Mr. J. C. LANDERYOU (Calgary East):
Mr. Chairman, nothing affects the economic welfare of our country more than our money policy. We have contended that our monetary system must reflect the country's collective ability to produce and distribute goods and services for the people of Canada. The borrowing of this $750,000,000 will affect every man, woman and child living in Canada to-day, and it will affect also the lives of every man, woman and child who may live in Canada in the years to come. We maintain that our monetary system must be corrected if civilization is to progress. Every time we make a proposal the Minister of Finance (Mr. Dunning) raises the issue of inflation, but I should like to refer to a statement by the minister as reported on page 1527 of Hansard of March 3, 1939, as follows:
My hon. friends deny on all occasions that they advocate inflation, but they propose resolutions similar in terms to the one we now have before us, which does mean the issue of currency by the Bank of Canada to the extent of from $500,000,000 to $750,000,000 more currency than is now outstanding, which would mean an increase in the total currency available in thip country of from two and a half to four and a half times. Now, my hon. friend says he does not advocate inflation.
I say once more that we do not advocate inflation. It is well to remember that the provincial debt, the municipal debt and the national debt are all increasing. In 1912 the net debt of Canada was $339,919,461. In 1913 it was $314,301,625 and in 1914, $335,996,850. At that time the debt was approximately equal to the amount of currency available in the country, tout to-day our debt is atoout eighteen times greater than the amount of currency in circulation. Our provincial debt in 1925 was $813,400,000, about five times greater than all the currency available in circulation. By 1935 this had risen to $1,622,100,000, or albout ten times greater than all the currency available in circulation. In 1926 the municipal debt was $1,050,206,121, or six times greater than all the currency in circulation. By 1935 this had risen to $1,452,850,565 or nine times greater than all the currency in circulation. So our total
municipal, provincial and federal debt is many times greater than all the currency available in circulation.
Considering the tremendous inflation which has occurred in the debt of the country, it is hardly right to say that the issue of $600,000,000 would be inflation. I suggested that the government should issue $600,000,000. This issue would be without cost to the government, apart from the cost of printing. But what was the answer of the Minister of Finance? His answer was in these words:
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 ten per cent to roughly twenty-four per cent. The sponsor of the suggestion contends that no inflation is intended or would result by thus increasing bank cash, so long as the gold cover of the Bank of Canada did not fall below the twenty-five per cent minimum. This factor, however, is not a test of inflation. If the banks use their increased cash in a 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.
If instead of issuing bonds and having the bankers create credit out of nothing, as we have done in the past, the government would issue $600,000,000, under our present banking laws it would mean inflation. If the banks were permitted to take $600,000,000 worth of cash and expand credit ten to one, it would mean an increase of $6,000,000,000 in the credit of this country. That is provided there were borrowers who would be prepared to take the money. Our banks cannot always get rid of their surplus credit, and this would depend upon whether or not there were borrowers ready to borrow from the banks. At the present time it must be remembered that our banks have only ten per cent cash reserve. Time and time again the government have said that they have control of the issue of currency and credit day by day, week by week and month by month. If the government takes action and forces the banks to increase their cash reserves, takes action to prevent the banks from inflating credit, then there would not be one dollar's worth of credit expansion in this country. The Minister of Finance knows that full well.