Mr. ILSLEY:

I shall have to deal with

that later. I am taking up the time of the hon. member for Halton.

Mr. CLEAVER:

I repeat again that I think Mr. Clarkson was misled by the question and that the proposition was not fairly put up to him. I repeat again that I hold in my hand the bank statement of the bank of Montreal for 1943, and I say that that statement shows every dollar of cash and every dollar of securities of any nature that the bank holds.

Mr. McGEER:

This afternoon the Minister of Finance referred to the fact that to-day we are carrying a much heavier load of debt with a very much greater amount of interest. The fact is that in 1920 we were financing dominion government bonds, issued to pay 5} per cent tax free. The rate of interest at that time ranged from 5i per cent to not lower than 2J per cent. Obviously the endeavour to balance the budget that took place between 1920 and 1930 resulted in the collapse of the whole economic structure of the Dominion of Canada as elsewhere. When that collapse came, refunding took place all the way down the line until the general interest rate was reduced from 5i per cent to 3 per cent, and in some instances the rate was lowered to three-quarters of one per cent.

The ACTING CHAIRMAN (Mr. Golding):

I would ask the hon. member to keep to the section under discussion, section 59, which has to do with cash reserves.

Mr. McGEER:

Of course, Mr. Chairman,

section 59 as I read it is the section which gives the banks power to issue money, and the question is whether or not that power should remain in the chartered banks or should be recaptured and vested in the Bank of Canada. What we are dealing with is whether we can go on carrying the burden of debt that is piling up. The minister overlooks the fact that we have now reduced our interest rate in some instances to a level where it is just about equal to the operating costs of servicing money. But do not forget this. According to the governor of the Bank of Canada, at page 10 of his 1943 report, issued this year, the

total annual interest payable in Canada by the dominion government as of August 1, 1939, was $169 million, and as at December 31, 1943, it had risen to $304 million. That means that this government, even on these figures, in a period of ten years must levy in taxation under this system for a total of $3,004 million. These credits are not offset properly against the interest.

Mr. ILSLEY:

Why not?

Mr. McGEER:

Why not? Let us look at some of the items he offsets. He says:

In calculating a net interest burden adjustments must be made for C.N.R. interest which the railway is able to pay out of its own net earnings-

Mr. ILSLEY:

That is right.

Mr. McGEER:

*-and cash revenue received by the federal government on its investments or advances to other organizations such as the Bank of Canada, the foreign exchange control board and the national harbour board.

Mr. SLAGHT:

We get these just the same.

Mr. McGEER:

We get these just the same, whether we pay interest or not. They have nothing to do with the interest item itself; they are independent revenues of the government, and if we were issuing our own money we would get these revenues in exactly the same way as we are doing now.

Mr. ILSLEY:

We would not have had the properties if we had not increased our debt to acquire them.

Mr. McGEER:

If we had used our own money we would not have incurred any debt.

Of course the assumption is that there is no. way by which a government can finance public enterprises unless it borrows its own credit, its own money. Let me give the committee one example of its fallacy which is based on indisputable facts. We were always told in Canada that this was a young country, that we had not the accumulations of savings which were required for our capital investments, that we therefore had to go into the realm of international finance, to London, Paris or Berlin.

Mr. BLACKMORE:

Or New York.

Mr. McGEER:

Or any place where large sums of money had accumulated over the centuries from large numbers of people. What happened when this war came? Did we go to London to borrow capital to build up the war organization? No, we did not, and we certainly did not go to Berlin or Paris, and we did not go to New York. The first thing we did was to lend England $700 million. Then we assumed the responsibility of our own

Bank Act Amendment

army, our own navy, our own air force, and a new munitions industrial organization. How did we finance that? Did we go.to London? Not at all. Instead of London being the rich uncle as we had assumed in the past, London was the poor relative. Not only did we lend $700 million, but we gave $1,000 million of goods and services. How did we finance that, because that required an enormous capital investment in plant and equipment and organization? Then the next year, because some people objected to a gift to Britain, we made it a billion dollar gift of mutual aid for the various nations.

Will anyone say again that, in the light of our experience in financing our enormous war programme between 1939 and 1944, we shall ever have to go abroad again to raise money to build railways or municipal buildings or provincial highways or harbour facilities? We have proven that Canada, as far as financing the development of her own resources w'ith her own intelligence and her own labour is concerned, is independent of the world.

This notion that you cannot do these things comes back to the old story that money without gold behind it would not have the confidence of the people.

Mr. BLACKMORE:

Another bit of nonsense.

Mr. McGEER:

That kind of shibboleth has gone forever. Our Bank of Canada bills go forth and are handled and accepted by anybody, and there is not a penny's worth of gold behind them. And when we argued, as we did in 1934, as the hon. member for Northumberland, Ontario, knows very well, that we should divorce our internal currency from gold, that was the same kind of "heresy" they are talking about now when we say that we should finance our undertakings with our national currency and not with our national debts.

Mr. CLEAVER:

Will the hon. member per, mit a question?

Mr. McGEER:

Yes.

Mr. CLEAVER:

If I may just state it first, so that you will understand what I mean.