February 10, 1939

CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

What I am about to say may sound a little vainglorious, but may I put it in this way: If to-morrow I were in the position of the Minister of Finance (Mr. Dunning), I know certain steps I would take which I believe would be helpful.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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?

An hon. MEMBER:

Let us have them.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

I am not prepared to give them at the present time.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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CCF

Thomas Clement (Tommy) Douglas

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

Mr. DOUGLAS (Weyburn):

I was interested in the hon. member's statement with reference ' to the different amounts of money in circulation in the different countries. Is the velocity of turn-over relatively the same in those countries, or is it higher in Canada?

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

That is a tough one.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

Yes, it is a tough one. The question of velocity is perhaps one of the most intricate of all questions in connection with credit and monetary matters. May I point out that the velocity in Canada has varied in the last ten years from seventeen to twenty-six times. I think at present it stands at about twenty-two, or in that neigh-

bourhood. But, so far as I am able to ascertain, the velocity is not very much different in any of the four countries to which I have referred, although I would be inclined to say that in all probability the velocity in Great Britain would be greater than elsewhere. In the eastern states it would be greater than in the western states. But if we take the United States as a whole, the velocity there would not be much, if any, greater than in Canada. But if it were greater it would only emphasize the differentiation to which I have referred.

I wish to turn more directly to the resolution which calls for the raising of the very large sum of $750,000,000. I find that the funded debt of 'Canada is, in round figures, $3,252,000,000. The maturing bonds in the next year or year and a half, so far as I can learn from the public accounts, stand at about $425,000,000. Then there are treasury bills amounting to $150,000,000. These two items call for about $575,000,000, which leaves $175,000,000 out of the $750,000,000.

When we come to the committee stage I should like the minister to be prepared to answer this question: What is this additional sum to be used for? We find reference in the resolution to "public works and general purposes." Perhaps I am now getting out of the realm of wholly impartial economic discussion and approaching that of political-

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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?

An hon. MEMBER:

Politics.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

Yes, politics, if the hon. member likes that word. I am wondering whether or not in the closing session of this parliament we are going to be treated to very rich supplementary estimates, and whether in this authority to borrow $750,000,000 we are providing the minister with a mighty handsome election fund.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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LIB

Ernest Lapointe (Minister of Justice and Attorney General of Canada)

Liberal

Mr. LAPOINTE (Quebec East):

Is it a hope or a fear?

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

The hon. member for Kootenay East does not mean that.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

Well, I am just a little

concerned.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

Not in relation to this matter.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

I have noticed the words "general purposes" and have studied them with care. I have a high appreciation of the wonderful virtues of the Minister of Finance, and of his transparent honesty. But when I see the expression "general purposes" mixed in with a sum of around $175,000,000-

Loan of $750,000,000

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

But this is not the authority, and the hon. member knows that. The authority must be specific.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

Oh, no, not so specific.

Of course, we shall see when the bill comes. I have the act, and I shall read it. I do not wish the minister to misunderstand me, because what I am saying is not said by way of carping criticism. I believe we must look at these things seriously. The resolution refers to "public works and general purposes," and also "The Consolidated Revenue and Audit Act, 1931," which I have in my hand. Section 13 of that act, the authority under which the minister is asking power to borrow, and the authority which will govern, reads:

(1) The governor in council may, from time to time, as the interests of the public service require, change the form of any part of the then existing funded debt of Canada, including any securities for which Canada is liable by substituting one class of the securities aforesaid for another, if neither the capital of the debt, nor the annual charge for interest is thereby increased.

That is, the minister may refund or manipulate so as to get a lower rate of interest- a perfectly proper procedure. Then, the section states:

Provided that in any case where securities bearing a lower rate of interest are substituted for securities bearing a higher rate of interest, the amount of the capital may be increased by an amount not exceeding the difference between the then present value of the security bearing the higher rate of interest and that of the security substituted for it.

That, of course, is perfectly clear and one of the provisions which no doubt the minister has in mind. Then follows the subsection stating that no substitution shall be made, and so on. Then we find this, under section 14:

(1) The governor in council may, from time to time, as the exigencies of the public service require, in the event of the consolidated revenue fund being at any time insufficient to meet the charges placed thereon by law, direct the proper officer to raise, by temporary loans chargeable on the said fund, or by the issue and sale or pledge of securities, in such manner and form, in such amounts, for such periods, and at such rates of interest, as the governor in council directs, such sums as are necessary to enable the said fund to met such charges.

That is a wide open power. Of course, the matter has to be reported to parliament; I do not question that fact. What I say is that in this resolution we are giving the minister very wide power. The reason why I emphasize this now is that he may favour the house, or the committee when we reach that stage, with as full a declaration as possible of the distribution of these funds when they are borrowed.

With no intention of delaying the house, I feel that we should pause before this resolution is passed and give consideration to the broad question of the policy of this country in connection with its finances, and I see no better place to do it than here. When we come to the budget discussion there will be all kinds of, shall I say, political prejudice, which will influence the debate. But there is no reason why we should not under this resolution consider carefully the policy of Canada and the general principles upon which we shall authorize the government to carry on this very large financing measure.

Hon. CHARLES A. DUNNING (Minister of Finance): It was my intention to be prepared, and I am prepared with respect to almost all, if not all, of the matters mentioned by the hon. member for Kootenay East (Mr. Stevens), to give information to the house in the committee stage. I think it would be more convenient for hon. members as well as for myself if we could take questions and answers in that institution of the house which is adapted for that purpose, rather than have a general exposition by myself just now, interrupted as I know it would be by requests for information; it would be easier, I believe, for everyone concerned to deal with that in committee. I have only this general observation to make. I know the hon. member for Kootenay East did not wish to convey the impression that this resolution precedes legislation of a new kind, or represents any departure in method of using the machinery we have for taking care of financing the needs of the country in so far as those needs require to be met by borrowing.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

I said so.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

My friend said so quite plainly, but one or two of the questions might have raised implications of a different kind. The Consolidated Revenue and Audit Act is our general controlling financial statute. It is the statute which places upon the government and the Minister of Finance precise limitations as to the exercise of the financial functions of government. Then parliament itself from session to session decides by individual vote in the estimates precisely what sums of money shall be spent. So what we are here deciding is not that 8750,000,000 shall be spent; we are here deciding upon the method of raising $750,000,000. In other words, this is not a voting of expenditure, but the provision of means whereby the expenditures authorized by parliament at various times may be met whenever the necessity arises to borrow. I wanted to clear the air to that extent.

Loan of $750,000,000

With respect to all the matters of detail mentioned by my hon. friend, I would appreciate it if hon. members interested in them would permit me to answer them in committee. I have all the information before me. It would help materially. There is no intention on my part to avoid discussion- quite the reverse-with respect to what ought to be from time to time the financial policy of the country. Indeed I make, with some trepidation, a suggestion, speaking now with respect to financial methods and what we should do from time to time in that regard. The hon. member for Kootenay East mentioned various matters which he said we as a parliament should examine carefully and endeavour to decide as matters of policy. Nearly all the matters to which my hon. friend made reference are of necessity under continuous study and examination, not only by the officers of the Department of Finance, but particularly by the officers of the Bank of Canada. The suggestion I thought of making is that it might be a good idea to give the officers of the Bank of Canada opportunity to appear, say before the banking and commerce committee, not for the purpose of the kind of discussion which might create impressions detrimental to our credit abroad, but for the purpose mentioned by the hon. member for Kootenay East. In that way his suggestion with respect to the desirability of wider public information as to financial methods-I prefer to use the term " methods " rather than " policy," although it is difficult to decide where method ends and policy begins-might be met without detriment to the best interests of Canada. I make that suggestion without having consulted the governor of the bank; it may be that he would not care to do it, but after all he, like myself, is a servant of the public and I am sure would take the same attitude. While the governor or his officers would have to be allowed discretion with respect to giving certain kinds of information the giving of which might be prejudicial to the interests of the country, I am convinced that if that could be done the understanding by hon. members of this house of financial operations connected with the government of Canada, as well as the much broader aspect of general economics of the country in relation to government finance, might be much improved. I say that with no reflection upon anyone, but just throw out the suggestion.

Meantime, with regard to this authority, I would say before we get into committee that our funded debt maturities, irrespective of any new money which may be required to meet expenditures authorized by parliament,

and including issues which are callable prior to 1940, which of course we must take into account in order to be able to substitute securities bearing a lower interest rate if there is opportunity to do so, down to December 31, 1940, amount to $649,000,000. In addition we have $155,000,000 of treasury bills outstanding at the present time, so it will be seen that this $750,000,000 will not provide an election fund-my hon. friend was not serious about that, I know-because, in fact, the total maturing and callable securities prior to December 31 of next year amount to $804,000,000.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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CON

Joseph Henry Harris

Conservative (1867-1942)

Mr. HARRIS:

Would the election fund make up the difference?

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

I am afraid the election fund which would be arrived at by that method would be a debit instead of a credit. I shall be glad to give detailed information regarding any bond issue or any aspect of the matter when we reach the committee stage. I do not suppose I can get the bill introduced tonight, but there will be two other opportunities for discussion, on second reading and in committee of the whole, which is virtually the same as being in committee of the whole on the resolution.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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SC

John Charles Landeryou

Social Credit

Mr. J. C. LANDERYOU (Calgary East):

I had intended asking the minister a question which is important to me because I intend to speak on this matter before we get into committee. Would the minister, in the short time left before six o'clock, break down the $750,000,000 and give me a rough estimate of the amount of money that will be used internally and the amount to be raised externally to meet these obligations? I will put it in this way: What portion of this amount can be met internally, with Canadian funds?

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UN MATURED SECURITIES, AND FOR GENERAL PURPOSES
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February 10, 1939