May 6, 1965

?

An hon. Member:

The Bank of Canada.

Topic:   DECENNIAL REVISION AND EXTENSION OF CHARTERS
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RA

David Réal Caouette

Ralliement Créditiste

Mr. Caouette:

Yes, Mr. Chairman, following the hon. member's interjection, we are certainly going to speak about the Bank of Canada, and not only about chartered banks in Canada which are endeavouring, by all possible means, to crush the Canadian people even more and which, in addition, are trying to control the Canadian government. In fact, they succeed when the Minister of Finance

May 6. 1965

Bank Act

announces that the liquidity or bank reserve will be decreased from 8 to 7 per cent, which means that the banks will have the privilege, under this provision, to multiply 14J times their reserves with the Bank of Canada.

Therefore, instead of improving the situation, the Minister of Finance is in the process of giving them greater and more devastating control, if you want, of our national economy. Then, the government will have to go and borrow from those private institutions. As I indicated the other day, during the budget speech, the government issues bonds that the chartered banks could buy and multiply 12J times. Now they will have the privilege to multiply them 14J times.

Why does the government not take the responsibility, through the Bank of Canada, to multiply the credit necessary for the development of the Canadian economy and the elaboration of a system which will allow every Canadian to live decently in a country such as ours?

Mr. Chairman, some cabinet members are undoubtedly interested in the passage of a proposal such as this. There probably are some bank directors among the ministers. There are some among the members of the house and among the senators. It goes without saying that the Canadian people will not be surprised to see what the Minister of Finance is now proposing, namely to give to some individuals complete power over distribution or control of the economic blood of the nation, that is credit and money.

Mr. Chairman, the management of chartered banks are afraid of Social Credit, but I do not think there is any ground for such a fear. Unlike the socialists who advocate nationalization of chartered banks, Social Credit does not want to nationalize them but only to require that they have 100 per cent reserves to guarantee their loans and that all new credit issued be created by the Bank of Canada and issued to the public through the construction of roads or public buildings, the financing of federal, provincial and municipal administrations, school boards, and others.

By using the credit issued by the Bank of Canada, people will make deposits in chartered banks, and that will enable them to keep on making loans, probably as much as they are now doing. But instead of lending a monetary creation, they will lend something that they have in hand, something that they own in their institutions. Then, they will be able to charge interest to their

[Mr. Caouette.l

borrowers. We are not the least opposed to that.

We do not object either to having the rate of interest, for those who must have bank credit, set through competition and offers of service.

Mr. Chairman, the Creditistes strongly object to reducing the liquidity from 8 to 7 per cent. Furthermore, we object to the chartered banks continuing to exploit the Canadian people. That is why we are right when we say that the Government should use the facilities of the Bank of Canada.

Today, in every western country, and particularly in the United States, renowned economists, sociologists and businessmen suggest that governments should immediately bring about changes in their financial system. Otherwise, the United States will head into a depression worse than the one it experienced from 1929 to 1939.

However, one may ask what will result from the application of such a system, a Social Credit system, instead of a social indebtedness system which the Minister of Finance would like us to approve through this measure?

The Creditistes know that the essential source of financial credit in Canada rests- and I insist upon the word "rests"

in the Canadian capacity to produce. That is the essential source of financial credit in Canada. Therefore, any new credit issued must derive from a central bank, namely the Bank of Canada.

Therefore when plans for public expenditures are brought down before the house, the members need not worry whether these plans are financially possible, whether the government has the money required and whether it is possible to milk further the hard-pressed taxpayers. The Minister of Finance need not worry unduly about that or rack his brain; he will be able to understand more easily that the economic objectives of a country are based on satisfying the needs of its citizens. Members will ask simply if the required expenses will meet real needs, if they are physically possible, if Canada has the required workers, brains and materials. In this connection I have no doubt that the Minister of Finance fully agrees with me that we have the workers. But, we also have some unemployed in the country, and even though the Minister is boasting about Canadian prosperity, we have people who are receiving welfare allowances nowadays. The Minister of Finance is telling us that this

May 6. 1965

Bank Act

country is prosperous while the Prime Minister and other members of the Government are telling us that there is poverty and destitution in Canada.

Workers, brains, materials required to provide the development of our national economy are available. Let us take, for instance, the decision regarding the building of another seaway at the cost of $500,000,000. Such a decision will be taken regardless of financial considerations. Since we have the necessary workers, brains and materials, the part to be played by finance should be to serve, not to make decisions.

Now when the Minister of Finance wants to do something for his country, Canada, he is obliged to kow-tow before the financiers and ask for their permission. It is rather unseemly for the Minister of Finance of a sovereign government which is master in its own country, to grovel before the financiers and beg their financial permission to do something, to make financially possible the limited development he is trying to do in this or that region of Canada. The decision will be taken independently of finance; its role will be to serve and not to decide.

The construction of that seaway has been decided because it fills a need and because this production will not affect adversely the production of other consumer goods. Here is a group of companies which offer to build that seaway for $500 million. They buy the material, supply the machinery, pay their employees, even an interest to the bank on the money borrowed for that purpose.

Let private enterprise borrow from chartered banks, I have no objection. But for the Government to do so when it can resort to the Bank of Canada, no. That is what the Creditistes are fighting for throughout Canada.

You may say that this is stupid. For instance, let us consider the St. Lawrence Seaway. Once the work is completed, the department concerned, after the engineers have established the probable duration of the Seaway, according to the use to which it will be put, and the wear and tear to which it will be submitted, then the department charged with inspecting government works will issue a cheque in the amount of $500 million. Where will the government get this money from? From the Bank of Canada? From the source of the financial credit of Canada?

[DOT] (9:10 p.m.)

Will the government contract a debt toward the Bank? Not at all, because the Seaway will be an asset created by the people of

Canada, by those who have contributed directly or indirectly to its construction. The people of this country cannot run into debt regarding its own production. If the Seaway had been built in the United States by the Americans, Canada would have incurred a debt toward that country. But in a sound financial system, a national debt, together with the interest it carries, can only be owed to other countries, when our imports exceed our export.

But there may be a danger of inflation, people will say especially during an electoral campaign, when the Liberals always charge Social Credit with creating inflation, while it is caused by their own system. When the Government must pay $1,103 million in interest on the national debt to chartered banks and to other financial institutions outside Canada, this causes an increase in prices throughout Canada. That is true and real inflation which does nothing for the economic development of this country.

Would not this policy lead us to inflation? The Creditistes say that Canadians have nothing to pay for building the St. Lawrence Seaway, which is its own production. But they will have to pay for its achievement, its use, and its depreciation. And this in accordance with one of the basic principles of Social Credit: Every new production must be financed by new credit, and the withdrawal of these credits must be accompanied by consumption at the same speed of consumption or disappearance of created resources, or of their depreciation.

It seems to me that an intelligent person is able to understand that through such a technique inflation can be avoided; but, instead, inflation is created through the present system.

Assuming that the St. Lawrence Seaway depreciation is achieved after 50 years, and that we should then build another one, the annual depreciation, destruction and consumption will therefore take place at the rate of $10 million a year, which the government will have to seek from the consuming public, users and others; those $10 million will be returned every year to the bank to be cancelled. But on the contrary, some rather unscrupulous politicians will try to make believe, especially during election campaigns, that Social Crediters will bring about inflation.

Since a product can only be consumed once, its consumption must only be paid for once. The consumer of bread or milk pays the price shown only once. The same applies to the goods of public capital. It is only through

May 6. 1965

Bank Act

the absurdity of the present financial system that the people must pay two or three times for seaways, public buildings, highways, bridges, which are burdened with an interest doubling and tripling their cost.

It would be possible, by applying this principle, to alleviate the present burden of the taxpayers for all expenditures of public capital. Through the financing of public capital by the Bank of Canada, taxes would be reduced gradually, since the interest on the fictitious national debt would no longer exist.

Then, any government could reduce taxes and alleviate the heavy burden on the Canadian people. Taxes would decrease and be limited to taxes necessary for the depreciation of public capital, which would not return to its place of origin, the Bank of Canada, interest laden. Then, it would be repaid only once and not two or three times.

Under the legislation introduced today by the Minister of Finance, we must continue to pay interest on pure and simple creation of money by a few individuals, which is contrary to the best interests of the nation.

The implementation of such a scheme would permit the progressive repayment of the national debt which now accounts for more than 14 per cent of the expenditures covered by the federal budget.

It goes without saying that under a Credi-tiste regime, small wage earners and low income families would be the first to benefit from a tax reduction. The first taxes that a Credististe government would abolish would be those on basic commodities. One of the first pieces of legislation it would introduce would provide income tax exemptions for married taxpayers earning less than $5,000 a year and for single taxpayers with a yearly income of less than $2,500.

That, Mr. Chairman, would be the difference between a Creditiste government which would favour the freedom and the fulfilment of man and a Liberal government which binds and strangles people with chains which prevent them from disposing themselves of the fruit of their labour.

Mr. Chairman, the bill which we will undoubtedly be called upon to examine within the next few days is what I would call an example of government stinginess. It increases further the control of a handful of individuals.

The other day, I quoted the following from the encyclical "Quadragesimo Anno" which Pope Pius XI addressed to the world some 34 years ago, in 1931:

[Mr. Caouette.l

"Those who control money and credit are the masters of our lives and without their authorization, no one has the right to breathe."

We have reached the point where not only hon. members but even the public realize that the Minister of Finance and the government cannot breathe without the consent of those who control the economic lifeline of the nation. When we call for detailed reforms of our system, our opponents deride us by saying ''Let us nationalize and socialize power, our natural resources, the Bell Telephone and private companies" whereas the only thing we ask the house to nationalize or socialize is money and financing. But it has to be left alone. We discuss here for months all kinds of bills, but when the interest to be paid on the national debt is mentioned, nobody dares to criticize a system which decreases the purchasing power of Canadian workers and consumers.

[DOT] (9:20 p.m.)

Mr. Chairman, nothing is said about the socialization of money. Nationalize private enterprise? Fine. But financial problems should not be dealt with.

Some people tell us: The system has always existed and survived. We cannot change it.

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?

An hon. Member:

It is a madmen's system.

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RA

David Réal Caouette

Ralliement Créditiste

Mr. Caouetle:

Yes, Mr. Chairman, it is a madmen's system, there is no doubt about it and it is administered by the maddest among them. That system torments individuals, human beings.

We have nothing against a bank's president and directors. We are against the power they have to give life to someone today and to put him into bankruptcy the next day.

In most cases of bankruptcy in Canada today, the main reason is-

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LIB

Herman Maxwell Batten (Deputy Chair of Committees of the Whole)

Liberal

The Deputy Chairman:

Order. I must advise the hon. Member that under Standing Order 61A his time has expired.

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RA

Raymond Langlois

Ralliement Créditiste

Mr. Langlois:

Mr. Chairman, I wish to make a few observations on the resolution introduced by the Minister today and on the different propositions and intentions which he stated he had in mind.

Every ten years we have to renew this Bank Act so that chartered banks and the Quebec savings banks may continue to operate for another ten years. The Minister mentioned with some pride that the interest rate on commercial loans was to remain at 6 per

May 6, 1965

cent, but that other interest rates either on mortgage loans or on personal loans would be raised if the banks so wished. There is one thing I should like the Committee to remember in this regard. It is this: At the moment this is all a lot of window dressing. The Minister was trying to cover up in the course of his opening remarks what was to come later.

Some of my colleagues have already dealt with this point, but I shall take it up again. I am referring to the 7 per cent bank reserve requirement. We all know that the banks now have 8 per cent of their reserves with the Bank of Canada in accordance with the Bank Act. When they have $8 in reserve, $8 guaranteed either in currency or in Government bonds, they can lend out in a form of credit $100. Discounting the $8 held in reserve this amounts to giving the banks permission to create out of nothing $92, which they then lend out at interest to Canadian consumers. To put it another way, if I deposit $8 of my savings with a chartered bank, they pay me interest on it at the rate of 2} per cent. On the basis of this $8 the bank is then given permission to lend out $100 upon which they collect interest at the rate of 6 per cent. In other words they give 24 cents to the depositor while receiving $6 on the $100 created on the basis of his deposit. This means a profit of $5.76. That is the way in which the banks operate at the moment. They have the right to create 12& times the amount they have on deposit either in their savings accounts or in Government bonds. By reducing this reserve requirement to 7 per cent the Minister is giving them permission to create funds amounting to 14.28 times their reserve-some of my colleagues have mentioned 14J as a round figure.

Why is this being done? There is a reason, and I will tell the Committee what it is. First, this is a pre-election measure in the interests of the Liberal Party right now. At the moment, every chartered bank across the country is doing everything in its power to get people to deposit more money in their savings accounts. They do this because, as I say, these deposits provide them with credit to a multiple of 12J times. But the banks are finding it increasingly difficult to get people to increase their savings. The Minister, by this change in the Act, has found one way which will permit the banks to continue to lend as before, without having to impose financial restrictions.

If the chartered banks were obliged at this moment to restrict credit across the country

Bank Act

the result would certainly not be to the Gov-vernment's advantage. We know what the reaction of the Canadian consumer would be. If the Minister does not know it, he can ask one of his predecessors what happened when he dictated a tight money policy. The measure before us would delay such a necessity until 1968, at least, permitting the Government to face an election and ensuring loose credit for the next three years. The Government will be able to get through the centenary year. But by 1968 if this country does not hit rock bottom and economic chaos I shall be surprised. However, at the moment this measure permits the Government to escape the trap which the Minister himself has created through his own monetary policy in past years.

As I mentioned a few minutes ago, the Minister of Finance knows that deposits going into savings are not as numerous as they were. He knows the banks can create credit on the basis of the 8 per cent of their reserves held by the Bank of Canada. He has only to read over the Bank of Canada Act to know this. It was made clear in 1935 and 1936 when the Committee on Banking studied this question. At that time Mr. Towers was governor of the Bank of Canada and Mr. Graham was questioning him. The Minister can read the report and find out what happened. We are now being asked to consider one move which will prevent the necessity for a tight money policy-and a tight money policy, added to all the taxes the Minister has placed on the shoulders of the people of this country, would mean a tight squeeze for the Government in the event of an election. We all know an election will come before 1968. The Minister hopes to get away with it for another three years, through 1967, and what happens to the Canadian people afterwards he does not seem to care.

Why is there a decline in the amount of money going into the savings departments of the banks today? There is only one reason. The people depositing in these accounts have less money in their pockets, less purchasing power. That is what we in this comer of the House are saying. They do not have enough money to buy Canadian products at the moment. So, instead of applying tight money policies as was done in 1959, the Minister has reduced the reserve requirement from 8 per cent to 7 per cent, thus allowing the banks to continue to lend at the present rate for another two or three years before the wheel goes round once more and we have

May 6, 1965

Bank Act

to tighten our belts again. My colleagues say the money is all in books. That is a fact. The hon. Member for Edmonton West mentioned it today, and it is mentioned also in the Bank Act itself. It is a fact.

[DOT] (9:30 p.m.)

I know this is exactly the way things happen. Whether you like it or not, it is the permission given to the local bank by the head office that will determine whether a loan is made to an individual-an individual the head office never saw in their lives; an individual they do not know. To that extent, I have nothing against it. But there is something I wish this Government would take hold of, and this House. I refer to the difference between our party and the N.D.P., which we often call the Socialist Party. They want to socialize production and private enterprise. As the hon. Member for Villeneuve mentioned a few moments ago, they want to socialize electricity, natural resources, this and that. There is one domain or one section of the economy wherein the Social Credit or the Creditistes are socialist, and this is the only sphere of economic activity in which we are socialist. This is in socializing the monetary policies of this country to give their control to the Canadian Government. This is one thing that the Government cannot rid itself of, namely controlling the currency. When the Government has lost control of the currency, you can say it has lost control of everything. There is a monopoly here. The Minister of Finance well knows there is a monopoly here. It is a monopoly controlling the distribution of goods. The distribution of goods, and production and services in this country is controlled by the currency that permits that distribution to come about.

I am going to put a question to you here, Mr. Chairman. We all know that currency is a conventional means accepted by the people, and in which people have confidence, as a unit of measure. It measures value; that is all it does. The wealth is not in the dollar bill; it is in what the dollar bill represents. It is a representation of goods. If the dollar bill is a unit of measure to measure value, how come that the dollar bill can change its value? How can it be worth $1.04 at one time, and at another time 92 cents? Have you ever seen a pound worth 14 ounces? You never did, and you never will. It is always worth 16 ounces on the dot. That is a unit of measure, to measure weight. Have you ever seen a metre shorter than 100 centimetres? You never saw it more than 100

[Mr. Langlois.l

centimetres, and you never saw it less than 100 centimetres. The true metre is held in a conservatory in France, in a platinum bar, and every other metre has to be measured by that. How come the lineal measure does not change? How come it is the measure of financial value that changes? If the measure of weight, pounds, does not change, and if the lineal measure, the foot or the metre, does not change, how come the value measure, the dollar, changes?

It is because there is speculation in regard to it. Somebody is applying tight money policies; somebody is applying loose money policies; somebody is speculating on it. The Minister knows about this. This is exactly the control that is in the hands of the chartered banks at the moment, given by the Government of the Canadian people. This control is given to these private institutions, which control the distribution of goods, services and production in this country. All we ask is that the Government control our currency, and control it from one end to the other. Let the chartered banks operate as they are, as a free enterprise; but let them have in their treasury enough capital to guarantee their loans 100 per cent. The caisses populaires and the credit unions in the different provinces must have 50 per cent in reserve as a guarantee. Ask them all to have 100 per cent in reserve as a guarantee. You cannot lend what you do not have. How can the Government permit private institutions to make loans when they do not have sufficient guarantee behind the loans? This is not a proper thing to do. This is the privilege of the Bank of Canada. That is the control we in this party desire to have belong to the Government, which is voted in by the people and should work for the people and with the people.

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?

Some hon. Members:

Question.

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LIB

Herman Maxwell Batten (Deputy Chair of Committees of the Whole)

Liberal

The Deputy Chairman:

Shall the resolution

carry?

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?

Some hon. Members:

Carried.

Resolution reported and concurred in.

Mr. Gordon thereupon moved for leave to introduce Bill No. C-102, respecting Banks and Banking.

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LIB

Herman Maxwell Batten (Deputy Chair of Committees of the Whole)

Liberal

The Acting Speaker (Mr. Batten):

Is it the

pleasure of the House to adopt the said motion?

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?

Some hon. Members:

Agreed.

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RA

Gilles Grégoire

Ralliement Créditiste

Mr. Gregoire:

On division.

May 6, 1965 COMMONS

Motion agreed to and Bill read the first time.

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LIB

Herman Maxwell Batten (Deputy Chair of Committees of the Whole)

Liberal

The Acting Speaker (Mr. Batten):

When shall the said Bill be read a second time?

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?

Some hon. Members:

Now.

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RA
LIB

Herman Maxwell Batten (Deputy Chair of Committees of the Whole)

Liberal

The Acting Speaker (Mr. Batten):

Next sitting of the House?

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RA

QUEBEC SAVINGS BANKS ACT

DECENNIAL REVISION AND EXTENSION OF POWERS

LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Hon. Waller L. Gordon (Minister of Finance) moved

that the House go into Committee to consider the following resolution:

That it is expedient to introduce a measure to provide for the decennial revision of the Quebec Savings Banks Act and the extension of the powers of the existing savings banks till July 1, 1975, and to provide further for certain changes in connection with the administration of the Act.

Motion agreed to and the House went into Committee, Mr. Batten in the Chair.

Topic:   QUEBEC SAVINGS BANKS ACT
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May 6, 1965