March 20, 1941

?

Some hon. MEMBERS:

No.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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SC

Victor Quelch

Social Credit

Mr. QUELCH:

May I continue?

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

Thomas Vien (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

The CHAIRMAN:

Not unless the hon. gentleman has the unanimous consent of the committee.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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SC

Victor Quelch

Social Credit

Mr. QUELCH:

I will not take long. I want to refer to one or two statements made by the Minister of Finance on September 12, 1939, regarding a pay-as-you-go policy. He said:

as I have already said, the real costs

of war must come out of current production, out of the goods and services produced during the war. It is true that some stocks of military supplies may be on hand at the beginning of a war, but their importance is slight for a war of any duration ....

First of all let me emphasize that however we finance the cost of the war, whether by taxation or by borrowing or by inflation, we cannot escape its real costs. By the real costs I mean the goods and services which have to be sacrificed out of our current production to meet the needs of war.

.... and I repeat it again, that in real terms, namely, in terms of the loss to the nation of this production, a war is paid for substantially during its duration.

I am afraid that the minister at that time was indulging in wishful thinking.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I was stating a fact; I was not announcing a policy.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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SC

Victor Quelch

Social Credit

Mr. QUELCH:

The minister admitted that the real cost of war was substantially paid for during the war. If that is so, why cannot its financial cost also be met during the war? I will put it to him in this way. We must

War Appropriation Bill

admit that while we are prepared to pay the real cost of the war, in so far as goods are concerned, we are not prepared to pay the financial cost; that is to say, a certain class of society is not prepared to make the sacrifice which is necessary in order that such a policy may be adopted. If they were, there would be no increase in debt apart from that resulting from the sale of war savings certificates. What we are really saying is this, that while we are providing the goods to prosecute this war, we are going to demand that future generations shall compensate us for a large proportion of this production. And remember that by far the greatest proportion of that compensation will be paid to a comparatively few people.

I cannot understand how anyone can say that that is an honest policy; for what is the government really doing? It is misappropriating the funds of future generations. Some people may attempt to justify such a policy on the ground that we are fighting a war to make the world safe for democracy for future generations, and that, therefore, future generations should be prepared to pay a certain proportion of the cost of the war. I heard the same sort of statement made time and again from 1914 to 1918. I heard it said that we were fighting to make the world safe for democracy, that we were fighting the war that would end war; yet here we are to-day, twenty-five years later, engaged in one of the greatest wars the world has ever known.

No; I do not think we have any right to ask future generations to sacrifice themselves for the troubles that we are facing to-day, because I believe that future generations will have plenty of troubles of their own without having to look after ours, as we are having to take care of troubles that were incurred hundreds of years ago. Britain is still paying interest in connection with the Crimean war, and in connection with every major war fought in the last hundred years or so. It is high time we started a real pay-as-you-go policy, because it would not entail a reduction in the standard of living of the people to a level lower than that due to the present policy of the government; whereas the difference that would be brought about would be this, that people would not have as a result of the war, at the end of the war, large accumulations of bonds representing nothing more or less than war profiteering. I say again, therefore, that there is no justification for the attempt to pass on any large proportion of the financial cost of the war to future generations.

I do not suppose it will do any good to ask the Minister of Finance again to consider this question. I appreciate the fact that he

has been quite frank in answering a number of questions, but before sitting down I should like to put to him a few more very short questions, which I think he can answer easily without deep consideration. Can he explain why rates of interest on money borrowed from the chartered banks vary? Why does the interest rate on money borrowed from the chartered banks since the declaration of war vary as it does? In one instance, it is two per cent; in another, one and a half per cent.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Money is borrowed for different period.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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SC

Victor Quelch

Social Credit

Mr. QUELCH:

Can the minister explain why the length of time for which money is borrowed, is reflected in a difference in the rate of interest? Is it from fear that interest rates may go up in the meantime?

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I am not sure I can give a complete answer to that question, but it is well known that the interest rate which is proper for one period is not proper for another. A certain rate prevails for long term loans, a certain rate for short term loans; and for very short term loans, such as treasury bills, the rate is almost negligible. The rates are fairly well graded between those points. That applies to loans generally.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
Permalink
SC

Victor Quelch

Social Credit

Mr. QUELCH:

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The hon. gentleman is opening up rather theoretical questions here.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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SC

Victor Quelch

Social Credit

Mr. QUELCH:

No; the governor of the Bank of Canada has admitted that the banks loan by creating the means of payment.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I do not know that I would undertake to answer these questions impromptu. It is rather like writing a book, or an essay, to deal with such matters. The hon. gentleman, I suppose, has spent a good deal of time in working out these questions and he asks them of me in the committee and

War Appropriation Bill

wants an immediate answer. Perhaps I have not given so much thought to the theoretical foundation of the variation in the rates of interest depending on the length of time the money is borrowed, but I do not think there is anything in the point that the hon. gentleman has just made, that it is merely a bookkeeping transaction as compared with an individual going to borrow money from a bank.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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SC

Victor Quelch

Social Credit

Mr. QUELCH:

That is true; when an

individual borrows money from a chartered bank, it creates the means of payment.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

What is

that?

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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SC

Victor Quelch

Social Credit

Mr. QUELCH:

Surely the leader of the opposition is not going to dispute the fact that when an individual borrows money from a chartered bank, it creates the means of payment.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

It all depends on whether the individual takes the money away in his pocket or puts it back in the bank.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

Thomas Vien (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

The CHAIRMAN:

Order. The hon. gentleman had the consent of the committee for a few minutes more, but unless he now gets further consent, his time is up.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
Permalink
SC

Victor Quelch

Social Credit

Mr. QUELCH:

On a point of order, I have finished the speech I was making and I am now asking questions. I understand that in committee one may ask questions as long as he likes.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

Olof Hanson

Liberal

Mr. HANSON (Skeena):

On the point of order, we have discussed this resolution for three or four weeks-

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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March 20, 1941