August 12, 1944

LIB

Gerald Grattan McGeer

Liberal

Mr. McGEER:

Then why were they not financed in 1936 and 1937?

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

William Henry Moore

Liberal

Mr. MOORE:

I am glad to reply to that. As a matter of fact I have some very interesting information here, if the hon. member would care to have it?

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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SC

John Horne Blackmore

Social Credit

Mr. BLACKMORE:

I should be glad to

have the hon. member reply. I want to be perfectly fair to the good member. I have high respect for his knowledge and understanding, but I believe he is not yet too old to learn.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

William Henry Moore

Liberal

Mr. MOORE:

I may say that I have been in a hard school these last two or three months.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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SC

John Horne Blackmore

Social Credit

Mr. BLACKMORE:

I shall be very glad

to have him answer because I want to be fair. But beyond the shadow of a doubt, if the number of cars that the shunting engine has to handle increases sufficiently, there will have to be another shunting engine.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

William Henry Moore

Liberal

Mr. MOORE:

Quite.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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SC

John Horne Blackmore

Social Credit

Mr. BLACKMORE:

So that the number

of shunting engines is not fixed in any given economy, nor is the amount of money which a country can have to effect its exchanges. When a country has to have new money, the contention of the hon. member for Vancouver-Burrard, the hon, member for Parry Sound and a few others of- us is that a number of tickets can be created by the state and the state does not need to owe anybody for the tickets.

May I say a word or two about the European situation. The Europeans were asking the question, "Why not create money to advance national projects?" after the last war. An all-important matter has to be raised and understood. As a whole the European countries are' "have-not" countries. Germany was a narrowly restricted country with 66,000,000 people as compared with Canada, almost an empire in area, with but 11,000,000 people. Who can draw a parallel between the conditions in Germany and those in Canada?

First of all let us bear in mind that the European countries had large populations and relatively meagre resources as compared with Canada. Having that in ,mind let us turn to what happened in Germany. In the first place, Germany was a small country with a large

Bank Act Amendment

population and with relatively meagre resources. In the second place, Germany was exhausted as a result of a most disastrous war. In the third place, she had had fastened upon her the terms of the treaty of Versailles which were positively ruinous. They demanded the delivery of the very goods and services which would have supported the money that Germany could issue. They demanded railroad cars, railroad ties, coal and many other commodities to be delivered in almost impossible abundance. At the same time they demanded the delivery of a great deal of gold. How could you judge a country which was in the condition Germany was by ordinary monetary standards? Any one who attempts to compare what happened in tragic Germany in 1920 with what might happen in blessed Canada with her boundless resources and small population simply is not capable of forming a correct judgment. Germany's great lack was goods. In normal times Canada can produce more goods than her people can possibly use. Our problem is one of distribution.

May I turn to the taxation aspect of money? The hon. member for Ontario said that the creation of money was a form of taxation. Mr. Chairman, I emphatically challenge that statement. The creation of money will not constitute taxation unless that money causes a rise in prices. Money will not cause a rise in prices if there are already more goods on the markets than there is money in the economy. To create money to equal the goods on supply is not a form of taxation in any sense of the word because it does not cause a rise in prices. I challenge the hon. member to question that.

The question was raised as to price control. We realize fully that price control is not always easy. Let me draw this to the attention of the hon. member for Ontario. You can always bring down the price of a commodity by increasing the amount of that commodity beyond what the people can use. As a simple illustration, if we have a bumper crop of potatoes in Canada, the price of potatoes comes down. The same thing will happen with any other commodity you can name. If you want to bring down prices, you increase production and then your prices will not go up. The main difficulty then will be of putting floors under your prices.

I think this is one of the points the hon. member for Ontario made. By using a scientific method of price control prices can be completely controlled. First, let there be abundance of production* of every kind the nation can produce to the point at which there is more of each kind of commodity than the

people can use. Then prices will not rise because of demand. You will have no inflation. If you put floors under the prices you will keep them from falling too low. If there is a tendency for prices of manufactured goods to rise prices can be brought down by means of a government subsidy or by discounts with compensation. By the use of price floors and discounts with compensation the price levels of the community can be brought into alignment and thereby prices can be almost completely controlled.

I do not wish to go further in the debate at the present time. I will let it go on just as it was going, but I wanted to answer those remarks of the hon. member for Ontario. I think I have-said enough just now.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

Arthur Graeme Slaght

Liberal

Mr. SLAGHT:

May I have just a word with reference to the scholarly and interesting contribution to this debate made by the hon. member for Ontario, for whom we all have the greatest respect. I listened closely to see whether he would discuss the amendment, and except that he would have the committee draw some inference from what he gave us, he did not in my view, and I say this with great respect, discuss the true point at issue.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

William Henry Moore

Liberal

Mr. MOORE:

I was trying to follow the remarks of the mover of the amendment, and I confined myself to those remarks.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

Arthur Graeme Slaght

Liberal

Mr. SLAGHT:

That may be the reason why the hon. member did not discuss the true issue involved in the amendment as between it and the section we are seeking to alter. I accept his explanation. I want to say a word on his attempt to make an allegory or comparison between what those who support this amendment propose should be done in Canada and what he told us was done by the German gangsters after they incurred such enormous foreign debts after the last war.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

William Henry Moore

Liberal

Mr. MOORE:

Not gangsters.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

Arthur Graeme Slaght

Liberal

Mr. SLAGHT:

The hon. member says "not gangsters?"

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

William Henry Moore

Liberal

Mr. MOORE:

In 1923-24, the period of which I was speaking, Germany was governed by a democracy.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

Gerald Grattan McGeer

Liberal

Mr. McGEER:

Schaeht was in charge in 1923 as he was in 1932.

Topic:   BANK ACT AMENDMENT
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LIB

Arthur Graeme Slaght

Liberal

Mr. SLAGHT:

Use any name you like, but they were the greatest monopolistic financial gangsters that ever ruled in any country. By any' other name a rose would smell as sweet. That same crowd of financiers deliberately flooded and overflooded Germany with marks for the purpose of inflating her currency to

Bank Act Amendment

the point where no country could stand it. That is the same crowd that helped Hitler build that system of army and munitions which invaded the Ruhr and then passed along for six years to engage in the cruelest and greatest gangster war the world has ever seen.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

Hughes Cleaver

Liberal

Mr. CLEAVER:

To what extent does the hon. member suggest that we should flood Canada with the same sort of dollars?

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

Arthur Graeme Slaght

Liberal

Mr. SLAGHT:

Not at all. I am coming to that, if the hon. member will be patient, but I do not want to spend too much time on it because I have other things to deal with.

The financial chaos in Germany was deliberately created for the purpose of repudiating her debts, and it succeeded; it worked. There is no suggestion in anything that has been put forward by myself or my colleagues that we should adopt a fraudulent course of that kind in Canada. I have made it clear throughout, following the close analysis of my hon. friend the member for Ontario, with which I agree, that throughout the war this country has had recourse to three sources of getting money: taxation, borrowing all you can by victory bonds from the public, and then there has been a gap between those two sources and our necessary war expenditure which it has been necessary to fill. My complaint is with the method that the Department of Finance adopted to fill that gap. Is that a matter of flooding the country with money in order to repudiate debts? My hon. friend knows better than that. I have never advocated any such thing, and it is a poor answer to drag in the gangster fraudulent intent which worked in Germany as against the arguments presented against the monopoly which the Canadian banks enjoy.

Now, Mr. Chairman, I desire to emulate if I can the excellent and quiet delivery to the committee of the hon. member for Ontario. I recorded yesterday the original capital of the banks, $1454 million, and their well-earned and disclosed reserve of $136f million, making a 'total of approximately $282 million, which is employed in the business of Canadian private banking. That is the amount that went into that business. In addition to that we permitted the banks some years ago to print and create, for the mere cost of the paper and the printing, 8140 million, amongst them, of their own bills. That is now reduced to some $40 million and will disappear in a few years. Somebody tried to tell us in the banking and commerce committee that that was not a privilege that we gave them, but a liability. I would not bother answering that, because the banks printed bills and lent them out at five and six and seven per cent interest.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

Hughes Cleaver

Liberal

Mr. CLEAVER:

I think we should be fair. The statement was that it was both a privilege and a liability.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

Arthur Graeme Slaght

Liberal

Mr. SLAGHT:

It is not a liability at all. It is a monopolistic privilege added to the other one that they enjoy.

I come now to the runaway character of the government borrowing from the private banks, and will show you the figures. They are very important. In 1933 the total dominion government borrowing from the chartered banks was $578 million. We have increased that now to $2,700 million, an increase of approximately 450 per cent. Another interesting fact in connection with that monopoly is that this same government on December 31, 1943, although indebted to the chartered banks for $2,700 million, had to their credit on deposit with the banks the enormous sum of $750 million. It is true that you would need to keep some sort of liquid amount, but they had on deposit with these same banks $750 million of the $2,700 million on which they were paying interest to the private banks.

I am not going to spend any further time on the proposition that the banks do create money. A year ago people challenged that, but the Minister of Finance in the quotation the hon. member for Vancouver-Burrard gave a few minutes ago put that at rest, along with Mr. Towers and others, when he said that the banks lend eight, nine and ten times their cash reserves. I quoted yesterday from Mr. Eccles and various other authorities, and so I take it that the committee is satisfied on that point. But just let me give this one further reference, which is so recent. I was questioning Mr. Towers in the banking and commerce committee on May 19, 1944, at page 161 of the proceedings, as follows:

Q. You told ns yesterday that the banks create money. When the finance minister takes a bond for $1,000,000 to a chartered bank and they receive the bond and credit him with a mililon dollars, you told us that in doing so they were creating money; is .that correct?

A. That is true. The moment it is credited, however, it becomes a loan from the depositors of the bank.

No one has ever questioned that. It goes on.

Q. I appreciate that-the reason being that instead of turning a crank and making billions of credit, they make it by a bookkeeping entry?

A. Yes.

Now let me deal for a moment with the excuses and, if I may say so without disrespect, the smoke-screens that have been put up on behalf of the banks by their advocates as to why we should not retake from the banks and exercise ourselves the right that under the British North America Act was vested in the dominion government on behalf of the people of Canada.

Bank Act Amendment

The first one is this. They use the expression with reference to creating interest-free money through the Bank of Canada-it was used some weeks ago by a very distinguished gentleman in this house-"you cannot get something for nothing." He brought out that old platitude. There is a great tendency to whip up a saying of that kind and throw it out as though that ended the matter. But that quotation has nothing whatever to do with the situation. The Minister of Finance in the last four years has financed1 through the Bank of Canada practically one billion dollars, although a couple of years ago when I wanted him to finance through the Bank of Canada to the extent of one billion dollars he was shocked and he told me: If you do that you will blow the lid off.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The hon. gentleman was

advocating that we should do that at once. He made his suggestion in the spring of 1942. The billion dollars that we have borrowed from the Bank of Canada has been spread over the entire period of the war, and in that is something like seven or eight hundred million dollars of bank notes which are carried around by the people and have not gone into the chartered banks at all as cash reserves.. That one billion dollars was gradually spread over a long period. That is quite different from the proposition of the hon. gentleman, put forward1 in the spring of 1942 here, that we should immediately issue $1,200 million of national currency.

Topic:   BANK ACT AMENDMENT
Subtopic:   CONDITIONS GOVERNING TEN-YEAR EXTENSION OP BANK CHARTERS
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August 12, 1944