gentlemen wish to pursue the inquiry; if they will take the annual financial statements of the large number of manufacturing establishments, wholesale merchants and others who are doing business throughout Canada, and look at the amount of their accounts and bills receivable, they will ascertain that entirely outside of banking credit there are tens of millions of dollars of credit outstanding. And this credit is of great advantage not only to the general public, the purchaser, the consumer but also to those middlemen who stand between the manufacturer and the wholesale dealer and the consuming public. That credit rests upon personal confidence, and I suggest that that credit should not be restricted or restrained by governmental action.
There is also bank credit. Now I am not a banker; I know little about banking except having been at times legal adviser to banks. But a bank has, as the foundation for its credit, its capital, its reserves and its deposits.


Mr. HEAPS:: And at times the government.


Charles Hazlitt Cahan: Well, I am not dealing which that phase; I am dealing with banks.


Abraham Albert Heaps: But it is a very important
phase.	i


Charles Hazlitt Cahan: In times gone by I have
gone day by day to consult with the executive officers of a great banking institution. They looked with great care upon the amount of loans or advances of credit made from day to day. As against the loans or advances they kept a careful eye, first, on their time deposits, because those could be withdrawn only on notice, and, second, a more careful view of their demand deposits, because they realized that if in making loans or advances they exceeded the limit and consequently in any single hour of the day they were not in a position to liquidate the cheques drawn upon accounts at their bank, -tha-t meant the closing of the bank, and that meant utter failure and disaster. So a close examination had to be made from day to day to ascertain whether the bank was really solvent in the sense of being able to meet demand liabilities upon presentation.


Richard Bedford Bennett: That was the trouble with the Merchants Bank of Canada.


Charles Hazlitt Cahan: Yes; I was all through the Merchants Bank of Canada disaster. That shows -the necessity of keeping such careful supervision over liabilities and of limiting bank credits. We had an illustration of that necessity in the fact that in the three years ending December, 1932, over five thousand banks in the neighbouring republic failed, destroying credits of over $3,000,000,000. And even after the bank moratorium was set up in the United States in March, 1933, a total of 1,307 banks failed to obtain licences permitting them to reopen, and $2,700,000,000 of bank deposits were thus eitheT destroyed or tied up indefinitely.
That shows -the caution with which -banks have to deal with banking credits. If the hon. gentleman who read so many extracts from my -address had done me the credit of reading further he would have found this passage:
But in fact the banks have not an unlimited power of creating credit in the form of bank loans, which may be drawn upon by their customers' cheques. Their dependence upon public confidence is so vital to their solvency that in actual practice they invite disaster whenever they make loans which are not accompanied by satisfactory guarantees for their repayment. If the banks are to maintain their solvency they dare not make loans or advances unless they have reasonable confidence that they will be repaid in due time.
That is an essential feature of banking practice which must be constantly regarded if a bank is to be protected against insolvency.

Bank of Canada
There were some passages of that address I should like some hon. members to consider, and if I can procure a copy I think I shall send one gratuitously to the hon. member for Vancouver-Burrard.


Gerald Grattan McGeer: The hon. member does
not need to do that, because I have already read and studied it very carefully, and I think
a great deal of it.


Charles Hazlitt Cahan: Thank you very much,
indeed. I was then dealing with the questions under consideration by the royal commission, without the slightest idea as to what the findings of that commission would eventually be. May I read what I said at that time:
I cannot predict the course that the parliament of Canada will ultimately adopt. I am merely seeking to state the issue for your consideration, for ultimately the people of Canada must render the official decision. I am convinced, nevertheless, that parliament will not approve of the unlimited issue of dominion notes for the purpose of defraying expenses of government. That kind of inflation would inevitably lead to national insolvency. It is true that anything is currency which the parliament or government of a country chooses to make legal tender, or that the people of the country are willing to accept as currency, such as bank notes, cheques or bills of exchange. But when currency is known to be increasing in volume every day, people are prone to mistrust it. They rush to get rid of it, spend it on something-anything they can buy. Up goes the rate of circulation, and prices rise by an amount corresponding both to the increase in the volume of currency and the increase in its rate of circulation. The value of the currency depreciates in the proportion that prices of commodities increase.
As the mark depreciated in Germany, sellers refused to accept marks. Retail trades closed their businesses at particular hours of the day, and then on particular days of the week, and then closed entirely. The catastrophe of the currency developed into a catastrophe of the food and other supplies, which was worse than the worst periods of the war. Thrift becomes an act of monumental improvidence when the currency is rapidly depreciating every day, and the spendthrift is recognized as the one prudent man in the family.
Of Germany an eminent writer says that one son could invest his inheritance in gilt-edged stock and lose it all, while his brother could squander his share on champagne, and sell the empty bottles for more marks than the original inheritance. Interest meant nothing. What was the use of earning ten per cent or fifty per cent per annum on your money, when the purchasing power of your mark could fall by ninety per cent in a single month. Extreme inflation means a fool's paradise for the rich, and grinding poverty and hardship for all other classes of society. When everyone rushes off to spend his money as soon as he receives it, when every manufacturer knows that bricks, mortar, machinery and goods are the one safe repository for his profits, and when every investor finds that ordinary shares alone are comparatively safe, a false volume of business and a false scale of values are inevitably
created. The manufacturer soon finds that factories and machinery are no good to him without working capital and credit, when there is no money or credit left. The investor finds that the ordinary shares, which he thought safe, are of no value to him without dividends, and the working-man finds that no liquid capital means for him no possibility of obtaining work at any wage.
The catastrophe culminated in Germany in 1924 when its currency was converted and stabilized on the basis of one trillion of inflated Rentenmarks into one gold Reichmark. In the meantime all public and private indebtedness had been completely liquidated by payments made in inflated marks and thus forever obliterated. I am convinced that the people of Canada will never decide to pursue the same rapid descent to the hades of social, industrial and commercial ruin.
My mind was incited to these reflections and to the making of these remarks by having been in Germany for some weeks in 1930 when the Bruening government was in office, at which time I was instructed by the privy council to adjust a large number of outstanding war liabilities between the government of Canada and that of Germany. I saw on the public streets men, apparently of the most intellectual classes, who were in a state of sordid misery. Some of them were asking for alms along the streets. I inquired of one of the officials with whom I came into daily contact as to the meaning of the condition of these men, and he said that the inflation of the mark had wiped out the entire accumulations of what were known as the middle classes of Germany. Some of the men whose faces he recognized had been scientists of high standing; others had been professors and teachers in the universities and colleges; others were men ranking high in the medical and other scientific professions. These men were reduced to beggary by the inflation which took place.
There was very little humour in the situation I saw from the time I landed in Berlin until I left some weeks later. I was received with every courtesy by those holding the highest official positions, but I do not think I saw a smile on the face of a man, woman or child. Although he may not have intended to be humorous one of the officials with a twinkle in his eye said, by way of explanation for the disaster, "You know that we had printing presses .and engraving machinery, and we happened to have a supply of paper suitable for engraving." He told me that when the rentenmark depreciated so rapidly those people working in government engraving and printing offices refused to accept it as payment. He told nje further that before the final catastrophe arrangements were made to print rentenmarks for a week, and at the end of that time, on the Saturday afternoon, the
Bank of Canada

entire product of rentenmarks was divided between the government and the workers. The workers took half of the entire production to satisfy their demands for wages and salary.
There can be no doubt that a catastrophe such as overtook that country, and such as has overtaken other countries would be induced in Canada by an unlimited issue of our dominion currency under government supervision. I had on one occasion a peculiar experience in Mexico. I arrived in that country in the nineties just after there had been a great depreciation in the value of their peso. A short time before my arrival the Mexican peso was the equivalent of a dollar in United States currency, but a sudden depreciation in the value of silver had brought their peso down to about forty cents not only in their own country but on the foreign exchange market. People whom I met in their homes, because I had letters of introduction to some cultured people, were all complaining of how prices had risen so high in so short a time. The price had increased two and a half times for everything which was imported from abroad and for a number of things which were manufactured and produced at home, and which were the essentials of life. These people were quite unconscious of the reason. I soon ascertained that the real reason was that the value of their peso, formerly the equivalent of one dollar in gold, had been reduced to forty cents in gold. To me, who was paying my way at the hotels and throughout the country with United States bills, the rates seemed very reasonable indeed, but for them there had been an increase of two and a half times the normal prices which they had been accustomed to pay.
Take another instance which came to my attention not long ago. I remember in my youthful days, when Nova Scotia was sending large quantities of fish products to Brazil, there was a time, if I remember correctly, when the Brazilian rei was the equivalent of one-half cent of American or Canadian money, and a milrei, or a thousand reis, represented $5 of American or Canadian money. I had occasion to have something to do with Brazil in 1889, and then I found that the value of the milrei, owing to inflation by the use of paper currency, had been reduced from S5 to S2.70 of our money. Inflation has kept on, and less than six months ago when I was in Brazil I found that the milrei, which was formerly $5, had decreased in value to six cents or six and a half cents, showing that once you enter upon that road to economic hades the descent is very rapid indeed.

Therefore, in discussing this matter at Toronto, I was very anxious indeed to impress upon that audience that the indiscriminate use of dominion notes, which were then the current notes, must result in disaster to this country. In discussing the Finance Act I then stated:
At the outbreak of the war, the enactment
by parliament of the Finance Act made a fundamental change in the monetary system and in the banking practice of Canada, which proved to be of great utility during the stress and strain of war and during the period of reconstruction that thereafter ensued. This act is now administered by the Finance minister and four other ministers of the crown-
That was in the autumn of 1933:
-who constitute the treasury board, of which the Deputy Minister of Finance is secretary.
The Finance Act provides for a reserve of legal tender currency, which may be utilized by the chartered banks in times when there are exceptional demands for credit, or when other emergent conditions arise. But the recent financial depression has induced many to believe that the provisions of that act are not adequate for certain national needs. An agitation has arisen in favour of creating a central banking institution in which shall be vested the functions now exercised under the provisions of that act by a committee of the government.
I went on to say:
It is also suggested that this proposed new central institution, should be vested with adequate authority to centralize in itself the gold reserves of the country; to control the issue and disposition of dominion notes, the coinage and issue of metallic currency and also to take such measures as may from time to time be deemed expedient to supervise and to advise the government with respect to the general monetary policy of the country.
I am no financial expert but as a member of this house, and particularly after becoming a member of this house, I took a special interest in the administration of the Finance Act which had been passed in 1914, and which was brought into force simply by proclamation so as to mitigate the difficulties arising from war, invasion, riot or insurrection. In 1919 the act of 1914 was continued in force until two years after the conclusion of peace. In 1923 the previous Liberal government, upon the termination of the act of 1914, introduced, through Mr. Fielding, then Finance minister, the Finance Act of 1923, which now appears as chapter 70 of the revised statutes. Part II of that act authorized the treasury board, consisting, as I said, of the Finance minister and four other members of the government of the day, to exercise very wide powers with respect to making advances of dominion notes to the chartered banks of Canada. Then an episode occurred of which we on the opposition side of the house from 1926 to 1930 said very little by

Bank of Canada
way of criticism, and perhaps we were in error in not voicing more strenuously at that time our confirmed opinions.
Canada, under the late Mr. Robb as Finance minister, returned to the gold standard in 1926, but in 1928, when Mr. Robb was still Finance minister, certain obligations of the dominion became due in the city of New York, and without endeavouring to obtain the sale of a sufficient number of dominion government securities to take up the obligations then falling due, Mr. Robb undertook, I assume by authority of the governor in council, to export 840,000,000 of the country's gold reserves to pay off these government obligations then maturing in New York. Then, to replenish the deficiency in the dominion's cash reserves, he issued a corresponding amount of dominion notes. The result was this-and I am not saying this by way of criticism of the present Prime Minister (Mr. Mackenzie King), but it i3 one of the reasons why I became so favourable to the creation of a Bank of Canada, which would take the place of the treasury board, nor in criticism of his government or of any government which might happen to be in their place- that the amount of dominion notes issued under the Finance Act rose from $200,000,000 in September, 1929, to $285,000,000 in November, an increase of 42| per cent, as compared with the normal post-war seasonal increase of 20 per cent. To that was due to an extent which cannot be fully estimated the stock exchange activities that finally resulted in 1929 in such disastrous failure and ruin, bringing disaster and loss to the extent of many billions of dollars to Canadians from one end of the country to the other and leading to numerous suicides and deaths. That abnormal credit inflation was financed by an increase in dominion notes, which permitted an undue expansion of dominion note issue and a corresponding increase in the cash reserve of the chartered banks, an increase which was not required at the time for the ordinary financing of domestic trade and industry, and an increase which, to secure its employment, went to finance the stock exchanges of Canada and of New York. I am not pressing that by way of recrimination, but I say that if a different policy had been pursued the disaster, if it could not have been wholly precluded, in view of American and other influences, would certainly have been mitigated to a very considerable extent. From that day I have not felt favourable to the continuing of the administration of dominion note issue under a committee of the privy council.


William Lyon Mackenzie King: I hope my
hon. friend does not wish to leave the impression that that one transaction was responsible
for the financial crash of some years ago. It is due to the memory of the late Minister of Finance that this should be made clear. In so far as the transaction referred to had any effect at all, it was but one of a great many transactions.


Charles Hazlitt Cahan: Quite so, and if I have not made that clear I wish to do so now. But it was, so far as Canada was concerned, a very important and material incident. It had this effect, however, that I felt, and I am sure that the former Prime Minister, the right hon. member for Calgary West (Br. Bennett) and other members of the late government felt, in view of that and other incidents which were occurring, which placed the committee of the privy council under undue pressure, that they were not by their experience in financial matters able to deal with the matter with the utmost competence. It induced them to favour the institution of a Bank of Canada which would take the place of the treasury board in relation to those matters connected with coinage, currency and dominion note issues. Therefore I was very much in favour of the creation of the Bank of Canada and the passing of the Bank of Canada Act. I had nothing to do with it except that I was one of a number of colleagues who were consulted with regard to its terms, and I fancy that perhaps some of the drafting which doubtless was more or less defective may have been due to my efforts at the time. I was pleased indeed when the then leader of the opposition and some of those associated with him quite warmly approved the passing of the Bank of Canada Act, although criticizing incidentally some of its features. To me it does not matter very much whether a certain percentage of the stock of the Bank of Canada, to the extent of $5,000,000, is held by private parties, or whether the government undertakes the acquisition of all of the outstanding shares, or whether on the other hand it undertakes to issue $5,100,000 more so as to give the government a preponderance of ownership. In the discussions to which I was a party it was suggested that the ownership of shares by private persons would give to a large number of people throughout the length and breadth of Canada more than a passing interest-


The CHAIRMAN:: I regret to interrupt
the hon. member, but he has spoken for forty minutes.


Some hon. MEMBERS:: Go on
Bank oj Canada


William Lyon Mackenzie King: I shall say a word or two so as to enable the hon. gentleman to continue. I have spoken and he may therefore now continue.


Charles Hazlitt Cahan: 
Mr. DUNNING:: That is now regarded as a very conservative estimate.


Gerald Grattan McGeer: Do I understand the hon. gentleman aright that this would all be caused by reducing the rate of interest to three per cent?


Charles Hazlitt Cahan: I am not talking about the rate of interest. My hon. friend knows better than that.


Gerald Grattan McGeer: I do not follow the argument. I -have been trying to follow it.


Charles Hazlitt Cahan: It is an inflation of our dominion note issue that I am dealing with.


Mr. LANDERYOU:: Who has suggested any inflation?


Mr. LAWSON:: That is your policy. You do not recognize it.


Charles Hazlitt Cahan: Who has suggested it? The proposed inflation of the note issue of the Bank of Canada by $621,000,000 to an aggregate of $721,000,000, and the use of -those notes for -the construction of public works, would inevitably reduce the value of every dollar, if not utterly wipe out every dollar of value in these life insurance policies.


Gerald Grattan McGeer: I should like to put on record now a correction of that statement. I made no suggestion-


Charles Hazlitt Cahan: I am not talking to my hon. friend. He is not all Canada; he does not represent all the radical views that are expressed.


Gerald Grattan McGeer: I am rising to a point of order.


Frederick George Sanderson: The hon. member for Vancouver-Burrard may not interrupt the hon. member who has the floor without obtaining permission.


Charles Hazlitt Cahan: At that moment I was not referring to the hon. gentleman at all.


Gerald Grattan McGeer: I am sorry, but what I understood the hon. gentleman to say was that I had proposed an increase in the note issue to $724,000,000, which is not so.


Charles Hazlitt Cahan: Upon further examination I find that, excluding bank deposits payable on demand and including only savings deposits such as bank deposits payable upon notice, dominion government savings bank deposits, post office savings bank deposits and other savings deposits in the loan and trust companies including the present value of dominion government annuities, at the present time in Canada there are approximately five million savings deposits representing an aggregate of $1,700,000,000 of the savings of industry and thrift in this country. I am suggesting again, and I hold very strong views with regard to it-and I think my opinions are sound and sane-that the undue and unrestricted inflation of our currency to the
Bank of Canada

amount suggested, $724,000,000 of dominion notes or corresponding Bank of Canada notes, would reduce or almost completely wipe out these credits. I think then, after seventy years of life, having been born and bred in the country and knowing something of country life, to which I have maintained a distinct and affectionate attachment, of what misery, disaster and ruin will be brought upon so many millions of our people if we endorse such an unlimited issue of our currency.
I should like to read one extract from the work of James W. Angell, The Recovery of Germany, which I think will be found in the library, in which he gives a vivid picture of the dire results of the. indiscriminate issue of irredeemable paper currency in Germany. I quote:
The group which suffered most from the inflation ... was the group which was ... least able to defend itself; the middle classes among the town dwellers.... Composed largely of people with small fixed incomes, such as salaried officials and clerks, recipients of pensions, and little investors living on interest and rent-of whom the latter group were hit especially hard by the government control of city rentals-they were precisely the group most exposed to the evil consequences of currency depreciation, while they lacked both the knowledge and the opportunity to combat it. Their savings disappeared (and) their pensions and annuities melted away.... Hundreds of thousands of educated men and women, too old or feeble or untrained to earn their own living, were abruptly faced with starvation. Many died. The others, passing from day to day without hope, survived only by the sacrifice of treasured books, furniture, jewelry, and all their saleable possessions, and at the end by domestic and foreign charity. Their history is one of the most genuinely pitiful chapters in all the war and post-war tragedy.
I am not here to defend capitalism. Men who control large amounts of capital have made many errors of judgment and mistakes, though not all, I believe, to promote merely selfish interests. On the other hand capitalism is the system the world has had for a thousand years. It is largely responsible for all the material progress that modern civilization has hitherto made. It has been developed by individual initiative, enterprise and courage. It ensures a large measure of individual ownership and safeguards private property. It provides practically all civil employment exclusive of governmental and municipal services. It pays salaries and wages for labour and interest and dividends for thrift and saving. And it is the accretions of the savings of the industrious and thrifty that make Up the capital with which our railways, canals, hospitals, homes, churches and colleges, as well as our public utilities of all descriptions, have been constructed and with which our industries, great and small, are

built up and operated. I do not believe we could have attained the state of organized civilization which we at present enjoy except under a capitalistic system, which, like all other human systems, has no doubt exhibited human frailties. But the ruthless dissipation and destruction of these savings by unrestricted inflation of our currency would, I am clear in my own belief, impoverish Canada for at least two or three of our future generations.
In addition to those who are advocating inflation by means of indiscriminate issues of dominion currency we have in this house a number of gentlemen who advocate a social credit program, which, as nearly as I can ascertain by listening carefully to their exposition of that program in this house, proposes to distribute what is called purchasing power to all citizens, old or young, to the extent of their individual requirements. The advocates of that system in this house explain, as nearly as I can understand them, that the purchasing power so freely to be distributed to individuals will make possible the acquisition by these individual recipients of all the goods and services they may require to satisfy their individual needs. Nevertheless I would remind them that mere purchasing power is without utility unless goods and services are available for purchase. It is admitted that these goods and services can be produced or provided only by work, either intellectual or physical, or usually work that is both intellectual and physical. But when purchasing power, whatever it means, whether it be an indiscriminate expansion of the dominion note issue or of other note issues, is freely distributed without work, I ask, who then will furnish the work necessary for the production of the required goods and services?


Mr. BLACKMORE:: Who said it was to
be without work?


Charles Hazlitt Cahan: Well, I read in the press
not long ago of someone-perhaps he was one of the supporters of the hon. gentleman -who said that if his wife and six children and himself were each to receive the monthly apportionment suggested to be issued under the social credit scheme, there would be no necessity for his working.


John Charles Landeryou: May I ask the hon.
gentleman a question?


Charles Hazlitt Cahan: I am not going to enter
into a discussion. I suggest that a successful solution of the problems propounded by the advocates of social credit must await the successful solution of another problem which has engaged the attention of the world for

Bank of Canada
centuries, namely the problem of effecting perpetual motion without the expenditure of energy. Twenty centuries or more of our history have clearly shown -that a free distribution of purchasing power which may be utilized for the acquisition of sufficient goods and services to supply the needs of the people cannot be made by any government unless that government arbitrarily reserves and exercises the right to conscript all labour, allots to each man and to each woman the special work for which each is deemed to be best qualified, and then by arbitrary force compels each to perform his allotted task. That I think is a proposition which is thoroughly vindicated by history. In Russia, and more recently in Germany and Italy, governments have apportioned' such available work to individuals as they deemed expedient, but they have compelled the performance of such work by the persons designated for each branch of the common service. I suggest to my hon. friend that if any government in Canada, even a prospective social credit government, should attempt to organize in Canada a new slave state, and so carry into effect the forcible conscription of labour and an arbitrary allotment to all citizens of the special form of labour to be undertaken and performed by them respectively, I have sufficient confidence in the natural desire of our people for individual personal liberty to believe that such a government would thereby inevitably ensure a condition under which their individual heads would speedily adorn the lamp posts of this capital city.


John Horne Blackmore: What about your
"work for relief" proposals now?


Charles Hazlitt Cahan: The ever changing conditions of our industrial and social system must necessitate corresponding changes in public laws and the regulations which control human activities. But in these times, just as we are emerging from years of extreme depression, the government and parliament should take special care not to postpone, and certainly not to preclude, the recovery of our economic stability by the wilful destruction of our banking and monetary system, or by unnecessarily restricting the freedom of individual and business initiative, or by precluding the adoption of such efficient industrial methods as are not subversive of the general public interest. The fabric of our civilization is woven out of strands of every kind and colour, but no substitute can be found for the individual initiative and the sound judgment of those who have slowly and laboriously by long training and experience developed their capacity for service to their fellow men.
The struggle for existence cannot be wholly eliminated. Life is work, and work is now and will ever be necessary to procure the essentials of life. The ideal world cannot be acquired, and the ideal life cannot be attained on any easy terms, and mere existence does not postulate or imply the right to exist at the expense of the community as a whole. The sick, the infirm and the feebleminded must ever be the concern and care of the whole community, but those of us who have health and strength must each personally assume the responsibility of acquiring, by careful training and preparation, individual efficiency in whatever work is available if society is to be maintained on the basis of individual liberty and individual responsibility. The responsibility for maintaining the economic growth and development of this country and for the improvement and betterment of social conditions rests largely upon the shoulders of our business men, as the Minister of Labour (Mr. Rogers) stated a few days ago, especially those engaged in finance, industry and commerce.
On the other hand I ask this committee to remember that mere opportunist and ill-considered legislation and excessive government interference, such as has been proposed I think by the hon. member for Vancouver-Burrard, can serve only to restrict the normal growth and development which otherwise is inevitable. Skilled manual labourers have been the builders of the foundations of our present civilization, and one cause of the delay in the revival of industrial activity is that we have failed to educate and train our youth to the performance of those services which are essential to the welfare of the whole community. Nevertheless the solution of the problem of unemployment depends largely upon the development of leadership and the inculcation of the spirit of independence and self-reliance, as well as upon the recognition by all leaders in industry and business of their personal responsibility for providing employment for their less qualified fellow men.
This old world has witnessed many recurring periods of business depression, but even in more modem history conditions in England after the close of the Napoleonic wars and in the United States after the close of the civil war were worse than those we have recently experienced. But always there has been recovery. At the close of the United States civil war I recall as a child of a fairly well-to-do family never even seeing white bread for two or three years, simply because we had been getting our flour from the middle states and those sources were pro-
Bank of Canada

hibibed to us. We did not use sugar, but for sweets depended on molasses from the West Indies, because the United States with its large markets was taking practically everything that could be supplied. We lived on oatmeal porridge and rye bread and other wholesome products of the field, and I think we raised as strong and vigorous a race of boys and girls as was ever raised in this country. Although the standards of life, as compared with the standards of to-day, were somewhat low, there was no lack of family good cheer and happiness and the enjoyment of those simple homely pleasures which are characteristic of the small rural community.
Things are going to be better. I read what I can in the modern engineering journals, and I am convinced there is lying dormant a wealth of scientific knowledge and achievement which will soon release for the benefit of mankind powerful physical forces of incredible utility. I believe we are now at the commencement of another period of unprecedented material progress and prosperity in which new inventions will give an increasing impetus to all forms of human activity. The creative activities of mankind will soon again have full play. The heights to be attained under the financial conditions in prospect may be fully measured by the depression of the abyss from which we are gradually arising. The government may be assured that in connection with this measure we do not wish to detract from government control and government authority, but what we urge upon the administration is that in perfecting as they deem best the measure now before the committee they should protect themselves from sudden ebullitions of popular feeling and from the extreme demands of political or partisan supporters. Canada, its safety, its prosperity and the happiness of its people are largely at the present time, and doubtless will be for some years to come, in the hands of the Prime Minister and his colleagues. I for one say-and in my statement I believe I voice the expression of opinion of the leader of the opposition and those about me-that to all sane and sound measures placed before us dealing with the financial and economic life of the people of Canada we are anxious to give reasonable and hearty support.


Mr. HILL:: In fairness to the hon. member for Yancouver-Burrard (Mr.. McGeer), may I say that I take responsibility for the criticism of the hon. member for York-Sun-bury (Mr. Clark) with reference to the statement by the hon. member for Vancouver-Burrard to the effect that the Bank of

Montreal had paid a quarterly dividend of four per cent. I read it in one of the financial sheets and passed it to the hon. member for Vancouver-Burrard eausing him to make the statement. I believe the article in the publication referred to the total payment up to date for this year, which amounted to four per cent for the half year.
While speaking, may I say that I believe every hon. member appreciates the contributions which have been made by hon. members speaking to the bill. The information given to the committee has been valuable, and that given by the hon. member for Yancouver-Burrard, who has made a long and careful study of the subject, has been particularly valuable. I think all members of the committee appreciate the contribution he has made.


Gerald Grattan McGeer: I do not think I would be performing my duty properly if I were to permit to go unchallenged some of the statements of the hon. member for St. Lawrence-St. George (Mr. Cahan). His argument is of the type that avoids facts, that deals with false premises, and that continues to support a system which thinking people know must be changed.
I shall deal with his first argument in which he attempted to show that my conclusions were not based upon sound reasoning or logic. He took my point, namely that if I had a million dollars in copper money I would have no difficulty in converting it into a million dollars of bank money. In an effort to prove that that was absurd and that copper money had no value and could not be created by parliament as money, he developed the specious argument that bo convert it into money I would have to divide it into twenty-five cent transactions, and go about the country getting persons to accept twenty-five cents in copper money, before I could have full legal tender money. The folly of that argument is evident when we appreciate that our newspaper issues are now sold in terms of copper cents. In Canada and the United States the vast bulk of the entire newspaper production is sold in terms of copper cents. In our large department stores the practice of inducing sales by breaking common term money, such as a dollar, to ninety-nine cents, and fifty cents to forty-nine cents, has induced an enormous use of copper money. I want to ask any hon. member this question: If a newspaper proprietor accumulated $1,000 in copper money from the day to day sales of his newspaper, would he have any difficulty in having that $1,000 accepted on his deposit slip as part of bis money deposited with the bank on a certain day, against which deposit he could issue cheques? Of course he would not. Copper

Bank of Canada
money to-day, meeting modem conditions of trade, forms a definite and realistic part of the media of exchange with which the bulk of our business is actually transacted. The idea of having to convert copper money into full legal tender money, or bank note currency, by finding people who will accept twenty-five cents as full legal tender money is an indication of the absurdity of the kind of argument resorted to by those who, rightly or wrongly, will stand by the old system, irrespective of whether governments are impotent and millions in destitution and in misery stand in breadlines.
Now I come to the other argument, one which has been commonly used as an answer to any man who suggests a program of sound monetary reform, namely: Look at what happened in Germany. Yes, for a minute let us see what happened in Germany. Germany, faced with the imposition of an appalling and impossible load of international debts payable in gold deliberately resorted to a program of inflation, for the purpose of liquidating her internal debts and maintaining an outward appearance of solvency, so that the things which were in pawn, the Saar and the Ruhr, might at some future date be returned to Germany without the payment of her international debts. Do we think for one moment that the printing presses ran themselves, or that to get the results they were seeking they had to print mark notes not in terms of tens, hundreds, thousands or millions, but by the carload, and by elevating the denominations to trillions? This was a possible use of inflation that could be resorted to as a means of liquidating debts within the country. An appalling program of inflation was pursued by Lenin who, in his Proletariat Revolution said that, from his point of view, the one thing which would make a success of a proletarian revolution was the destruction of the money power of the bourgeois and the aristocrat. By inflation he de-troyed the value of the Russian rouble and proceeded to rebuild upon a basis of managed currency a scheme of civilization that repudiated the ideas of capitalism and inaugurated a plan of Marxian communism. Whether or not we like their ideas of political economy or political freedom, in Russia they have been able to finance the most enormous program of industrialization, the greatest program of national education and the greatest program of war preparation, through managed currency, that Iras ever been put forward by the people of any nation. Japan has done the same thing.
Of course it is very easy to drift away from a real argument and to place the proposals of your opponents upon a false premise. For that reason the horn, member for St. Lawrence-
St. George proceeded to state that I had declared we should inflate the dominion note issue up to $724,000,000. I said no such thing. What I did say was that under the legislation passed by this parliament, with $181,000,000 of gold reserves the Bank of Canada had enough reserves to create an issue of $724,000,000 and still be within the limits of safety as set by parliament itself. I said again that under banking practice as set forth by the Macmillan committee this was a sufficient legal tender issue to support $7,240,000,000 of bank credit. That was not my opinion of what should be or could be; it was merely a statement of what under today's conditions parliament and banking practice have fixed as a limit for a medium of exchange-


Charles Avery Dunning: I rise not to differ from the hon. gentleman but to point out, if he wishes his figures to be correct, that the twenty-five per cent relates not only to currency but to deposits as well. His figure therefore would need to be corrected by that difference.


Gerald Grattan McGeer: In any event there would be no difficulty in accumulating more gold if it was necessary.


Charles Avery Dunning: But if my hon. friend likes to use correct figures-


Gerald Grattan McGeer: Yes, and I thank the minister for his statement. I was using that merely as an illustration, and not as a statement of what I thought should be done. The point I wish to make is this. No one suggests for one moment that this country needs or would be justified in putting in issue any such figure as $7,000,000,000 of bank credit. What I do say is that within the limits of our gold reserves and our gold production, of our legal tender currency and our practice of creating an effective bank credit transferable by cheque deposit type of currency, there is more money available than is necessary to finance the government without a disastrous imposition of taxation.
I want to refer to one other point. It is very easy to refer to American banks as a proof that our banks are sounder, but I wonder, Mr. Chairman, if that is altogether a safe or a proper comparison to make. Our banking system was modelled after the British banking system and was established in 1867. In other words, ever since Canada has been a confederation the Department of Finance has been the central department of issue around which our banks could revolve. At all times the minister of finance and the treasury board had the power to authorize
Bank of Canada

the issue of dominion notes to supply the banks of Canada with money. In the United States a very different system was inaugurated. There you had national banks and state banks, and the national banks were not allowed to maintain a branch system. Consequently you had all across the United States individualism rather than collectivism in banking. That had its weaknesses and its failures, but cities like Portland, Seattle, San Francisco, Los Angeles and others through the middle west have found great advantage and secured much benefit from the fact that local banking institutions were established throughout the United States. When the crash came, as it was bound to come when confidence was lost, a great number of the banks went broke because they could not supply the legal tender cash which their depositors demanded.
Following 1844, when the British banking system was being developed, Great Britain had 640 banks, but the number gradually fell through bankruptcies and mergers until to-day in Great Britain there are only 40 banks, and the big five do the bulk of the banking business. In the United States long before the collapse came and before the federal reserve system was set up, which is in many respects similar to the British banking system, we in Canada and in Great Britain had gone through that period of bankruptcy which followed the establishment of the federal reserve system in the United States in 1914. I think probably one thing might be said which constitutes a unique distinction and would be endorsed from the experience of thousands of business men in the Dominion of Canada. I think they will agree with me that in the United States it was a case of the people breaking the banks, but in the Dominion of Canada it has been more a case of the banks breaking the people. That is really the situation that exists.
I was interested in the hon. member's refutation of the Keynes' theory that a low rate of interest induces investment and creates employment, because I understood from him that if we were to reduce rates of interest by increasing the use of national currency and by organizing at a low rate bank credit money, we would wreck the whole structure, bring down employment, reduce savings, and as a result impose hardships and restrictions on everybody. I wonder if that is borne out by the facts.
In 1920 we had dominion notes in issue to the amount of $176,000,000, and we had bank note currency in issue to the extent of $228,000,000, a total currency issue, dominion and bank notes authorized by parliament, of $404,000,000. Then came the trouble. De-

flation started; since then the $404,000,000 has been reduced to $224,000,000; steadily after 1920, notwithstanding the rise in activity up to 1929, the process of money deflation continued, right up to the end of 1935. Who can deny, in the face of the prosperity we were enjoying in 1923, 1924 and 1925, with a large volume of money in issue-practically fifty per cent more than was in issue during the period of 1930 to 1935-that the results prove that with a decline in the volume of money in issue the very conditions the hon. member for St. Lawrence-St. George predicts are brought about? Where is the value of your home now? Where is the value of your investment? Where is the value of your securities? Where is the value of your investments in stocks such as the Canadian Pacific Railway or a thousand and one others? With a steady decline in the volume of money in circulation, ruination spread throughout business; unemployment came, and hungry men, women and children appeared and were saved from starvation only by the deliberate act of the national government which came to the rescue of provincial and municipal governments and put some $750,000,000 into circulation to take care of humanity.
When I hear arguments of the kind we have had to listen to to-day applauded by hon. members of this house, I fear for the future of the people of the Dominion of Canada. The time has come when men have got to deal, not in specious arguments that start nowhere and end behind where they started, but with a constructive program.
One would think from the argument of the hon. member for St. Lawrence-St George that one should be judged in his work as a public man through the limited reports that come out in the newspapers. I do not blame the newspapers for publishing what has been published with reference to myself, nor do I apologize for the tactics that I have employed. I know there is a place for cold, deliberate and studied debate, but I know there is another place for the kind of argument that arouses public opinion, and when men are out trying to arouse public opinion to change institutions that have the sanction of time, the tactics that need to be employed for this purpose are the tactics that command attention. I have done my best to arouse public opinion in the way I thought it could be aroused. But I went a little further than that and wrote a book setting forth the views I hold. I put it into circulation presenting and elucidating the program of managed currency and planned economy which I offer andi which is very different from the kind of pro-

Bank oj Canada
gram that the bon>. member for St. Lawrenoe-St. George attributed to me today. I pointed out that the fundamental institutions making up a program under which the ideas I have might be carried out by government consist of : (1) the mint; (2) a national banking system; (3) a scheme of scientific taxation; (4) a department of economic regulation and control; and, (5) a department of international trade and credit control. As far as I know, no one who believes in the school of thought I believe in has ever suggested that a mere inflation of currency or the mere pouring out of money or giving money to people for nothing will do anything but harm. But to put into circulation an adequate volume of the medium of exchange, which will sustain good government and ordered progress, is just as essential to human advancement as the putting into an irrigation system of the proper quantity of water is to the success of production on such land. Of course, I have had some very nice things said about me and some other things as well; and sometimes when I hear members like the hon. gentleman from St. Lawrence-St. George speaking I am reminded of the fellow who went to a Masonic lodge banquet where he received an illuminated address. It was too much for him and he drank well but not wisely. When he got home that night he tucked his shoes under his arm and opened the front door and was astounded to see his wife at the head of the stairs. After she had told him in no uncertain terms what she thought about him he said, "Yes, my dear; that is what you think about me; but"-drawing this illuminated address out of his pocket- "I want you to read what the world thinks about me." I wish to call attention to one or two things which I think rather offset the belittling references to myself made by the hon. member for St. Lawrence-St. George. On September 15 of this year I was pleased to receive this letter:
Dear Mr. McGeer:
Your book reached me in the crowded weeks before my departure from Canterbury and I laid it by to read on board. A storm during the earlier part of our voyage prevented me from reading it until now, but as I at length read it, I rejoice greatly at so clear and courageous a statement.
You are proving indeed a tower of strength in the crusade against an engineered poverty and against the essentially godless rule of finance.
May God prosper your work.
Yours very sincerely and gratefully, Hewlett Johnson,
Dean of Canterbury.
That English church dignitary not only holds a high place in the Church of England but is a distinguished engineer and a man who has a right to the respect of those whose 12739-229
minds run in scientific channels. From the premier of Ontario I have received this communication:
I am quite in agreement with your policy with regard to governmental finance.
Of course, I do not know whether Liberal members in this house respect the great work which the Premier of Ontario has done, but the day will come when it will be respected. I do not think that letter was written idly or carelessly or without some good reason in his mind for writing it. I have another letter from one who wrote a book on money in 1894, and who has been proven to have had the prescience almost of divine authority-Arthur Kitson. In 1894 he told of the troubles that were bound to overtake the world if it continued on the gold standard, because, as he said, it creates debts and makes it impossible for men to pay them. With the dawn of the twentieth century, he said, the nature of the world's activities woidd show whether or not men would abandon or continue a system that was bound to end in war, revolution and destruction. Well, the twentieth century came and the chaos that Kitson predicted has been here ever since. After I had appeared before the banking and commerce committee he received a copy of my evidence and writing to me he said:
I have just been reading your evidence before the committee on banking, and I wish to congratulate you and tell you how sincerely I appreciate the many points you have made. It reads to me like one of the finest addresses ever delivered on the currency and banking question. I am anxious to get a dozen copies of this if I can for distribution among our leaders. Would to God we had a McGeer in our House of Commons! There is not a single member here who can deliver a reasoned address on the true science of money. If you have not sent my friend Leigh of the London Chamber of Commerce a copy, I will lend him mine.
I am hurrying to get the post.
Sincerely yours,
Arthur Kitson.
From John Maynard Keynes I have received a letter which I prize highly. He says:
Dear Mr. McGeer:
Thank you very much for your letter and its enclosure. I am delighted to see the lines on which you are trying to promote sensible ideas in Canada. I could not say that I agree in every particular, but with many of your leading points, I am, as you will have expected, in * complete sympathy.
( \ our exploit as regards reading my "Treatise on Money" should certainly deserve a word of appreciation from the author. I am asking my publisher to send you, as a small recognition of it, a copy of a forthcoming book of mine-a collected volume of essays.
Yours very truly,
J. M. Keynes.

Bank oj Canada

This may seem funny to some hon. gentlemen, but in the work I have been trying to do these words of appreciation, coming from that wide field, gave help and encouragement and they lead me to believe that I need not be w'orried about men who talk in the language that came this afternoon from the hon. member for St. Lawrence-St. George. I made a speech in this house a little while ago-


Mr. ROWE (Dufferin):: Take it as read.


Gerald Grattan McGeer: I think it would probably be just as well if it were not read because it would be wasted on men like you. The speeches I make do require a little intelligence and tolerance and sympathy to be appreciated. But it was appreciated, and incidentally I can tell my hon. friend that it was read somewhere, for I happen to have a letter signed by the chairman of the United States Senate committee on banking and commerce, Duncan U. Fletcher. He says:
My Dear Mr. McGeer:
I deeply appreciate your favour of May 19 and wish to assure you it was indeed a privilege for me to have the opportunity to introduce extracts from your recent address into the Congressional Record.
Due to your extraordinary interest in and enthusiasm for what this administration has been doing, as well as monetary matters in general, I have thought it likely that you would be interested in the enclosed copy of an article I have prepared on "The Fight for the Control of Credit." This article will appear in the convention edition of the Philadelphia Record at the time of the holding of the Democratic convention in that city.
With every assurance of my highest esteem, I am,
Very sincerely yours,
Duncan U. Fletcher.
That is from Duncan U. Fletcher. When men holding the positions of those whose letters I have read have seen fit to write me in these terms, I suggest that it must have been as the result of some effort on my part and some work done that was worthy of something more than sneers, worthy of something more than jeers; now if there is any diuty that members elected to this house have to perform it is to apply whatever intelligence and capacity they have to the understanding of problems that can be solved, so that a greater measure of social and economic security, a greater measure of human contentment and happiness may be brought to the human family from time to time. I firmly believe that His Holiness the Pope was right when he declared that the cause of destitution and war, of strife and misery, is largely to be found in the mismanagement of money, due to the fact that currency and credit are under the control of a few men who think more in

terms of earning interest than in terms of advancing human well being. As long as I am in this house and have breath to speak, Mr. Chairman, I will speak as I have spoken, urging the government to secure the cooperation of the opposition and to enlist the support of the Senate, appealing to the government to move forward to the control of currency and credit issue as its most conspicuous and sacred responsibility in a constitutional democracy.


Mr. HAYHURST:: I do not intend to
make a lengthy speech, but I should like to refute some of the arguments on this subject that have been placed upon Hansard. I agree with the hon. member for Vancouver-Burrard (Mr. McGeer) that many of those who have studied the books of the orthodox economists fail to realize that this is a new day, that the law of to-day is "to change," and that, as Maynard Keynes has had occasion to change his mind and his economics, so have many other men and women of the past generation and so have many who are growing up in our present civilization; they are forced to change their minds because of our modern conditions. I believe that the views of Maynard Keynes are wrong in some respects. The hon. member for St. Lawrence-St. George (Mr. Cahan) was wondering who would furnish work, and when, in reading the books of Maynard Keynes, I noted his opinion that the sole subject of our thinking, economically speaking, should be the provision of employment, I felt he had missed the crux of the present great change in the circumstances of our lives.
While I have plenty of material here I am not going to quote from any of it because I prefer to tell the committee of the experience I have passed through as a farmer. You, Mr. Chairman, as a farmer must know that our farmers to-day, with modern machinery, can produce thousands of bushels of any kind of grain where formerly they produced hundreds. The question is not now one of providing work; it is one arising from the great and plentiful production of a scientific age, and what we require is a financial system which will adapt itself to this new era of ample power and productive capacity. So, when Maynard Keynes said that work was the essential objective, he missed the point. Some people think that the group with which I am associated are decrying work. That is not so. I enjoy work, I enjoy life, and I know that the boys and girls of to-day who are going through our universities are looking to a better age in which they can use their intelligence and abilities to develop the

Bank of Canada
future scientifically. The trouble to-day is that along with our scientific development we proceed to sabotage some of the finest of our machinery in order that we may remain in an age of scarcity. Yet the fact is evident that we are facing a new time, that the age of scarcity is behind us and the age of plenty is at hand-which is also, we believe, an age of social security. Therefore the crucial question is not a matter of work. I am sure Maynard Keynes would not assume that because he had eliminated employment in his home it would be necessary for him to build another home where he could keep all the servants at work just as they formerly were. Yet that is much the same as the suggestion that is heard from the Clydebank, in Great Britain: "Let us build another supership for our majestic commercial fleet, one that will supersede the Queen Mary." What is the idea behind that? Merely that of providing work, whether the supership will pay or not. That supership could be produced, because the machines are there and the men are there. So if it can be produced, why not produce it? The trouble is that progress is retarded by men of limited vision who read and believe the old economics instead of taking them with a grain of salt as we have been forced to do.
Conditions have forced us to realize that this new age has falsified much of the old economics. We do not decry skill in human endeavour; it represents wealth just as much as the farmer's wheat or the baker's bread. The economic difficulties of the present time are largely due to a lack of occupational opportunities for which our young men and young women have spent so much time in, preparing themselves. Do you not think with me, Mr. Chairman, that it is a tragedy that they should have their hopes frustrated and their enthusiasm shattered because there is no work for them to do? We believe we must have a financial system which will pay our people whether they work or not. I know this may sound ridiculous. At the same time, in order to remove the spectre of poverty and starvation which confronts us, it is necessary to have a keener intelligence in respect of monetary matters to grasp the problems that are before us. Most of the suicides, due to the monetary troubles which afflict so many people, and to which the hon. member for St. Lawrence-St. George referred, are due to what is essentially a lack of freedom from which individuals are suffering because they have not the tickets to purchase the necessary food and clothing they require.
I do not desire to weary the committee with an outline of our philosophy, but I hope it will be realized how different conditions are from those which prevailed when we were boys. Then the life in our communities was largely self-contained. We had the village blacksmith, the tailor, the shoemaker; these workers lived in small cottages, frequently with a few acres attached, and a cow and a few pigs to help them over periods of depression. To-day those classes of people are practically non-existent. There are hardly any blacksmiths in the villages; they have moved to the cities to work in factories, where they can produce goods more efficiently than they could under conditions of individual hand labour.
It is not necessary to go into this at length. I merely wish to appeal to your reason to recognize that we must change because the *times have changed; we must reorganize the financial system because the times demand it-At the present time the financial system practically rules the affairs of government. We contend that the government should entirely rule the financial system, and so make credit available. That does not mean inflation; our system of social credit, which so many people sneer at, is that credit should be written in bank books in proportion to the amount of goods produced, and there would be a direct relation at all times between credit and currency and production. I feel that we must work together. Probably many hon. members feel that we in this corner are directly opposed to the present system. That ' is not so, except with regard to the control of finance. We are individualists. We believe that capitalism will still exist under our *system, because individual initiative and skill are not going to be diminished or decreased. We are going to endeavour to increase them, by giving our young boys and girls greater opportunities for education, by permuting them to continue their courses at the universities in order to make themselves more efficient as producers in this new world of potential prosperity.
Someone asks: Who will furnish the work? Why, that is the trouble; there is not enough work to go around!. If in western Canada we are producing ten times the quantity of wheat per man that we produced in our fathers' days, how can we expect to continue the old policy of work and wages as the old laissez-faire economists would have us do? When the hon. member for St. Lawrence-St. George (Mr. Cahan) spoke about his perpetual motion machine I thought he missed the point entirely. Our point is that debt is perpetual. We are living under a debt creating system
Bank oj Canada

and we believe that we should issue credit and currency in order to finance the productive capacity of mankind instead of building up a debt creating system by borrowing more money or lending out money at interest rates. We believe the government should take control of that money.
While I am speaking of interest rates there is one matter I should like to bring to the attention of the government. Interest rates on mortgages in western Canada-and I know the same situation exists in eastern Canada, are entirely too high. The wages of money are out of all proportion to the wages of man. Too often have we heard the cry, "Give us this day our daily work." I think it is time we went back to the old prayer, "Give us this day our daily bread." The fact is that the wages of money in western Canada are entirely too high in proportion to the amount of work, or the lack of work, that is done by money. We agree that credit, as the Minister of Finance (Mr. Dunning) said, rests upon our ability to produce, our character, our judgment, our reputation and so on. Personally I borrow money at the banks and I have no particular objection to the banking system as it has been conducted in the past. But the fact is that to-day we are facing a new age of such tremendous potential production that we must change our banking system entirely. So, if the government would accept our suggestion, we would make the government sovereign over the production of credit and currency.
1 should like to know just what is the policy of this government as compared with the policy of the government it superseded. It is apparent to me, whether or not it is apparent to other hon. members, that money should not be a commodity, to be traded in and juggled in all world financial dealings for profit. I believe it should be for the convenience of production, and the government should control the entire production of credit and currency. Naturally we wish to raise the standard of living of our people, and we propose to do so by giving the people a dividend out of the surplus production. This dividend, at which so many people smile, is based upon the production of goods. We do not wish to create a class of lazy people who will not produce real wealth. A nation that will not produce real wealth naturally will deteriorate. We realize that the farmers of western Canada and the manufacturers of eastern Canada can produce far more real goods to-day than ever before in our history, and if we had the proper machinery we would naturally reduce the man power necessary to look after those machines. That is perfectly true in the west and I know it is also true in

the factories. Some of the finest machines that have been developed in the last few years have been bought up by the financiers in order to remove them from the market, so that these new labour saving devices will not be used. That is strange to me. The other day I had a letter from my brother, who lives in Bradford, England. In the factory in which he was working they refused to instal an automatic machine to look after the weavers, because it would put fifty men out of work and the city of Bradford wondered what they would do with those men. That is a problem facing us, and we might as well put the cards on the table and stop sneering about these problems.
I recognize that my philosophy may not be the one which will bring about a solution of our problem. I am a humble student of economics, and if anyone can show me a better philosophy I am willing to accept it. I am sorry the hon. member for Vancouver-Burrard is not in the committee at the moment; I should like to get his pamphlet and read it over, and if there is anything worth while in it I shall certainly add it to my philosophy. I have read the books of Ricardo, Adam Smith, Mills and other great economists. They lived in a different age, and the financial system of that time was probably suited to that age, but those who have eyes to see realize that the power age in which we live to-day has revolutionized the productive capacity of mankind. If that is a fact, as we believe it is, why not accept it and abolish the slavery and drudgery that exist?
I can go to my own home town, in order to show what we are up against, without reading from books. This is an actual incident. Our city fathers thought it would be a wise plan to bring in a machine, a caterpillar tractor, with scoops behind an elevator and with fingers on the scoops, that would go through gravel and dig a ditch twelve feet deep for a new sewage system. That machine crawled along slowly, but it did a tremendous amount of work and only two men were required to look after it. Then the city fathers said, "What are we going to do? Shall we pay the poor people the dole or shall we give them work?" They decided on the work and wages policy, sent the machine back to Edmonton and put the poor people back in the ditch. So the next morning one could see these fellows digging deep in the ditch in the muck and mire, and they were asking me for suitable clothes because some were fairly well dressed, their shoes and clothing not being suitable for work in the ditch. That is the situation. Was it a wise

Bank oj Canada
move for that mayor and council to send the machine away and put those people at that work? Is that ennobling work? Is it the kind of thing to put these people at, improperly clothed, so that they would catch cold, or would it be better to use the machine? All over western Canada one can see tractors behind barbed wire fences; the farmers cannot use them because they have no money to buy gasoline, so they go back to horses, and many horses have been starved during the winter for want of proper attention and care. When we have gone forward in civilization we hate to go backward again. We hate to go back to the horse after having used the motor car and the tractor, and from the horse we hate to go back to the oxen. But if the aim is to produce less wheat we had better go back to the oxen and the single plough instead of the tractor with ten ploughs behind it.
The fact is that we are in a new age; we must realize that. Instead of giving these people the dole we must just give them a dividend. We suggest giving everyone a-dividend, not to make fish of one and flesh of another. If one man happens to be receiving dividends to the extent of $50,000 and another man receiving nothing, we give them both dividends just the same. If the other likes to return the dividend to the state, well and good. We do not want to take away dividends from anyone; that is the beauty of these new economics. Even Maynard Keynes, after starting out to decry the old system of economics and proving our economics, at the end tries to go back to his policy of work and wages. That shows that although Maynard Keynes is writing for a group of professors, whereas I have spent most of my time toiling on the land, I can see his fallacies better than some of the professors because they in the universities are so far removed from real life. I am speaking this afternoon from real life, not from books. I could talk all night from these books that I have at hand; I have read all the books that the hon. member for Van-couver-Burrard (Mr. McGeer) referred to regarding Kitson and so on. I believe Kitson probably hit the nail on the head in regard to the gold standard when he said that gold is a symbol of hatred in the world. We believe that as a backing for money gold is a symbol of hatred. It is a begetter of war. If you sow hatred between nations because one grabs more than another, you are sowing war and will reap war. The people of Ontario and Quebec have not felt the depression to the full as others have, because they have so many gold mines in the northern part of those provinces, as we heard yesterday afternoon, and so
much of their surplus labour goes to those mines. But is it wiser to produce gold from the ground; is it really a better commodity than wheat? Is it better that those who have invested largely in the gold mines of this country should receive such handsome rewards while those who have invested in land receive a poor pittance?
That is the story I have to tell the committee. I feel that the farmers are being enslaved to-day because they cannot pay the high rates of interest demanded by the mortgage companies of eastern Canada. In closing I should like again to say that I hope the Minister of Finance in his sound judgment makes the government sovereign over the control of credit and currency, and that credit and currency will be issued, as the hon. member for Vancouver-Burrard suggested, in terms of public need. Of course that may be considered a very wide statement. We think that you must have a national credit account and issue currency against the amount of real wealth produced in this dominion. Then you would have something upon which to base your currency and there would be no inflation, as so many hon. members have suggested.
I am sorry for having spoken at such length; I intended to say only a few things to elucidate some of our philosophy. There is so much that might be said about it but I do not wish at this time to trespass further on the indulgence of the committee. Therefore I take my seat hoping that some of the things we have said from this corner will be heard with some degree of assurance that we have studied this subject. We feel that something along the lines which we are suggesting is the only solution. I have yet to hear of any better solution from any other part of the house.


Richard Bedford Bennett: I think the word "registered" should be added in section 6, so that it reads "registered holder." It now reads:
(ii) four directors to be appointed by the holder of the class "B" shares ..
The words generally used throughout the act are "registered holder" as descriptive of a person who is a shareholder in the bank. The word "registered" should be added here if we are to maintain a certain measure of uniformity. Section 7 says, "the registered holder of ten class 'A' shares." "Registered holder" is the correct term from the drafting standpoint.


Charles Avery Dunning: It would be "registered holder" of class "B" shares as well as of class "A"?


Richard Bedford Bennett: Quite so.
Bank of Canada


Charles Avery Dunning: We shall have to go
through it-


Richard Bedford Bennett: It is just a simple matter.


Charles Avery Dunning: -so that the word "registered" may be inserted before the word "holder" wherever it appears in the whole section.


William Lyon Mackenzie King: I so move.


Richard Bedford Bennett: When the word "shareholder" is used you do not have to say "registered shareholder," but when you say "registered holder" in one place you should carry the term all the way through.


Charles Avery Dunning: If we can get an amendment which will enable the correction to be made it can then be made as indicated.


[Stage Direction]
Amendments agreed to.
Section as amended agreed to.
On section 7-Qualifications.
Abraham Albert Heaps: I believe the minister was to make some statement in regard to the method of electing directors. He said early in the proceedings that he would have some remarks to make in connection with the method of appointing directors from the private shareholders.


Charles Avery Dunning: I do not remember the statement to which my hon. friend refers. Obviously by the amendment only one will be elected each year. My hon. friend will understand how much that simplifies the matter. Only one is to be elected, and so far as the representative character of the directors is concerned may I say that that matter will be largely in the hands of the government, through the provisions passed in section 6. I take it that the shareholders, like any other shareholders, will be free to elect whom they wish and that in its appointees the government must take care of the representative factor contemplated by the original act and still contemplated in the amendment.


Abraham Albert Heaps: I am speaking of the
directors who would be elected by the private shareholders of the bank.


Charles Avery Dunning: Only one each year.


Abraham Albert Heaps: The minister will recall that when the bill was before us on a previous occasion he made reference to the fact that the chamber of commerce had elected their slate, and he said that the change in the measure would obviate conditions of that kind recurring.


Charles Avery Dunning: Yes.
jMr. Bennett.]


Abraham Albert Heaps: I wonder whether the minister had anything in mind at the time he made that observation.


Charles Avery Dunning: Only that the system we are here setting up involves that only one director is elected in each year, together with the fact that occupational and other aspects can and should be taken care of by the government in connection with its appointees. These shareholders will vote for a director in the same manner as would any other shareholders.
.Mr. BENNETT:	Except that there is a
limitation as to their proxy.


Charles Avery Dunning: Yes; through the Minister of Finance they may vote by proxy. But there would be no necessity for a slate when only one is to be elected. It is quite obvious the problem disappears.


Abraham Albert Heaps: But the same propaganda
as was carried on a couple of years ago could be duplicated, even only one director is appointed.


Charles Avery Dunning: Anybody has a right to
put out propaganda in favour of the election of a particular person.


Richard Bedford Bennett: Of any shareholder.


Charles Avery Dunning: Yes, of any shareholder.
Mr. K1NLEY:	That chamber of commerce angle is a bad one.


Charles Avery Dunning: I am not expressing my
views. The hon. member will see that the problem does not arise by reason of the change we have made in the section which has just passed the committee. If the organization to which the hon. member belongs wishes to do so, it may spread all the propaganda it desires among private shareholders in favour of the election of a particular man, because only one needs to be elected by the shareholders.


Mr. KINLEY:: It will not work with one.


Charles Avery Dunning: No, and that is my point.


Abraham Albert Heaps: One is to be elected by the
dominion at large; is that right?
Mr. DUNNING; By all the private shareholders of the bank.


Mr. MacNICOL:: Now that the opinion
of the directors, or whatever they are called, who are to be elected by the ordinary rank and file of the people, is to be of so little value, in view of the fact that the government will totally dominate the board, may I ask the minister if in his opinion men of outstanding capacity in any class will offer their services on the board.

Bank oj Canada


Charles Avery Dunning: I have no doubt about
it. To be a member of the board of the Bank of Canada will, doubtless, be esteemed a great honour by any individual selected. I have no doubt about that, at all.


Abraham Albert Heaps: Is there any limitation as
to the persons who may be directors representing private shareholders?


Charles Avery Dunning: The limitations are contained in the section now under consideration. Section 7 of the bill, which deals with section 10 of the act, states that such person is to be a registered holder of ten shares. The section is as follows:
No person shall be elected or appointed, or shall continue to hold office as a director who-
(a)	is not a British subject ordinarily resident in Canada; or
(b)	is employed in any capacity in the public service of Canada or of any province of Canada, or holds any office or position for which any salary or other remuneration is payable out of public moneys; or
(c)	has reached the age of seventy-five years.
There is provision for removal from office in case of incapacity. That is the provision in the original act, and it is carried forward into this bill. I omitted to say that such person shall not be a shareholder in a chartered bank.


Mr. STIRLING:: With reference to the choice of the one director who is to be elected by the shareholders, did I understand the minister to say that the government would have a say in such selection?


Charles Avery Dunning: No, except in so far
as private shareholders may send their proxies to the Minister of Finance, as is provided in the original act.


Richard Bedford Bennett: I am bound to say that
a few days ago the minister was unfair in his description of the election of directors of the bank. The chamber of commerce might not properly have done what they did, but they carried on a propaganda which any one could carry on and which, in fact, others did carry on. The only point was that they put forward a whole slate, rather than concentrate on one person. The minister described it as a fiasco; I heard him say it.


Charles Avery Dunning: Not as a fiasco.


Richard Bedford Bennett: I never heard of a
corporation which had eleven or twelve thousand shareholders expressing its will to the extent it was expressed by the shareholders of the bank in connection with the selection of directors; I never have known it done in this country. Usually a few men
have proxies covering the whole matter, and it is just a matter of form. The chamber of commerce took the position of issuing propaganda, and carried it on to an extent which I think was most undesirable. It is needless to say that the government was not a party to it, in any sense. But who could prevent the chamber of commerce doing this? Who could prevent their issuing propaganda? But when you remember that eleven thousand people voted;-possibly the deputy minister could give the correct number-


Charles Avery Dunning: It is twelve thousand.


Richard Bedford Bennett: When you consider that
that number voted, you realize it is an extraordinary thing to describe as a fiasco. I thought it was a strong statement.


Charles Avery Dunning: My right lion, friend is correct; I did use the word "fiasco," when I referred to the fiasco which took place at the time of the first election of directors. However I did not intend to cast any reflection upon the right of any party to organize such propaganda, and I cast no reflection upon the methods of the chamber of commerce. So far as I am concerned, that is all past.


Mr. HANSELL:: Can the minister throw any light on the term "diversified occupations" as it appears in subsection 2?


Richard Bedford Bennett: That was the whole point of the election.


Ernest George Hansell: I recognize that any director must have some knowledge of finance and banking. I wonder whether the thought in the minister's mind was that the directors would bring to the board some knowledge of industries, as well.


Charles Avery Dunning: Those words appear in the original act, and they are not being changed. The intent at the time the measure was enacted was that stated by the hon. member, namely that the various broad divisions of industry might have a voice on the board of the bank. Certainly it is the intention of the government that that shall be done.


Richard Bedford Bennett: One was an agriculturist from western Canada; as a matter of fact, if I am correctly informed, he was a rancher.


Charles Avery Dunning: A farmer-rancher.


Richard Bedford Bennett: Yes, and the other interests were represented. The hon. member is not aware of the fact, apparently, that the first election proceeded on the principle that
Bank of Canada

men of diversified occupations and interests should be represented. I am sure the minister could indicate the interests represented.


Charles Avery Dunning: The designations shown here-I do not know how they were arrived at, I suppose they were stated by the candidates themselves-are, representing primary industry, Mr. Wright, who has been referred to as a western farmer and rancher; Mr. Bradshaw, "other occupations."


Abraham Albert Heaps: What is he? Is he in other occupations?


Charles Avery Dunning: I merely give the designation here stated. Mr. Bradshaw represents "other occupations" than primary or manufacturing industry; Mr. Black, of Hamilton, manufacturing industry; Mr. McKean, of Halifax, primary industry-he is a lumberman; Mr. Magor, manufacturing; Mr. Beau-bien, of Montreal, and Mr. Woodward, of Vancouver, are stated to represent "other occupations" than primary or manufacturing industry. I can follow now the designations. Primary industry apparently has two representatives, one lumberman, and one farmer and rancher; manufacturing has two representatives, and "other occupations" have three representatives on the present board.


Mr. WOODSWORTH:: Will the minister state that in any real sense these men are representatives of these industries? They are engaged in these industries; that is all that can be said. It was a slate that was put over by the chamber of commerce.


Charles Avery Dunning: That has been discussed.


James Shaver Woodsworth: But the minister still persists in saying that they represent these industries.


Charles Avery Dunning: I am not saying anything about them. I was simply answering a question and stating the designations given by these people themselves.


Abraham Albert Heaps: These people were all elected; the chamber of commerce undertook to try to influence the shareholders of the bank to elect this slate, and they succeeded. That is all there was to it.


Charles Avery Dunning: If my hon. friend is going to make any extended remarks, perhaps he will permit me to say there is a desire to report progress in order that there may be an opportunity to present a report of a committee before six o'clock.


Abraham Albert Heaps: I shall not be a minute. A shareholder or director of a chartered bank is not entitled to become a director under the new set-up.


Richard Bedford Bennett: He never was.


Abraham Albert Heaps: The old act provided the same thing, but is there much difference between them and men who have large financial holdings in other financial institutions, like Mr. Bradshaw, for instance? I give that as a concrete example, although I do not like to mention names. It seems to me there is really not very much difference between the position of a man who may be a shareholder in a bank and that of a man holding a large interest in other financial institutions. It is practically the same thing.


[Stage Direction]
Section agreed to.
Progress reported.

William Lyon Mackenzie King: Mr. Speaker, I would move, with the consent of the house, that we revert to the order for motions, so that the Minister of Pensions and National Health may present a report from the committee on pensions and soldiers' problems.


[Stage Direction]
Motion agreed to.
Hon. C. G. POWER (Minister of Pensions and National Health) presented the third report, also the fourth and final report, of the special committee on pensions and returned soldiers' problems, together with a copy of the minutes of proceedings.
He said: I should like to give notice that I shall move concurrence in the final report of the committee on Friday next, if this will serve as a notice of motion. The report will be printed in the votes and proceedings.
On motion of Mr. Mackenzie King the house 'adjourned at 5.58 p.m.
Thursday, June 11, 1936