June 17, 1935

CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

It is absolutely impossible for the Bank of Canada, or any other body, to exercise that control. They must in their own interests take such steps as may be necessary to protect themselves against their foreign commitments. For instance, for the banks which have substantial business dealings on the continent of Europe, with some of the old gold countries-and there are not many left now-but with France, with the Netherlands, in connection with sugar importations and sales, and in connection with the Dutch East Indies, the matter becomes important. In connection with Switzerland, and the little business we have with that country, owing

Exchange Fund

to great differences and fluctuations in currency, it becomes important. I suppose it is known that last year those who had to go to Geneva found it necessary to pay an exchange rate of practically sixty per cent. That is, there was a sixty per cent exchange rate in dealing with the Swiss gold franc.

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LIB

William Daum Euler

Liberal

Mr. EULER:

Would the Prime Minister give me an answer to my original question? What is the amount made available for the purposes of the bill? That is, we will get the profit by revaluation from $20.67 an ounce to $35 an ounce on the sixty per cent of the gold handed over by the banks, plus the full profit by way of revaluation on the gold handed over by the receiver general. What is the total amount?

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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

We had $106,936,427.29 in gold coin and bullion on June 5.

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LIB
CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

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LIB
CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

Yes.

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UFA

George Gibson Coote

United Farmers of Alberta

Mr. COOTE:

I believe it quite proper for the government to take steps to protect the external value of the Canadian monetary unit, but the important point for us to consider at this time is the policy to be followed by the minister in administering this fund. That is, at what level is it considered desirable to hold the value of Canadian currency as expressed in terms of other currencies? I speak particularly of the American dollar and the British pound. It seems to me that during the past few years our currency has been at too high a level in other countries, so far as our exporters are concerned, and Canada's basic industries are to a great extent dependent, so far as their price levels are concerned, upon the price which they receive for their sales in foreign countries, and the value at which they can translate foreign funds into Canadian currency. Undoubtedly we have suffered in our attempt to compete with many other exporting nations of the world. To-night we heard considerable discussion as to why it was so difficult for Canadian and even English textile companies to compete with those of Japan. I noticed that no person mentioned that which I believe to be the most important factor, namely that Japanese currency to-day 925S2-237J

is depreciated in terms of Canadian currency by approximately seventy per cent. I think that is the greatest factor in favour of Japanese exporters.

Then, to come to the industry in which I am most interested, agriculture, our chief competitors might be said to be the Argentine, Australia, New Zealand and Denmark. In each of these countries we find that, compared with that of Canada, their currencies are depreciated to very marked degrees. In Denmark the currency has depreciated 22 per cent as compared with the value of our money; in New Zealand the figure is 23 per cent, and in Australia 24 per cent. The official rate for the Argentine is given as 24 per cent, but the unofficial rate is approximately 60 per cent. What is needed in Canada to-day is higher commodify price levels, and the easiest way to do it would be deliberately to depreciate our currency. We must do it frankly and honestly, as has been done by the other countries I have named. In Denmark, Australia, New Zealand and the Argentine the step was taken as a matter of governmental policy, and now that the Canadian government is setting up an exchange fund to be administered by the minister it seems to me we are taking a very positive step towards making the level at which our currency is held in foreign countries a matter of government policy. I am not suggesting that we engage witih any other countries in a race for currency depreciation, but we do require this depreciation to restore our price level's. There is a great deal of opinion expressed in financial papers in favour of stabilizing exchange rates of various countries. So far as I am personally concerned I do not believe that we can afford to stabilize our price structure at present levels. That would mean disaster for those engaged in most of our primary industries. It would mean that for many years to come they must carry an almost intolerable burden of debt. But with a currency depreciated to 'the level of most of our competitors our price level would be placed nearer where it really ought to be. I am sure even that would hardly restore the price levels of 1926. Some of the outstanding if not some of the best economists have said repeatedly in the last few years that a rise in the price levels to the point at which they stood in 1926 is absolutely necessary if we are to be able to continue to carry the present debt structure. We all realize the devastating effect of attempting to deal with debts in any other way. I think myself that that is the proper way to deal with them.

Exchange Fund

I should like to make it clear again that I am not opposing this bill, nor am I even criticizing it. I think the important point to be considered at this time is the policy of the minister who will be in charge of this fund. I hope it will not be used to stabilize price levels at where they are to-day and I hope it will not be used to keep our currency at its present high level if there are other factors which would operate to bring it down. I realize that this is a matter for debate and I have debated it in this house and have put my point of view before hon. members. I shall not repeat my views to-night at any length but I think it is realized by the majority of hon. members that there shouild be a rise in commodity price levels if we are going to compete with other exporting countries. Take the case of Brazil; their currency is depreciated forty-four per cent as compared with ours. Not long ago I was talking to a bank manager who had just returned from Brazil and he gave as one of his personal reasons why there had been no unemployment or distress in Brazil the fact that depreciation had taken place in their currency and they had maintained much higher price levels than otherwise would have been possible.

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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

I take it the hon. gentleman knows the real reason.

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UFA

George Gibson Coote

United Farmers of Alberta

Mr. COOTE:

I suppose the Prime Minister is referring to the measures which they took to protect the price of coffee.

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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

I refer to the fact that they have not paid the interest on their debt.

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UFA

George Gibson Coote

United Farmers of Alberta

Mr. COOTE:

No doubt that would be a big help. I shall not labour this point any further as I am sure the Prime Minister and the house realize the importance of this question. I have no objection to this bill. I suggest to the Prime Minister that he should amend the Currency Act to value gold at more than S35 per ounce and thus bring about a depreciation in our currency to at least the level of Australia, New Zealand and Denmark.

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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

What is the value of the Australian pound in London?

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UFA

George Gibson Coote

United Farmers of Alberta

Mr. COOTE:

In Montreal it is given at $3.94 on June 15 and the British pound is given as $4.93. If we were on the same basis as Australia, so far as the value of the pound is concerned, it would give to agriculture that increase in prices which is so badly needed. I do not think there is anything which would do as much to bring back prosperity in Canada as the increase which could be secured in the price level for agriculture by a deliberate depreciation of our currency. I do not need /Mr Coote.]

to go into the method by which this can be done as I think the house, and particularly the Prime Minister, is well aware of what should be done. I approve of having the administration of this fund in the hands of a minister rather than under the control of the central bank, but I should like to urge the government seriously to consider a policy of depreciating our currency to the value of Australian currency.

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UFA

Henry Elvins Spencer

United Farmers of Alberta

Mr. SPENCER:

I understood the Prime Minister to say that the larger banks of Canada had similar foreign obligations when the gold was taken from them to be deposited with the central bank. However, the figures he gave showed that of the larger banks two had $13,000,000 in gold, one had $6,000,000 and the other only $2,000,000. If their foreign obligations were similar why was there so much variation in the amount of gold on hand? Secondly, I should like to know if the forty per cent allowed the banks to permit them to meet their foreign obligations was in proportion to the gold which they had on hand to take care of their foreign obligations?

Mr. BENNETT': I tried to make it clear that the forty per cent was forty per cent of the gold transferred. In the case of the Bank of Montreal it was 40 per cent of $13,043,509 or $5,217,403. In the case of the Bank of Nova Scotia it was 40 per cent of $6,546,338, or $2,618,535. As to the variations in the amounts of gold held in Canada, it is only necessary to say that some of the banks with branches abroad held gold abroad to take care of the sudden fluctuations and our arm reached only to the gold in Canada.

In connection with the point raised by the hon. member for Macleod (Mr. Coote) as to our dollar being valued too high, I think it is only necessary to say that in terms of gold our dollar is worth only about sixty cents, if my memory serves me aright, and I am subject to correction. Does the hon. gentlemer know the figure?

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UFA
CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

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UFA

George Gibson Coote

United Farmers of Alberta

Mr. COOTE:

Is the Prime Minister referring to government obligations or the total obligations of Canadians?

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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

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UFA

George Gibson Coote

United Farmers of Alberta

Mr. COOTE:

With reference to the remark of the Prime Minister, that suggestions were made from this corner that the Canadian currency should be tied to the pound, I may say that in any statement I ever made in the House of Commons I was careful not to use those words. As a matter of fact, a friend of mine who lives in the metropolis of Canada urged me to advocate that very thing, to make the pound legal tender at S4.87. I stated to him at that time that that was much too low a level because this country must have a pound worth more than that unless a change took place in the pound sterling itself. When the imperial conference agreement was under discussion I used on that occasion this language: I said that our currency should be brought to such a level as would make the pound worth $4.87 here. That would have been a distinct advantage to us at that time. I have not the exact words I used but that is as I remember. I am sure I never used the expression "tying our currency to the pound."

There is one other point which the Prime Minister made to which I would refer, and that is the payment of foreign debt. The Prime Minister will agree that so far as actually paying off any of this debt is concerned, we can pay only by the export of goods, commodities and services-and in commodities I include gold. Of course, it may be easier for us to renew these obligations if we keep our currency at a certain level, at par with the United States.

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June 17, 1935