June 9, 1925


Hon. J. A. ROBB (Acting Minister of Finance) moved the second reading of Bill No. 170, to authorize the raising, by way of loan, of certain sums of money for the public service. Motion agreed to, bill read the second time, and the House went into committee thereon, Mr. Gordon in the chair. Section 1 agreed to. On section 2-Loan authorized.


CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

I want to call

my hon. friend's attention to just one thing, and that is that some hon. members have spoken to me about the object of this bill. I understood it to be merely refunding and I so advised them. They also said that they could not see any loans falling due this year which would account for the refunding. I told them that doubtless the refunding was occasioned by reason of short-date loans made by my hon. friend last year, which loans he proposed now to turn into long-date obligations. All I want is to be assured that I was right. I think I must have been right.

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LIB

James Alexander Robb (Minister of Immigration and Colonization)

Liberal

Mr. ROBB:

I think when the resolution

was before the House I gave a list of maturities. They are as follows:

July 1, Dominion stock $ 60,800 00

Aug. 12, treasury bills, London 23,333,333 33

September 15, one year notes, New York 90,000,000 00 November 15 one year notes, Canada.. .. 8,000,000 00

December 1, war loan, 1915-1925 42,014,500 00

Total $164,408,633 33

256i

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IND

William Charles Good

Independent Progressive

Mr. GOOD:

Is it the intention of the government to convert practically all of these short-term borrowings into long-term loans?

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LIB

James Alexander Robb (Minister of Immigration and Colonization)

Liberal

Mr. ROBB:

We have not yet determined

what method of financing we shall make use of. That will be determined when we have the bids. It will depend largely upon the condition of the money market. I may say to hon. members, as an indication of how popular Canadian securities are, that this bill was scarcely on the order paper two hours until we had a couple of calls from New York. We had two visits from bond men in Canada and one from bond men in New York last week. We have had visits from bond men in New York to-day. We are waiting until the session is over in order to determine just how favourable the market may be.

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?

Mr. MAOLEAN@York

Are any of the

commitments of the government in connection with the National railways still in the shape of short-term loans?

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LIB

James Alexander Robb (Minister of Immigration and Colonization)

Liberal

Mr. ROBB:

These are not National Railway loans.

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IND

William Findlay Maclean

Independent Conservative

Mr. MACLEAN (York):

I know, but are some of the commitments in connection with the National railways still in the shape of short-term loans?

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LIB

James Alexander Robb (Minister of Immigration and Colonization)

Liberal

Mr. ROBB:

I could not answer my hon.

friend as to that.

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PRO

Henry Elvins Spencer

Progressive

Mr. SPENCER:

Has the minister considered making further use of the savings deposits in the Post Office Department by removing a certain number of restrictions which at the present time people are under who use that department? I understand there is a limit of the amount-it is $1,500, I think- that can be placed in the Post Office Department in one year, and a limit of $5,000 in all on which interest can be paid. Has the minister considered giving a higher rate of interest to depositors on post office savings accounts and making more use of that system of borrowing for the government, thus saving a considerable sum of money?

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LIB

James Alexander Robb (Minister of Immigration and Colonization)

Liberal

Mr. ROBB:

That is a matter worthy of attention. I have not taken it into consideration.

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LAB

William Irvine

Labour

Mr. IRVINE:

The minister in this bill is

asking parliament to authorize the pledging of Canadian securities, in other words, our credit, to some financial institution in order that we may borrow it back again at whatever per cent they may wish to lend it to us. Has the minister ever considered the possibility of finding some better way of utilizing our own credit than that now in practice? Surely

Proposed Loan

it is apparent that if we are to continue raising our required finances in accordance with the present system, by which we double our indebtedness every twenty years, it is impossible that we shall ever get out of debt. This must be clear to everybody. Has either the minister or the government ever thought of any other method of using our own credit in order to avoid this piling up of debt?

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LIB

James Alexander Robb (Minister of Immigration and Colonization)

Liberal

Mr. ROBB:

My hon. friend has brought

this point to the attention of the House a number of times. We believe in having a sound financial system and it is our opinion that it should be such that there would be no doubt in a man's mind as to what he would receive when he sold a bushel of wheat, for example.

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LAB

William Irvine

Labour

Mr. IRVINE:

Is it a sound system whereby our debt is doubled every twenty years?

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CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

It is not our

financial system that accounts for the fact that * every twenty years or so our liabilities are doubled; the reason is rather to be found in our fondness for spending money whether we have it or not. We have that on the one hand, and on the other there are troubles in connection with the incidence of taxation. Of course, if you spend more money than you can raise you will go into debt; and this is true not only of individuals but of nations as well. I do not think there is much difference in this respect between the individual and the nation; if expenditures are more than income there will be liabilities. That I think is what the hon. member means when he speaks of our indebtedness being doubled. And you will increase your liabilities whether you express them in sound money, in terms of credit, or in any other way. You may increase your liabilities in terms which may not mean very much having regard to the value of your token, but you may also increase them to a startling extent under a system of financing Which might be very different from ours.

I am perfectly free to admit that if there is any way in which the Department of Finance can put into effect any improved system of financing, such a system should be adopted. And when I say "system of financing" I am using a term that covers a very broad field: it covers the basis of taxation; it covers the standard of currency; it covers of necessity the methods by which you make your loans. If the Department of Finance could find some new system of that sort it would be an excellent thing, provided, of course, the troubles incident thereto were not worse than those from which we now suffer.

I am not for one moment suggesting that the present system is perfect; I do not think that anything human can be perfect. But so far I have not been able to find an alternative which shows any real promise of betterment. Possibly somewhere there is a happy spot where the differences are reconciled as between those who think that one hundred per cent happiness is to be found in sound money and those who think that humanity ought to be looked upon as the first consideration. Personally I think that the humanitarian aspect which my hon. friend (Mr. Irvine) very properly refers to from time to time ought always to be the first consideration. But in connection with any palliative system, I think that any changes that have so far been made in the name of humanity have not benefited humanity to any considerable extent; humanity itself has suffered most from these so-called financial reforms. Money under the gold standard may work a lot of harm sometimes; it may mean the closing off of credits, which is a bad thing, and it may mean unemployment and the slowing down of industry. But it is a good thing to have such a system if you do not pay too much for it; and at the present time I really fail to see any way in which the Acting Minister of Finance (Mr. Robb) can finance except in the way he proposes. At any rate, I have not seen any plan submitted which in my opinion could be adopted.

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LAB

William Irvine

Labour

Mr. IRVINE:

I am glad to see that the ex-Minister of Finance (Sir Henry Drayton) has come so ably to the defence of the acting minister (Mr. Robb). I understand that the ex-minister has a very wide and thorough knowledge of financial questions, but I will take issue with him on at least one of the points which he made, the first one, that the doubling of our debts was due not to the system of paying interest but rather to the fact that we were spending money whether we had it or not. I do not know, of course, what the hon. gentleman meant by " money"; I presume he would mean credit. However, I will not enter into a discussion of that phase of the question now; but I shall ask him another question which possibly will bring out the point at issue. We are now providing for a loan of $164,000,000. I do not know whether we have or have not that " money ", to use the phrase of my hon. friend, but we will assume we have the credit; otherwise we could not borrow the money. Now, $164,000,000 in twenty years at five per cent would be approximately $328,000,000. Will that $164,000,000 increase to $32S,000,000 merely because we borrowed

Proposed Loan

" money " which we did not have? Or will the increase come about because of the five per cent interest which we shall pay to someone, 'absolutely for nothing? And this does not take into consideration brokerages and other expenses in the placing of loans. The ex-Minister spoke of our adopting some other system. What he said would be timely if there were any chance in the world of this parliament taking any new action in any direction, but there is not the slightest danger of that. However, if we were contemplating taking new action, then I certainly agree with the ex-minister that we should be careful indeed about what we did. The hon. gentleman is afraid that any new system might be worse than the one we now have. I do not think that is possible; it seems to me that the present system will land us in destruction in a short time. We have a national debt now of nearly three billion dollars and the only way we can pay our debts under the present system is by incurring new debts with which to cancel old debts. Our indebtedness is thus doubled each twenty years providing we fail to pay interest. At the present time our people are over-burdened with taxation and the end of the journey is in sight. Yet this is called " sound financing ". I would not blame the present government or the Acting Minister of Finance (Mr. Robb) for following the path that has been followed right along, if there were no better system in sight. But there are better policies that could be adopted and I do not think the government has interested itself sufficiently to examine them. Certainly there is no more dangerous policy than the one at present in effect; we are heading for bankruptcy whether we want to admit it or not. And this is true not only of Canada but of other nations as well. I think the words of the British Ambassador to the United States, uttered in New York about two weeks ago, were ominous indeed; and we can only conclude from them that Great Britain through her ambassador was giving warning to the United States that she would not be able to pay even the interest on her indebtedness in the future. The situation is worse in France and is not much better in Canada. This " sound financial system " of our9 is landing us in the ditch.

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CON
LAB

William Irvine

Labour

Mr. IRVINE:

Mr. Chairman. I used the

term "sound money" in rather a jocular sense. There is no difference that I have been able to appreciate between the financial systems now in vogue in Germany, Austria, France, Great Britain, the United States and Canada. The financiers of the world have forced Aus-

Proposed Loan

tria and 'Germany back into the old, "sound, orthodox system of financing." We never needed to be forced; we were content to follow without even making a protect. There is no different system of finance in any of these countries. The other point mentioned by my hon. friend was that we pay our interest from year to year, therefore our debts do hot grow. But if we pay our interest from year to year then that is debt paid, and we can only pay by increasing the taxation of our people; and it would be a very courageous government indeed which would dare increase the present taxation very much more. Still we go on borrowing. If we cannot increase our taxation further to pay interest, then we must charge up interest to the national debt, and borrow still more to pay that interest; and so on we go down the toboggan slide to bankruptcy,

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LAB

James Shaver Woodsworth

Labour

Mr. WOODSWORTH:

Mr. Chairman, I

should like to support the contention that there is another way by which we might do our financing. I recognize that until we have a sound system of national banks it is extremely difficult to do so. But it would seem to me that this repeated borrowing on such a vast scale ought to make even the most conservative-minded pause and ask whether there is not some other way. I cannot understand why, if we had our own banking system, we could not directly issue these amounts. I am not pleading for "easy money," I am not pleading for inflation, but I would suggest there is no more danger of inflation by the government issuing its own money than by its going to a bank and pledging the credit of the country for the bank to issue its money. However, I suppose we are not considering that larger *question of our own banking system, without which I cannot quite see how we can handle the situation. But I should like to call attention to the suggestion offered by my hon. friend from Battle River (Mr. Spencer). The Acting Minister of Finance (Mr. Robb) I think said that he had not considered an increase in the rate on savings bank deposits. A debate on this question took place in 1914, and on page 5199 of Hansard we have the following from Mr. Lemieux:

Does my hon. friend the Minister of Finance (Mr. White) think that in the present financial condition he would not be doing well by increasing the rate of interest on the savings in the post office savings banks? There is a general outcry amongst the plain people of this country against the low rate of interest the government pays its depositors. Could not my hon. friend take the interests of the plain people to his heart, and pro bono publico increase the rate of interest paid to depositors in the post office savings banks by one per cent?

JMr. Irvine.]

Mr. White, the Finance Minister of the time, replied:

That matter has frequently been discussed in the House. The raising the interest rate on savings deposits in the post office, and in the chartered banks of the Dominion, would be followed by an increase in the discount rate. If my hon. friend had taken the trouble that I have to look into this matter, and had examined the statement of, say, the Bank of Montreal, he would have found that to increase the rate of interest by even one half of one per cent would have a very serious effect on the earning power of that institution. The result would be to increase the discount rate to the manufacturers and business people of Canada. . . For the present, at all events, I see no prospect of increasing the interest rate on deposits in the post office savings banks. I may say that my predecessor reduced the interest rate on such deposits, giving as his reason that in consequence of its being an artificial rate the discount rate had been found burdensome to business.

There is a very frank admission by the then Minister of Finance that the reason the interest on the savings in the Post Office banks was not increased was because it might interfere with the profits of the chartered banks. No real argument was put forth to show why the banks would need to raise their interest rate, because there is already a wide spread between the interest charged by the banks and that which is allowed on deposits in the savings banks. But I am inclined to think that this policy, which has now been going on for eleven years-indeed, it was in vogue when this debate took cplace in 1914-has been dictated very largely 'by the interests of the banks and not by the interests of the people at large. There would seem to be no reason why the small savings of a large number of people should not be collected and used for government purposes instead of the government going to the banks and paying to them a much higher rate of interest than is being paid to the depositors in the Post Office saving bank. What proportion of this $164,000,000 is it proposed to spend1 on the retiring of these bonds and what proportion will be spent on public w'orks and general purposes?

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LIB

James Alexander Robb (Minister of Immigration and Colonization)

Liberal

Mr. ROBB:

I have already placed that information on Hansard two or three times. The total maturities this year amount to $164,408,633.33. The bill now before the committee provides for $164,000,000. It is all, therefore, for the retiring of bonds; in fact it will 'be floted that the maturities this year amount to $408,633.33 more than we are asking for.

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June 9, 1925