July 13, 1903

CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

So that in place of holding $24,000,000 against the $39,000,000 you would hold against it about $10,500,000 ?

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The MINISTER OF FINANCE.

That is substantially correct.

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

Does the hon. gentleman think it is wise to make so large a reduction in the securities which we hold ? I suppose that he does regard it as prudent or he would not have brought this measure down, but it does strike me that the reduction by nearly one-third in the gold and other securities which we hold on account of this circulation is a pretty important matter. It is true of course that the commerce of the country is developing to a very large extent; it is true of course that our revenue is larger than in 1880; but I suppose we have to consider this question from the standpoint of all possible contingencies. and we must consider what the effect would be in a time of financial stress.

I would like to have the view of the minister with regard to that.

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The MINISTER OF FINANCE.

I may say that the step now taken has been taken only after most careful consideration and consultation with the most eminent financiers of the country, because in matters of this sort we should take care that we make no mistake. If this Bill were to be considered entirely by itself, the figures I have given as to the great growth of the country would show that there is ample reason for the expansion. I may mention Incidentally-though I think the Bill would stand on its own merits-that as a matter of fact while we are increasing our circulation in one form, yet we are adding to our reserves of gold a special reserva-

tion for the savings hanks. Of the $7,500,000, which we could issue under this provision, we propose to set apart about $6,000.000 at once as a special reserve for our savings bank deposits; in respect to which we have never had any reserve whatever. Irrespective of that, however, the degree of reserve which we would have even under this Bill will be so much beyond what the legal reserve is; so much beyond what at any time any of my predecessors expected to hold, that there is no danger whatever. I can assure my hon. friend (Mr. Borden, Halifax) that before reaching this conclusion I have had careful consultation not only with my deputy who is an expert in the matter, but also with other financial men. As I have pointed out we are taking advantage of that in a measure which I shall call your attention to in a few moments. We are proposing to set apart $6,000,000 of that sum of money and to ear-mark it as a security for the savings banks-we are not taking it away from the general securities for the obligations of the Canadian people.

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CON

David Henderson

Conservative (1867-1942)

Mr. HENDERSON.

Does the minister expect to increase the currency for circulation by the operation of this measure ?

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The MINISTER OF FINANCE.

If we were to take full advantage of the Bill and to deal with this Bill alone, the effect of it would be that we would have the right on an issue of $30,000,000 to have a reserve of $7,500,000. Instead of having $20,000,000 with a reserve of $5,000,000, we issue $30,000,000, with a reserve of $7,500,000. The net increase not to be covered by reserve, will be $7,500,000, and we claim that we would be amply justified if we took that and applied it to the general business of the country. We would still have a larger reserve than any Finance Minister hitherto has found it necessary as a matter of law to establish. But while we take this power under this Act, we propose by another measure which is to follow It to set apart $6,000,000 of that amount, and, instead of using it in the general business of the country we will ear-mark it, and hold it as a security for the savings banks. The actual increase of the loaning power of the government under this will be insignificant, perhaps $1,000,000 or $1,500,000.

Mr. HENttERSON. I understood that the object of this measure was to increase the circulation, which I think the requirements of the country would justify. I agree with the hon. member for West Elgin that there is an abundance of $5-bills in the country, in comparison with other bills, but I am sure that it would meet with the approval of the banks as well as the general public if a large number of $10 and $20 bills were put in circulation.

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The MINISTER OF FINANCE.

With regard to the general question of an increase of the circulation, I can assure my hon.

friend that we are anticipating and preparing for It We have power to issue an unlimited circulation with dollar for dollar in gold over the $30,000,000, and we shall be prepared to meet the demands of the circulation in that way.

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IND

William Findlay Maclean

Independent Conservative

Mr. MACLEAN.

The government should have no hesitation in issuing $5 notes. The $5 note issued by the government will obtain recognition not only all over this country, but also in the United States. There is no trouble now in passing the $1 and $2 federal notes in the United States, and a great many of our people going into that country take Dominion notes with them. But the moment they present a Canadian bank note, it is refused.

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LIB

John Charlton

Liberal

Mr. CHARLTON.

Is the hon. gentleman sure that is the case ?

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IND

William Findlay Maclean

Independent Conservative

Mr. MACLEAN.

I have often experienced it. I have often seen Canadian bank-notes refused, but if our people go there with $5 federal notes, they will have no trouble in passing them at par. I am surprised to hear the hon. member for North Norfolk saying that Canadian bank-notes are not rejected in the United States.

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LIB
IND

William Findlay Maclean

Independent Conservative

Mr. MACLEAN.

A larger circulation is required in this country to-day, and I think the government are taking a very good step in meeting that requirement, and they will make no mistake if they provide for a generous issue of $5 federal notes.

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CON

James Clancy

Conservative (1867-1942)

Mr. CLANCY.

I would ask the Finance Minister if it has been the custom of the government to use any part of the reserve in the past ?

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The MINISTER OF FINANCE.

No part of the legal reserve has ever been used. It has always been maintained up to the full standard required by the statute.

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CON

James Clancy

Conservative (1867-1942)

Mr. CLANCY.

Then I do not understand what increased security is offered to the people.

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The MINISTER OF FINANCE.

I may remind my hon. friend that though there is a legal reserve which must always be maintained, we usually carry somewhat more, which we are able to use in times of stringency.

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CON

James Clancy

Conservative (1867-1942)

Mr. CLANCY.

What excess has there been over the legal reserve ?

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The MINISTER OF FINANCE.

At this moment we hold between $3,000,000 and $4,000,000 over and above the legal reserve.

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LIB

John Charlton

Liberal

Mr. CHARLTON.

I may venture to remark upon the assertion made by my hon. friend from East York (Mr. Maclean), that Dominion notes of the denomination of $5 pass current in all parts of the United States, that the hon. gentleman is no doubt mistaken. Banks in the United States are

not allowed to handle Canadian currency at all.

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IND

William Findlay Maclean

Independent Conservative

Mr. MACLEAN.

I was not speaking of the banks.

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July 13, 1903