April 12, 1939


On the orders of the day:


CON

John Allmond Marsh

Conservative (1867-1942)

Mr. J. A. MARSH (Hamilton West):

Mr. Speaker, I should like to direct a question to the Postmaster General (Mr. Mc-Larty). In substance this question is the same as the one I asked about seven weeks ago. Does the Postmaster General contemplate the making of proper provision for trans-Canada air mail service between the air ports of Hamilton and Malton? We are not getting very good service at the moment.

Topic:   AIR MAIL SERVICES
Subtopic:   HAMILTON AND MALTON-INQUIRY AS TO TRANS-CANADA AIR LINES FACILITIES
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LIB

Norman Alexander McLarty (Postmaster General)

Liberal

Hon. N. A. McLARTY (Postmaster General):

The hon. member had the same question on the order paper some time ago, at which time the reply was made that the Post Office Department was giving consideration to the extension of all air mail services. I do not know that I can now add anything more definite to that answer.

Topic:   AIR MAIL SERVICES
Subtopic:   HAMILTON AND MALTON-INQUIRY AS TO TRANS-CANADA AIR LINES FACILITIES
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THE BUDGET

INQUIRY AS TO PROBABLE DATE OF PRESENTATION


On the orders of the day:


CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Hon. R. J. MANION (Leader of the Opposition):

I should like to ask the Minister of Finance (Mr. Dunning) if he is ready to advise the house as to the probable date of bringing down the budget.

Hon. CHARLES A. DUNNING (Minister of Finance): I cannot be very definite, but I may tell my hon. friend that I am endeavouring to be ready for April 20. In view of some of the difficulties, I would not like that to be regarded as a definite undertaking.

Topic:   THE BUDGET
Subtopic:   INQUIRY AS TO PROBABLE DATE OF PRESENTATION
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LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UNMATURED SECURITIES, AND FOR GENERAL PURPOSES


The house resumed from Tuesday, April 11, consideration in committee of the following proposed resolution-Mr. Dunning-Mr. Sanderson in the chair: That the governor in council be authorized to raise by way of loan under the Consolidated Revenue and Audit Act, 1931, an amount not to exceed in the whole the sum of seven hundred and fifty million dollars for paying or redeeming the whole or any portion of loans or obligations of Canada, and also for purchasing and withdrawing from circulation unmatured securities of Canada, and for public works and general purposes.


SC

John Horne Blackmore

Social Credit

Mr. J. H. BLACKMORE (Lethbridge):

Mr. Chairman, during the past few days when this resolution has come before the committee

[Mr. Homuth.l

there has been a good deal of opposition offered to it from my group. We wish to let tt be known that we have no desire to block or delay in any way the proceedings of the house, but we are strongly opposed to any measure which tends to thrust this country further into debt. We believe there is a great deal of truth in the maxim that you cannot borrow yourself out of debt or tax yourself into prosperity. Such measures as the one now proposed have thrust the country into debt by borrowing and will be followed by taxing the country, a procedure which certainly cannot bring prosperity. We want to be out of debt, and we all want prosperity.

I just wish to say to the minister that we do not propose to continue our opposition to this measure any further at this stage. We would rather wait for the second reading of the bill and talk about it at that stage; but in all fairness to everyone concerned we wish to let it be known that we propose to oppose the measure when it comes before the house for second reading. There are several reasons why we intend to do so, and I shall outline them briefly.

In the first place the national debt is already so great that it is ruining the country. It is resulting in a high cost of living which is rapidly making existence for the great majority of the Canadian people next to impossible. In addition, a tax structure is being developed which is growing and tending in the same direction, and we feel that unless something is done to prevent further development along this line it will not be long before this dominion will become uninhabitable for the majority of the people at present in it. It is easy enough to be optimistic, but there is such a thing as being too optimistic about certain matters. We would like to point out again to all the members of the house something which they all know and of which we are aware, and that is that we are to-day in a critical situation in Canada. The statements by the mayors who are at present meeting in Ottawa constitute, I think, evidence sufficient to support my statement. I do not propose to detail what they have said; but they are the men who are out on the firing line; they know just what kind of conditions confront the municipalities throughout this country, and almost to a man they are declaring that the municipalities can no longer stand the pressure. That, I submit, should be sufficient evidence that a change must come.

Then there is a cutting off of relief, or a tendency in that direction, which is alarming people terribly. I think there are very few people in Canada who would not go to work if they could find work, but a great number

Loan of $750,000,000

of people are at their wits' end to know what they are going to do when their relief is cut off, as is now being threatened. That is bad all the way round. I do not propose to go into detail concerning it because that would not be in order at the present time.

The unemployment situation also continues. Again I do not propose to discuss that question except to point out that we have not yet even commenced to find a solution for unemployment in this country.

We have among our agriculturists a situation which, in my judgment, is genuinely serious. Again I do not wish to discuss that now in any detail, but I would point out that the measures which the government is wisely taking this year to assist agriculture are a strong indication that the government and the country behind them realize that all is not by any means well with the agricultural industry of this dominion.

Virtually every measure which is proposed in the house to-day, practically every measure on the order paper, calls for the expenditure of money. If this money is to be raised by taxation, then the whole situation is indeed alarming; it should fill anyone with misgiving. Naturally I support and favour every measure for the amelioration of the condition of the agriculturists. I would commend the government for every one of those measures; they are forward looking. But the question of where the money is coming from is a very serious one which is disturbing everyone throughout the country, and it indicates that some new means of getting money should certainly be forthcoming if there is any possibility of finding some means that does not entail borrowing.

Another matter to which I wish to refer casually, in passing, is the danger of war. Everyone in the house must realize that if a war broke out, involving Canada to any such degree as she was involved in the last war and entailing any such financial sacrifices as Canada underwent in the last war, the debt structure of this country would be utterly insupportable. The other night the Minister of National Defence (Mr. Mackenzie) gave us I think considerable encouragement when he indicated that if war did break out, drastic changes in our financial set-up would immediately be made. What he had in mind, of course, he merely hinted at. It is far more serious to attempt any new method of financial management while a war is on than during peace-time. If, therefore, some drastic change in the financial management of the country is possible, we believe that the change ought to be made now while we are at peace, so that we can acquire a little bit of experience with it before we are plunged into the strain of war.

There is one other matter which I shall mention, and then I shall have said all I propose to say at this time. There are great financial and monetary experiences which men have gone through in the past, as a result of which a good deal has been learned about monetary theory. By a careful examination of these great experiments I feel certain that much could be learned which might be applied in the formulation of, shall I say, a policy or a method of procedure which might be adopted with advantage in this great new country-a new policy or a policy involving elements which we are not now applying in our financial system. I shall refer briefly to two of these.

The first one is the Bradbury experience in England. Most members of the house will remember having seen the Bradburys, the treasury notes of England. That was a paper currency issued by the national treasury to finance the great war. It replaced the gold circulation of the country. It bore the strain of the war superbly. There is abundant evidence to prove that it did not cause inflation. Virtually it entirely displaced gold in the country. What was the backing of that paper currency? Under what conditions and why was it issued? Could something of the kind be used in Canada? I do not propose to enter in detail upon a discussion of this experiment, but I commend it to the careful consideration of all governments in the world to-day. At least one man whose judgment I regard as well worthy of respect, namely William A. Shaw, editor of The Calendar of Treasury Books and Papers, looks upon the "Bradbury" as the greatest monetary discovery among men. Elements are there which, I submit, should be considered with great care.

I turn from that experiment to one associated with the island of Guernsey. In many places little is known about it. In 1815 the Guernsey island "States" issued 3,000 one pound notes, and with them constructed a market house. We know that the issue of that money cost no interest and entailed no debt; on the other hand it produced an astonishingly salutary effect upon the economic life of the island. I shall talk more about this at some future time, but for to-day I simply say that apparently the experiment was an unqualified success. As evidence of that we have the opinion of no less a thinker on monetary affairs than Sir Norman Angell, whose statement is to be found on page 271 of his book, the Story of Money, a copy of which is in the library. So successful was this experiment that when the island was at the height of success, 55,000 one pound notes were in circulation in a triangular area only 9J miles long by 51-miles wide. Altogether, we are told, 80,000 one pound notes were put into circulation

Loan of $750,000,000

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

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

Not so much as that.

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

Abraham Albert Heaps

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

Mr. HEAPS:

I am speaking from memoiy and the minister can correct me if I am mistaken. Of that amount, I believe that about $38,000,000 was utilized for public *works. The balance may have gone back into the consolidated revenue fund and I do not know whether it was used or not. What I am tr3'ing to get at is this. Five years ago under the Conservative regime the government issued new currency to the extent I have just mentioned and no ill effects ensued from that departure in finance. I am wondering whether the present Minister of Finance is more conservative than the former Conservative minister. I should like to know why there is any objection now on the part of the Department of Finance to following the example of the former government in issuing new currency for the purpose of creating public works which

Loan oj $750,000;000

would be entirely free from debt. Can the minister state any objection that the department has to a policy of that kind?

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

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

Let me indicate to my hon. friend exactly what happened and why. The period to which he refers was close to the time of transition from the old Finance Act to the Bank of Canada legislation. Under the old Finance Act a large amount of currency was outstanding based upon securities owned by the chartered banks but held at that time by the Minister of Finance as security for the extra currency issued under the old law. In making arrangements for the coming into being of the Bank of Canada it was necessary for the government of the day to provide for the absolute retirement by the banks of currency which was outstanding under the terms of the old Finance Act. There was, therefore, an interregnum which it was necessary to provide for in order to ensure that a sufficient volume of currency should be in existence to carry on and to meet the commercial needs of the country.

That issue was made in the manner to which my hon. friend refers. It was followed soon after by retirement out of circulation of all the money which had been in circulation through the medium of the chartered banks under the provisions of the old Finance Act, so that there was an incoming of new money, dominion government notes, which subsequently became Bank of Canada notes, and an outgoing of chartered bank notes to the extent that the chartered banks had borrowed from the Minister of Finance under the old Finance Act. I trust I have made that clear.

There may have been and probably was a greater amount of dominion notes issued at that time than was sufficient to cover the amount outstanding under the terms of the old Finance Act, and to that extent, therefore, there was an increase in the amount of money in existence. I would not attempt to put a limit on the figure, speaking from memory; I would say, probably ten, twelve, or fifteen millions. Since the Bank of Canada came into being, we have been working under a new and regularized system with respect to the volume of currency in existence. Formerly, under the old Finance Act, it could be moved up and down depending upon the necessities of the chartered banks, developed through their borrowings under the Finance Act from the Minister of Finance. That was in addition to the normal currency-issuing powers of the chartered banks under the Bank Act. Now we have a condition, under the Bank of Canada Act, whereby the Bank of Canada can, as in fact it does at all times, control the volume of currency in existence. I would point out to my hon. friend that this involves

a continuous study, by the bank and by its expert officers, of the question of how much currency should be in existence in Canada from day to day, from week to week, and from month to month.

The proof that the bank discharges this function is found in the figures which I gave last year indicating the degree to which expansion of our currency issue had taken place since the Bank of Canada was instituted.

I gave the information as demonstrating the policy of the bank and the policy of the government to be what I then described, and confirm to-day, as an expansionist policy of easy money. I deliberately avoided the use of the word "inflation" because of the unfortunate meaning which is attached to that word.

I prefer to use the word "expansionist" because, from the institution of the Bank of Canada to the present time, from that day forward, there has been an expansion of the volume of Bank of Canada currency in circulation in Canada, and a consequent increase in the cash reserves of the bank system.

My hon. friend asks why it would not be good to add twenty-five, or fifty, or one hundred millions more. My answer is that the questjpn of how much is constantly under study. It is part of the necessary function of the currency-controlling body constantly to study that question, and if within the next year it is apparent that more currency is desirable in order to assist in maintaining a reasonable equilibrium in the business of the country that currency will be issued. To ask me to-day whether there ought to be twenty-five millions more than there is, or even to ask the governor of the bank whether there ought to be twenty-five millions more, is a question that does not permit of a categorical answer.

I know I should not refer to the proceedings of a committee, but I thought I had under my hand a copy of the report of the proceedings of the standing committee on banking and commerce in which the governor of the Bank of Canada gave a review of the relative expansion of currencies in a number of countries including Canada and placed on the record a table that showed the relative degree to which expansion or the opposite had taken place. I am sorry I have not a copy of the document in question, but I do wish to say how much I appreciate the extent to which members of the banking and commerce committee, and others who are not members but who attend, are taking a real interest in the evidence being given there by the expert officers of the bank and of the department with respect to monetary matters.

I do not speak in any sense derogatory of this chamber when I say that matters of such

Loan of $750,000,000

great complexity can be much more effectively gone into in a committee where examination of witnesses is possible and where witnesses can produce the kind of basic information which is contained in every number of the report of the proceedings of the banking and commerce committee for the current session. I think that in referring the Bank of Canada report to that committee of the house we have taken a forward step in conveying, not only to members of this house but to the public, an understanding of the more intricate questions of finance, currency, money and credit. And I would urge that we do not attempt here to postulate conclusions upon matters which are often entangled with a great many other matters of which we may not have immediate cognizance, but that the fullest use be made of the present sittings of the committee on banking and commerce to get on record the views of everyone. My hon. friends in the far corner opposite will, I know, get their views on record, and will also, as they have done at the meetings up to now, examine the officers of the bank. They can examine me if they want to, although the governor of the bank and the deputy minister of finance are much closer to the detailed questions of day-to-day administration than any minister can possibly be.

The hon. member for Lethbridge (Mr. Blackmore) spoke of optimism as being dangerous. Perhaps so, but I can tell him that any man holding my position who had not a strong streak of optimism in his nature would not occupy the position long. But of course it must be optimism qualified by caution. I do not subscribe to the "whispers of death" attitude, neither do I subscribe to the doctrine : "All is well; do not listen to any criticism." I believe the position I have indicated to be the properly balanced approach to our problems, especially in this critical time.

Because I do not understand the theories of my Social Credit friends, because I cannot see how their theories can possibly work in a practical way, I do not say that they should not ventilate them and have them analysed. I think they might adopt very fairly the attitude I have tried to train myself to adopt in regard to these questions. Not a day passes on which from five to ten men somewhere in Canada who believe they have a solution for Canada's economic problems do not write to me about their ideas. Some of these are so wide of the mark as to involve a negative answer immediately. But I have tried to have every one of them examined critically and analysed carefully in order that so far as our officers are concerned they

may not miss any idea which might promise economic improvement for the people of Canada.

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

John Charles Landeryou

Social Credit

Mr. LANDERYOU:

We surely need it.

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

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

My hon. friend says,

"we surely need it." I say to him that the officials who are responsible for the whole management of Canada's financial policies and the financial operation of the Bank of Canada are among the best in the world, his opinion to the contrary notwithstanding.

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

John Charles Landeryou

Social Credit

Mr. LANDERYOU:

From whose point of

view? Ask the unemployed.

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

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

I will say this for them: Unlike my hon. friend these officials acknowledge that they need all the information that is available. My hon. friend takes the ground that he has it all and he knows it all. I am thankful that my officials do not take that viewpoint. Any man who did would not qualify as an official of the Department of Finance or of the Bank of Canada.

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

John Charles Landeryou

Social Credit

Mr. LANDERYOU:

A legalized racket,

that is all.

Mr. HANSON. The hon. gentleman got his financial education in the kitchen.

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

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

May I thank the leader

of the Social Credit group for his intimation that it is not intended to debate this resolution further. Of course that in no way detracts from his right, or that of any of his followers, to speak on the second reading of the bill. I think it is desirable to get along. I merely rose to answer the question of the hon. member for Winnipeg North (Mr. Heaps).

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UNMATURED SECURITIES, AND FOR GENERAL PURPOSES
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IND

James Samuel Taylor

Independent

Mr. J. S. TAYLOR (Nanaimo):

I have some observations which I believe would be of value in the discussion of this resolution and the bill which will follow it, but my present hoarseness will unquestionably .prevent my giving voice to them. I should like the minister to concede that when the bill comes along I may have an opportunity of saying what I should like to say now.

Topic:   LOAN OF $750,000,000 TO MEET LOANS OR OBLIGATIONS, TO PURCHASE UNMATURED SECURITIES, AND FOR GENERAL PURPOSES
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April 12, 1939