The next month. And deposits payable after notice at the end of November, amounted to $88,000,000; they had fallen to $76,000,000 in December. The result was that, with just that small variation of $15,000,000, because of the nature of the loans the bank was unable to carry on.
I could multiply these instances if it were thought desirable, but I mention this for the purpose of trying in my own poor way to remove from the minds of some of our friends the thought that money is made merely by lending it. Every hon. member knows that 51952-1021
in western Canada people go about and make the statement that all you have to do is to make loans enough and your deposits will be large enough to do anything with them.
Of course not. That is the position to which I desire to direct attention. I do not do this for the purpose of finding fault; I am trying to induce the minister to remedy what I conceive to be a misapprehension on the part of many people with respect to that matter. Unconsciously, and not with any intention at all, the statement made at the pages to which I have referred was calculated to and did leave an erroneous impression on the minds of those who read it. I do not mean-
Once more, how evil it is to think of things that are not done. I say, "had the effect." When I use the word 'calculated," do not think for a minute I suggest that the minister calculated it. I used the word in its proper sense-was calculated to and did leave an erroneous impression on the minds of those who read it. That, I think, is the proper and correct use and intention of the word.
The hon. member for Comox-Alberni (Mr. Neill), with that fine and nice distinction with which he uses words, suggests that I should say "likely to," and I am quite content to do so.
I should particularly like, before I turn to another matter, to leave on the minds of my friends to the left this clear impression, that banks do not make money in that sense, nor do they make credit, unless they have real deposits with which to make it. That is the fact.
point, the question of the negotiation of $35,000,000, to which the minister referred. At page 11145 of Hansard he said:
However, no action was taken until about the close of this deflationary period, in November, 1932.
Mr. Bennett: And the exchange situation was the cause.
Mr. Dunning: Yes. I shall give my right hon. friend credit, if he will have patience.
Mr. Bennett: I am not concerned with that.
Mr. Dunning: -when my right hon. friend persuaded the chartered banks to issue $35,000,000 under the Finance Act in order to relieve the cash shortage which had developed and which threatened to become more acute. I am not inclined to criticize my right hon. friend for the action he then took, certainly not for his general objectives. My real criticism would be directed rather against the tardiness of and perhaps also the lack of vigour in his measures. I realize, of course, that the machinery which was available to his hand was inadequate and cumbersome, and that any bold and aggressive measures would have been bound to meet the strongest possible resistance from the orthodox financial world.
I am going to direct attention to the language in that regard of the governor of the Bank of Canada. I mentioned a matter which I think the house should always keep in mind when dealing with this problem, that is, that we are different from Australia, for instance, whose only creditors were Great Britain and themselves. We found ourselves owing vast sums of money to the United States of America, they being in fact our principal creditor, if you take into account loans to corporations, private and public, to our state, and to the provinces and municipalities. We also owed large sums in England. On the one hand you had the exchange with respect to the pound sterling, and on the other hand the difficulties in connection with exchange with the United States of America. The Minister of Finance suggests that there was a certain measure of tardiness with respect to the action that was taken. May
I remind the house that in 1932, when the empire agreements were being considered, the Liberal party voted to tie the dollar to the pound. They voted as a body to that effect. We resisted that; for to tie the dollar to the pound at that time would have done incalculable harm to this country, in view of what happened afterwards. We had on the one hand to pursue a course which would not raise exchange to any higher point than it had risen with the United States, where we had payments to make at that time in gold or its equivalent; and we had on the other hand to maintain our exchange position with Great Britain, Great Britain herself being in a most difficult position with respect to exchange. What did we do? We pursued the middle course, and we maintained so far as possible for our dollar a value that lay in between the pound on the one hand and the United States dollar on the other. Hon. members must know of the attention given to that matter by the Bank of Canada, which had to consider it on more than one occasion. I shall content myself with reading these words from page 13 of the first report of the Bank of Canada:
The Canadian dollar has exhibited a remarkable tendency, when not at parity with the pound or United States dollar, to take up an intermediate position. Obviously, in the long run, the purchasing power of our dollar must approximate that of the United States dollar and the pound sterling, or there would be a marked divergence in exchange rates. From the point of view of short term movements, it is probable that the large volume of United States and United Kingdom investments in Canada, and the existence of so many Canadian bonds payable in two or three currencies- a feature of our financial economy which is not found to an important degree in any other country-have had a tendency to restrict fluctuations in our exchange rate. A discount on the Canadian dollar in the United States encourages purchases of Canadian securities; a premium encourages selling; and the situation vis a vis the United Kingdom is the same.
One must add to this statement by pointing out that relative price levels in the security markets of the three countries, and the degree of confidence in our position, are important factors in security transactions.
So that we have the authority of the Bank of Canada for the position which we took. But I think it well in this particular to point out that exchange rates in the United States rose to the very high figure of 25 per cent, and at one time higher still. In other words the Canadian dollar was worth only seventy-five cents, and at one time a little less. Confronted with that position, we dared not anticipate and take the action which we took in 1934; for to do so would have been ruinous to the confidence which we must