March 14, 1938


The house resumed from Tuesday, March 8, consideration of the motion of Mr. Dunning for committee of supply, and the amendment thereto of Mr. Blackmore.


LIB

Walter Adam Tucker

Liberal

Mr. W. A. TUCKER (Rosthem):

Mr. Speaker, at the outset I did not intend to take part in this debate, but in view of the remarks of the Minister of Finance (Mr. Dunning), if I did not some hon. members might think that the minister's very able speech had convinced me that I was wrong. On the contrary I am still unrepentant and unconvinced in connection with the suggestion I made during the debate on the motion for an address in reply to the speech from the throne, and I desire to give a few of the reasons why. I cannot go into these at length, as the minister did, because my time is limited. On another occasion the house was most indulgent with me and permitted me to exceed my time, but I do not want to presume on that indulgence.

I am sorry the minister is unavoidably away from the house to-day because I am quite sure I shall not be doing the justice to the subject I would do if he were here to ask the questions he usually asks and make the statements he usually makes to put me right when he thinks I am wrong. I was certainly pleased that the Minister of Finance undertook to deal with the suggestion I made. Although he did not agree with it, I feel it was a distinct step forward when he took it up at all. In the short time I have been following the speeches in this house I have come to the conclusion that when things are brought up first they are generally ignored as being beneath any notice. Then if they are brought up often enough, eventually some notice is paid to them and the first thing we know the suggestion has been enacted into law. I feel that my suggestion has reached the second stage, and I have high hopes that something will be done. For example, when the suggestion was first made that we should have a central bank it was not received with any great favour, but in time it came to be adopted by this house. Even the right hon. leader

of the opposition (Mr. Bennett) had decided that a central bank would be an improvement over our present system. I have no doubt that everyone now agrees that the central banking system as we have set it up is a great improvement over what we had before. Some of our great leaders of public finance disagreed very strongly with the proposal for the setting up of a central bank, but it seems that as a general rule the things they oppose strongly are ultimately carried out to the great advantage of the people. I suggest that when some of our great leaders of public finance strongly oppose some of these ideas we should cast our minds back and see how often they have been wrong before. I would remind the house of the tremendous effort that was made to keep on the gold standard. In England, for example, the high priests of finance and the chancellor of the exchequer were all agreed that every effort should be made to keep England on the gold standard. But England went off the gold standard and immediately began to make a recovery to prosperity that has been nothing short of remarkable.

I do not suggest that the Minister of Finance and the government can learn anything from a humble member from the western prairies, but whether they learn or not, I am glad to have the opportunity of placing my views < before an indulgent group of fellow members of this house. My suggestion is that the national credit should be used for national development purposes. I am quite satisfied that the very able speech of the Minister of Finance has not entirely disposed of that suggestion. The banking system of this country monetizes the credit of the country and we are asked to pay them a heavy tribute because of that duty which they perform. I am satisfied that it will take more than one speech by any member in this house to right that wrong, and it will take a good many hours of thought to realize how it may be fully remedied.

I should like first of all, Mr. Speaker, to make my position plain so far as the motion of want of confidence is concerned. I do not propose to vote in favour of the want of confidence motion. I have never concealed the fact that I should like to see a great deal more done by the government than has been done to date in the way of tariff reductions. Farm implements, for example, which are part of the raw material of the farmer, I should like to see placed on the free list. As to textiles, I should like to see a really substantial reduction made in the tariff on the goods that enter into the manufacture of clothing, especially in these hard times when many of our people are having so much difficulty in

Use of Canada's Financial Resources

getting along. I certainly would like to have seen the tariff left as it was on furniture instead of the action being taken that was taken last session. If in reducing our tariffs we can obtain from the United States a quid pro quo, by way of reduction in the customs tariffs on Canadian goods imported into that country, so much the better, and I hope this government in its negotiations with the United States will be ready to go far enough in reducing the tariff to enable us to gain a real entry for our goods into their markets, increasing, on the one hand, the purchasing power, particularly of our primary industries and so their ability to buy goods in this country, and also reducing the cost of living to our people, who are having such a hard job getting along. I am satisfied that this government intends to go as far as it can in negotiating such a treaty; and if I should vote lack of confidence in this government I would be voting against their carrying on a work which I think is all-important to this country and should go forward. I would also be voting in favour of an alternative government which was not prepared to go even the small distance that was gone at the time the Canada-United States trade agreement was signed. So I could have little hope of any such government going the distance necessary in a new agreement to cure unemployment and the other ills from which we are suffering. I have no hesitation in saying that I owe it to my constituents and the future of this country that I should vote confidence in this administration, even though it has not gone as far as I should like in regard to the tariff.

I could say the same thing with regard to the control of credit. I have never made any secret of the fact, and I do not suppose I would be expected to, that I should like to have seen the Bank of Canada taken under one hundred per cent public ownership as well as control. The suggestion was made, and I still do not think it is sound, that private finance should have representation on the board of directors of the Bank of Canada. Tremendous power has been placed in the hands of the Bank of Canada. By increasing the cash base and thereby increasing the credit extended by the commercial banks of the country the Bank of Canada can cause, as it were, a rise in the general level of prices. Representatives of private finance on the board would know of such a decision, and since they would be elected by private interests, they would think it wise and proper to report to them the making of such a decision. If they hope to be reelected, they know they must serve those interests. When the members of this house are not told what

the intention of the Bank of Canada is from time to time with regard to expanding or contracting the credit base, thus raising or lowering the level of prices and thereby making it either wise to invest, or wise to liquidate securities, I say it is not fair that representatives of private interests should have the opportunity of getting that knowledge. In my opinion there should not be a single representative of private interests on the directorate of the Bank of Canada.

But this government at least went the distance of taking over control of the Bank of Canada, and I supported it in so doing. I have never thought, indeed it is unwise to think, that in a country as broad as this, with so many varied and conflicting interests, any one group or province can have its own way; and if a government is proceeding in the general direction in which we would like to see it proceed I think we should give it our support, reserving the right to suggest that it should go further.

There is another matter in respect of which I feel I can support this present administration without any hesitation. On June 1, 1936, I spoke in this house very strongly in favour of an easy money policy. I sought at that time to cite the opinions of many prominent men all over the world in favour of an easy money policy, broadening the credit base, thereby stimulating the issue of credit and raising the general price level, thus decreasing the burden of public indebtedness and generally putting primary industries in a better position. My study, such as I have been able to make, of the policies of the Bank of Canada, confirmed by what the Minister of Finance said the other night, definitely indicates that the policy of the Bank of Canada for the last two years has been, and their present policy is, one of easy money. I think by so doing they have operated to raise the general level of prices, to improve the position of private industries, and to lighten the burden of debt. I am glad they have done it, and I commend the government because it has upheld them in so doing. The government by its trade policy has caused the value of our exportable surplus of goods to rise materially, and by its monetary policy-taking over control of the Bank of Canada, expanding the credit base, and raising the general level of prices-it has made a great contribution to the recovery that is going on in this country.

Somebody may ask ms: Well, what is your position? As I said at the outset, I still believe -and possibly it is no credit to myself, and may suggest that my mind is not open to persuasion-in monetary reform. I have listened to everybody who held what might be called to-day the orthodox view, although it was

1294 COMMONS

Use of Canada's Financial Resources

not the orthodox view five years ago; and the only difference that I can see between the orthodox view to-day and the view taken by people like myself is that we want to go a little further. I do not accept the suggestion that has been made that we have already gone a certain distance and that it would be disastrous to go any further.

What I have in mind and what I suggest is a short range policy and a long range policy. The short range policy would be to issue sufficient currency to put the unemployed to work on a national development program until our long range policy has put them to work in the ranks of industry. That is all I intended to suggest in the speech I made in the debate on the address. This suggestion was not intended to be a definite long range policy, but I know, and I think that every member of the house will agree, that there are in this country to-day young men now reaching thirty years and over, who have never yet been able to find work, who have been out of work ever since they have been able to look for a job, and until our long range policies have time to absorb all the unemployed into industries where they can earn their own living, this government should definitely look after them, should do something in the way of national development work to give such people a job. It should be done not by imposing a further burden on industry but as a responsibility of the country by the use of national credit. In their ranks there are young men who actually enlisted, went overseas and risked their lives for this country without any thought of reward. They came back thinking that a grateful country would see to it that they were at least given a chance to earn.a living, and I submit to you, Mr. Speaker, that it ill behooves members of parliament, who have been very fortunate, to sit back and say we are going to follow steadfastly our present policy without modification, even if it means that those out of work may be out of work another three years or longer. We should take a much more sympathetic attitude towards these young men. We owe a great deal to them. They were all ready if necessary to make the sacrifice of their lives for this country.

Then there is of course a long range policy in regard to monetary matters which I suggest. I shall not have time to go into it at length this afternoon; I have referred to it before. It is a policy either of setting up a separate branch of the Bank of Canada, of splitting that bank in two, as the Bank of England is split into two, or of setting up a separate institution, a national bank which will

monetize the credit of our governmental institutions at cost and avoid the burden of interest on public debt which is weighing down the people of Canada and preventing us from doing the things we should do for those for whom something should be done.

I wish first of all to deal very shortly with the long range policy of the government. As I understand it, there are still 132,000 employable unemployed receiving public aid in the dominion. Our long range policy is, I believe, absorbing the unemployed. If we in western Canada have a crop; if we make a proper treaty with the United States which sufficiently opens up the channels of trade with that country; if we continue the policy of the present administration and further lower tariff barriers in respect of other countries, these unemployed in my opinion will be absorbed into industry within the next eighteen months. But in the meantime, if we have the situation so well in hand, and if we need roads, for example, so badly, can we not safely get busy on a program for that purpose and look after these people?

Here I might say a word for the national park in my own province. People who have been through the Prince Albert national park know that it has one of the finest golf links in Canada, and splendid fishing, swimming and boating facilities. Two hours after you arrive there you can be at a lake where, probably, for days at a time you will not meet anybody; certainly in that park you can get solitude away from all the troubles of civilization. I have been told by persons who have visited all the national parks in Canada that ours has more recreative facilities than any other in the dominion. But what is the situation? One must travel over more than three hundred miles of dusty gravelled road in proceeding from the international boundary to that park. Time and again when people in the United States have been attracted, by the good publicity work done in advertising our national parks, as far as the boundaries of Canada, they have found this terribly dusty gravelled road ahead of them and have turned back. They are doing that by the hundreds. I submit that a policy which would look after our unemployed until they are absorbed into industry, and would hard-surface that road so that we would get thousands of United States visitors to the park where now we are getting only hundreds, would be good business, and is something to which this house and this government should give attention.

There is also the matter of irrigation. I do not know to what extent we can go into that, but I suggest that some of this money might

Use of Canada's Financial Resources

be used for irrigation work, and if by this means homes were provided out west for several thousands of Canadians, homes would be made also for several thousands required to service their needs in other parts of the country, and anything which serves to increase the population of Canada is really worth while in the world troubled as this is troubled, and where it might be said by land-hungry powers that we are not making use of the resources with which Providence has endowed us.

I wish to deal shortly with some of the objections of the Minister of Finance to my suggestion. The minister stated in his speech the other evening something which I understood had been denied by most people in this house up until the time the Minister of Finance stated it. I may be wrong about that, but I am going to read the statement and then I will comment upon it. He said:

As we have seen, the Canadian chartered banks as a group think it expedient to maintain an average reserve of ten per cent, and consequently if, as a result of the purchase of ten million dollars' worth of securities by the central bank, the reserve of the chartered banks has been increased by ten million dollars, the chartered banks will seek to expand their assets and deposits by approximately one hundred million dollars.

I can remember when the suggestion that the banks loaned out ten dollars for every dollar of cash by which they increased their cash reserves was treated with a great deal of derision. The question was asked, how can anybody lend ten dollars if he has only a dollar? And I can remember it seemed to be assumed that that settled the whole matter. I should like to read what was said in this house, which indicates perhaps that. If I am wrong, I am in the judgment of the house in this respect. In the first speech which I had the privilege of making in this chamber, at page 349 of Hansard, volume 1, 1936, I said:

I find by this Macmillan report, Mr. Speaker, that in July, 1933, the average daily borrowings of the banks under the Finance Act was $48,552,000. What does that mean? It simply means that, under the Finance Act, if the Bank of Montreal or any other bank had one million dollars' worth of government bonds which were paying at that time in the neighbourhood of 5i per cent, they could go to the Minister of Finance and get one million dollars' worth of new money for which they paid at that time 2J per cent. They get that new money against the credit of this country; then on the basis of established banking practice they are able to buy nine million dollars' worth of government bonds. Let us trace what happens. The bank pays 24 per cent on one million dollars, but, mark you, it is drawing

5J per cent on ten million dollars' worth of bonds. And they call that w-ise public financing! There is no doubt about it at all; it is right here in this Macmillan report.

The minister is reported to have said:

No, it just isn't so.

Now at that time it was quite all wrong to say that a bank could take a million dollars, borrow a million dollars' worth of new currency under the Finance Act from the Minister of Finance, and thereby increase cash reserves and then buy another nine million dollars' worth of government bonds. That is just what I was suggesting at that time. Of course in order to do that the banks have to pay interest to their depositors on the money that is redeposited. But the bare fact remains that it is apparently now admitted that the banks do increase their loans or their purchases of investments-one or the other-to the extent of ten dollars for every dollar increase in their cash reserve.

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

On the assumption that the whole sum is deposited back in the chartered banks.

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
LIB

Walter Adam Tucker

Liberal

Mr. TUCKER:

Yes. Well, practically the * whole sum is. The entire argument of the Minister of Finance is based on that, because he said that if we increased the cash reserve by $350,000,000 it would find its way back into the hands of the banks and increase bank loans, bank investments and bank deposits by $3,500,000,000. That was the point made by the Minister of Finance. I will continue to read his speech from where I left off:

Thus it is that the security purchases by the Bank of Canada tend to expand bank deposits in the country by approximately ten times the amount of the transaction.

You may ask just how the chartered banks will expand their assets and deposits as a result of open market operations by the Bank of Canada. If the chartered banks can find good borrowers they will tend to increase their ordinary commercial loans, and by so doing increase their deposit liabilities by a similar amount. Otherwise they may buy investment securities-

And that is what they have been doing for the past three or four years.

-which will usually earn them a considerably lower rate, or they may expand partly in one way and partly in the other. Either move will increase the aggregate of deposits of the banking system as a whole.

I am purposely labouring that point because, when the time comes that something is accepted which formerly was apparently not accepted, it is wise to signalize the event and call people's attention to it to prevent the ground from having to be gone over again. If it is true that the banks can and do sell government bonds to provide cash to increase

1296 COMMONS

Use of Canada's Financial Resources

their cash reserves, and that they can and do thereupon make loans or advances to the extent of $10 for every dollar of increased cash resources they get, it is wise that we should know that and cease to contradict the statement that it is so. Now, this is known as monetizing the credit of the country. In that connection I should like to mention one significant fact. Before our present banking system and the system of using cheques on deposits for doing the business of the country came into effect, every dollar's worth of business was done with money issued by the government of the country. To-day, as the Minister of Finance said, ninety to ninety-five per cent of the business of the country is done by cheques on deposits in the banks. And the Minister of Finance pointed out that those deposits in the banks are the result of providing the banks with the necessary cash basis to make the loans or buy the bonds to create the deposits. Therefore we have the situation that the financial interests of the country create ninety to ninety-five per cent of the circulating and purchasing media of this country. We have departed from the old plan that the state itself should create this purchasing medium. What I am suggesting is that we should gradually but as rapidly as we safely can return to the system by which the state has control of and issues and creates the circulating media of the country. What is happening to-day? Has there ever been a time when this country was plunging into debt at the rate it is to-day?

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

Hear, hear.

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
LIB

Walter Adam Tucker

Liberal

Mr. TUCKER:

I mean by that during the past ten years.

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
CON

John Ritchie MacNicol

Conservative (1867-1942)

Mr. MacNICOL:

No, the hon. member means during the last two years.

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
LIB

Walter Adam Tucker

Liberal

Mr. TUCKER:

No, I heard the leader of the opposition (Mr. Bennett) say "hear, hear." I did not want to leave him out of the picture. During the fiscal year 1936-37 the average rate of interest paid, by the dominion government, including the interest on short term debentures, was 3-745 per cent, almost three and three-quarters per cent. And the annual interest charge in 1936-37 was $136,278,193. Just to give an example of what is happening in this matter, I should like to indicate what we have paid in the way of interest on the public debt, and how it has grown, in the last eighteen years.

I hold in my hand a very informative pamphlet, which I suppose is familiar to every hon. member, entitled Dominion Public Finance, issued under the authority of the Minister of Trade and Commerce (Mr. Euler) and printed by the king's printer. At page

33 it gives a table of the public debt of Canada and interest payments thereon since July 1, 1867. I am not going back to 1867 but I think everyone here is interested in seeing what has been happening in connection with the public debt at least in recent years. I find that in 1919, after the war was over, the public debt of this country was $2,676,635,725. From then until 1936 we paid interest on that debt to the amount of $2,294,751,878. Remember that the total debt in 1919 was $2,676,000,000-

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

May I tell my hon. friend that the amount of interest paid up to the present is $2,545,000,000.

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
LIB

Walter Adam Tucker

Liberal

Mr. TUCKER:

Well, I wanted to be sure not to overstate by using the figures I find in this pamphlet. I find that the debt had increased by 1936 to $3,431,944,027. That is, after paying some $2,300,000,000 in interest on the public debt, that debt had increased in those eighteen years by over twenty-eight per cent. The development of this country had been hampered by high interest rates and the heavy taxation necessary to the payment of this large amount of interest; yet in 1936 the public debt was twenty-eight per cent higher than it had been eighteen years previously. And that is not due to the war; this is only our own federal national debt. The question is, can we go on paying over $2,300,000,000 in eighteen years and increasing the amount of the debt at the same time by twenty-eight per cent? There is no reason why it should not go on similarly in the future as in the past unless we change our system of public finance. We spent very little on national defence in that period. I am glad the Minister of Finance took the trouble to go into this matter because I am sure, now that he has taken it up, other hon. members will regard it as worthy of consideration and give it the attention it deserves.

I should like to remind the house what my actual proposal was. I quote:

I suggest that with that amount of gold we have the right to issue on a sound money basis $718,000,000 worth of currency fully secured on a twenty-five per cent basis. We have $157,000,000 worth issued, which would leave $560,000,000 that we could issue to put our young people to work. Does anybody suggest that that would not be sufficient to put them all to work?

I went on to say:

It may be suggested that this would mean inflation. My answer is that if there is any danger of inflation as a result of issuing what is required of that money you can take power to increase the reserves required to be kept by banks in the Bank of Canada. By law they are required to keep only five per cent. The central reserve system of the United States

Use of Canada's Financial Resources

requires banks to keep with the central reserve a reserve of twenty per cent. If the United States, with its vast wealth, has realized the need of doing something like this to prevent inflation when it increases its currency issue, Canada can do the same.

There was my definite proposal. I did not suggest that we should forthwith issue that much money; I said we should issue what was required of that much money. If the whole $560,000,000 was not required-and I do not think myself that anything like that sum would be required-then it would not be necessary to issue it.

There was a suggestion made that I was mistaken in my figures, that that amount could not be issued. It was said that by virtue of the Bank of Canada Act the bank had to have a reserve against its deposits from the chartered banks as well as against the notes issued, and I suggested that that obligation could be waived by order in council. Just to keep the record straight I should like to read the Bank of Canada Act in that regard (chapter 43, 1934):

26 (3) At the request in writing of the board, the governor in council may suspend the operation of this section in so far as it requires the hank to maintain a reserve of gold equal to an amount not less than twenty-five per centum of its notes and deposit liabilities. Such suspension shall be for such period not exceeding sixty days as may be specified by the governor in council, but on the further request in writing of the board may be extended from time to time for further periods not exceeding sixty days each, provided, however, that no such suspension shall continue for a period longer than one year without the sanction of parliament.

Under this provision, the government has it within its power to do the very thing I suggested. The central bank is not hampered by the requirement of keeping twenty-five per cent of its deposits from the chartered banks in the form of cash, because it can have that requirement suspended by order in council until parliament meets; and I suppose it could get parliament to ratify that suspension if it were in the public interest to do so.

The minister stated that, roughly, $210,000,000 could not be included because of the requirement of a twenty-five per cent coverage of gold in respect of deposits with the Bank of Canada by the chartered banks. Suppose it was not deemed wise to suspend that gold clause-and I do not necessarily suggest that it would be wise. Last year we produced S143,314,000 worth of gold. We could have used thirty-six per cent of that gold, and we would have looked after the objection raised by the minister; it would have covered those deposits quite easily, as

well as the issue proposed by myself, that is, assuming that it would take the whole $516,000,000 to put the unemployed to work. But I do not assume that at all. I submit that a very much smaller sum would look after the problem in this country, would take care of these people, would give the unemployed as well as the country generally real satisfaction, and we would get real value for our money. Of course if there is a desire to preserve the present system without any change whatever, and the government will look after these unemployed and provide us with our hard-surfaced roads, I will support them in that policy without any hesitation.

I do resent very much, however, when for example I go from Saskatchewan to visit friends on the Pacific coast, having to go to a foreign country in order to find a good road to get there. When I return home from this parliament I do resent having to go through the United States in order to get a good road back to western Canada. There should be a hard-surfaced trans-Canada road from Halifax to Vancouver, and there should be hard-surfaced roads into every national park in this country, in order to take advantage of the vast tourist trade we could tap by virtue of these roads.

I should like to briefly examine a further objection. I quote again:

An increase of say $350,000,000 in chartered bank holdings of Bank of Canada notes would increase their cash reserves from the present figure of about $250,000,000 to $600,000,000, and their cash ratio from about 10 per cent to roughly 21 per cent.

Then the minister went on to say:

If the banks use their increased cash in the normal way, as a basis for the extension of roughly ten times as much in loans to the public, or for the acquisition of ten times as much in investments, bank deposits would expand by approximately an equal amount until the cash ratio was brought down again to approximately ten per cent. This would mean an increase in bank deposits from the present level of about $2,387,000,000 to something like $6,000,000,000, or more than 2-6 times the level of December 31, 1929. Am I merely old fashioned or orthodox when I say that this would mean a colossal measure of inflation?

My answer to that is that there are only two ways in which the banks could increase their loans. Tthe first way would be by lending money to people who had good propositions to put before them, satisfying the banks that they had a chance to pay -back that money with interest; in other words good, feasible, commercial propositions. If there is that much business waiting to be done in this country; if we can expand our cash loans from two billion to six billion on a perfectly

1298 COMMONS

Use of Canada's Financial Resources

sound basis which would satisfy the banks, I submit it would be a good thing to do that. On the other hand they might purchase government investments. If they purchased investments that were already out and there was competition in those purchases, the cost would rise and the return would be driven down so that there would be definite limits in this regard, and I do not suppose that a great deal of harm could be done in that direction. But if they were lending money to governments on their bonds this dominion would control its borrowings; it would not need to borrow except to repay debts on which it is already paying exorbitant rates of interest. The municipalities and provinces would also have to borrow from the banks. As far as I can see, the banks would not lend money, even if they had the cash reserves, if it was not a safe proposition, in each and every case, so that there is not much danger of the inflation which is suggested by the minister.

I would make this suggestion, however. To make doubly sure, the government could take power to increase the reserves required to be maintained by the chartered banks with the Bank of Canada. Then if there was any tendency on the part of the banks unduly to inflate or expand their credit so as to cause an inflationary movement in this country which would not be in our best interests, we could go the banks and say, "If you do not stop this inflation we will exercise this right to increase the reserves you are required to maintain with the Bank of Canada."

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
LIB

Walter Edward Foster (Speaker of the Senate)

Liberal

Mr. SPEAKER:

Order. I am sorry, but the hon. gentleman has exhausted his time to speak.

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
?

Some hon. MEMBERS:

Go ahead.

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
LIB

Walter Adam Tucker

Liberal

Mr. TUCKER:

I certainly appreciate this indulgence; I had not intended to presume on the kindness of the house.

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
LIB

Walter Edward Foster (Speaker of the Senate)

Liberal

Mr. SPEAKER:

The hon. member may continue, with the unanimous consent of the house.

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
?

Some hon. MEMBERS:

Go ahead.

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
LIB

Walter Adam Tucker

Liberal

Mr. TUCKER:

If we had that additional power over the banks it would in effect double the control we have at present. We feel we have control over them to-day, but with that added power we could if we wished go to the banks and say, "We have issued $350,000,000 worth of new currency. If you make the slightest move to lend a single cent of that, we are going to clamp on the increased reserve rate," and I think that would be sufficient to make the banks back up.

Of course we have been increasing the cash reserves. I think the minister suggests that this would be taken advantage of to the fullest extent; that the banks would lend ten dollars for every dollar in the increased cash reserve. We control them in that regard now to prevent undue expansion. We could continue to do so.

I will anticipate a criticism which I would have liked to deal with later on. The suggestion is that if we increased the cash of this country, that would be returned to the banks and they would have to pay interest on that increase which, in effect, would be a tax on the banks. If it is a valid argument to say that the banks can increase their loans to the extent of ten times the increase in cash reserves, it is fair to say that they could, without difficulty and in a sound way, by finding sound borrowers, increase their loans to the extent of the amount only of that money that is returned to the banks. Probably, as the right hon. leader of the opposition says, it will not all be returned. Let us assume that $300,000,000 is returned. I submit that the banks could be permitted to re-lend not ten dollars for every dollar but one dollar for every dollar. On that money, for which it pays its depositors one and a half per cent, it would be paid six or seven per cent. There would be no real loss or tax on the banks in that transaction and no large inflation of credit with the disastrous effects mentioned by the minister.

So I submit, Mr. Speaker-and I will terminate my remarks at once-the suggestion that inflation would inevitably follow is not necessarily true. When you set up that tremendous inflation as an objection, you are assuming something that is not necessarily so. I submit that you could control it-prevent it. When you suggest that it would be unfair to the banks, my reply is that you should control it, to the extent that they should be permitted to lend only one dollar for every dollar returned to them, so that it would not cost them a cent.

These were the two main objections, as I saw them. There were others which I should have liked to meet. I do not want to presume any longer on the time of the house. I should have liked to deal also with my suggested long range policy of getting away from paying the banks a tribute for monetizing the credit of Canada, which to-day costs us three and three-quarters per cent, amounting to the sum I have already mentioned. If we had the use of that sum we would be able to do more for the people who need to have something done to help them in these difficult times.

Use oj Canada's Financial Resources

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
CCF

Major James William Coldwell

Co-operative Commonwealth Federation (C.C.F.)

Mr. M. J. COLDWELL (Rosetown-Big-gar):

Mr. Speaker, first of all may I say the amendment would seem to declare that the government has failed to use the resources of this dominion as adequately as our people have a right to expect, for the provision of a satisfactory standard of living for the masses of the people. I believe that is an obvious statement of fact which the Minister of Finance (Mr. Dunning) in his very instructive address the other evening, did not destroy in any particular. I therefore propose, when the time comes, to vote for the amendment.

So far, however, the discussion has been centred only upon the monetary aspect, and hence has developed into an academic, and I think not very convincing, argument concerning finance and various types of credit. To my mind a discussion of this sort narrowed down to one particular point tends to confuse the issue which is really before us and which has been raised by the amendment, which states the government has neglected to use the resources of the country- not the financial system; not monetary matters, but the resources of the country, in the interests of the people.

In what do those resources consist?-surely in our natural resources, in our machinery of production, in our labour power, and so on. After all, the financial system is but a method of accountancy; it is but figures, as it were, entered into the ledgers of those who own the machines and the resources, and can therefore decide what human labour shall be utilized from time to time to operate our economic system.

In such a productive system the object of making and distributing goods is not their usability, unfortunately, but their salability at a profit. Hence within such an economic system abundance from time to time becomes a curse, and production is therefore artificially restricted; for only those things that are scarce can be sold at a good price and at a substantial profit. Selling, I repeat, not using, is the real object of our economic system; and within that system everything distributed, whether it be goods or money, must be sold at a profit, or production ceases.

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

Does not ability to sell depend upon ability to use?

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
CCF

Major James William Coldwell

Co-operative Commonwealth Federation (C.C.F.)

Mr. COLDWELL:

Yes. The right hon. gentleman has said that ability to sell depends upon ability to use, and in that he is right. But may I say it depends more upon the ability to exchange or, in other words, to sell.

Only selfishness or stupidity would deny that there is something fundamentally wrong with a system which actually encourages scarcity and dreads abundance as a plague. My opinion is that, regardless of what we may think of social credit, its advocates have performed and are performing a service to our society by focusing attention upon this very problem. I believe, of course, that somewhere in the economic structure purchasing power has actually been issued against every item of production, but the trouble is that holders of potential purchasing power do not exercise it as such. They cannot use it for purchasing power, because they themselves have only certain limited human needs. Hence, to me the problem raised by the amendment is at once one of maldistribution and of increased consumption of consumable goods.

A few individuals have margins so far above their consumptive possibilities that they restrict the consumption of others at the other end of the scale. Last Tuesday, in discussing social credit, which applies also to what I am saying, the Minister of Finance (Mr. Dunning) said, as reported at page 1155 of Hansard:

The false premise to which I refer is that, as an inevitable result of the working of our present economic and financial system, there is a chronic shortage of purchasing power in the hands of consumers. This deficiency is supposed to arise from the fact that, of the costs incurred in the production of commodities for sale, only a part have involved the distribution of purchasing power to potential consumers.

Then he went on to refer to the Major Douglas A plus B theorem, with which I am not concerned. And then he added:

Now, the theory alleges that, as individuals who are the potential consumers always receive for their work in production less than the total cost of the products of industry, they never have enough purchasing power, enough money and credit with which to buy those products of industry.

I disagree with the statement that enough purchasing power is never distributed, but I would say the minister is quite wrong also in saying that sufficient purchasing power is placed in the hands of consumers, as consumers. The toll taken by monopolistic industries and individuals who produce for profit and who demand interest does not reappear in the purchase of consumption goods but goes into the savings, which, in turn, are used again for further exploitation of the producing masses. Herein, I believe, lies the chronic defect in the present economic system. The issue of more money will not rectify it. The very nature of the method of production and distribution, under the

Use oj Canada's Financial Resources

present system, demands that those who own the means of production retain the difference between all goods produced and the goods given to the worldng producers for their services and for their sustenance. That is the source of the accumulations of wealth with which we are confronted. It is the cause of depressions, as well as the cause of the lack of purchasing power in the masses. Figures representing these profits represent the amounts available for investment by the few who own and control the means of production. A few years ago they found profitable fields for investment of these enforced savings in industries within their own country, and afterwards abroad. To-day, as national self-sufficiency increases, overseas investments are becoming less. And so we find that government bonds are being purchased as an opportunity for investment.

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink
CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

Our investments abroad have increased.

Topic:   ELIMINATION OF POVERTY-AMENDMENT OF MR. BLACKMORE
Permalink

March 14, 1938