1933-03-27

COMMITTEE ON STANDING ORDERS

[Stage Direction]
Mr. A. U. G. BURY (East Edmonton) presented the first report of the select standing committee on standing orders and moved that the report be concurred in.
Motion agreed to.


Right Hon. R. B. BENNETT (Prime Minister) moved:: That for the remaining period of the session, all private bills, when presented, be read a first _ and second time forthwith, and that standing order 105 respecting the posting of private bills referred to the house be suspended.
[Mr. Murphy. 1
This is the usual rule, made in like circumstances, having regard to the date which we have reached in the session.


[Stage Direction]
Motion agreed to.

Richard Bedford Bennett: That the name of Mr. Hackett be substituted for that of Mr. Sproule on the select standing committee on agriculture and colonization.


[Stage Direction]
Motion agreed to.

[Stage Direction]
Bill No. 56, respecting The Nipissing Central Railway Company.-Mr. Casselman.
'	TAX ON SUGAR

Hon. E. N. RHODES (Minister of Finance):: I have received many representations in protest against the alleged unfair action of wholesalers who are said to have anticipated the budget and in consequence have it is alleged reaped substantial profits through raising prices immediately on the stocks of sugar they have in hand.
The question of forestalling is a very difficult one to deal with. It has proved difficult and baffling to all governments, and up to the moment I know of no effective remedy which has been discovered to meet the situation. There is this to be said, that while there can never be an exact balance, the fact remains that when a tax is removed the reverse of this picture holds good, and the wholesaler on that occasion is out of pocket the amount of tax which is remitted, to the extent of the stock he has in hand.
I may say that all wholesalers have not been quite so fortunate, if the sugar wholesalers have been, because I know of one instance where one firm in one city borrowed 818,000 for the purpose of paying the duty to take tea and coffee out of bond, in anticipation of this very thing happening, and in that instance they will be losers to the extent of the overstock in hand and the carrying charges in the meantime.
While it is doubtful whether a remedy can be found, I wish to take this early opportunity in the session to say that the matter will be most carefully inquired into, and if a remedy is available to meet the justice of the case it will be applied.


Mr. POULIOT:: There is the peace, order
and good government bill.

Questions


Mr. DUFF:: Has the minister received any complaints with regard to the six per cent sales tax on molasses? People who cannot now afford sugar must use molasses, on which there is a sales tax of six per cent.


Edgar Nelson Rhodes: I think I can answer that
question offhand and be absolutely accurate. I doubt whether there is any commodity on which a tax is placed with respect to which there will not be some protests.



QUESTIONS

[Stage Direction]
(Questions answered orally are indicated by an asterisk.)

Mr. TETREAULT:: 1. Was a heating system installed in the post office of Granby, Quebec?
2.	If so, when?
3.	What was the total cost of installation?
4. Who sold the heating system to the government and who did the installation
thereof ?


Mr. STEWART (Leeds):: 1,	2, 3 and 4.-
A hot water heating system was supplied and installed by Alex MacKay & Co. Montreal for $1,080 at the time the building was constructed in 1903. When the addition to the building was erected in 1924, the two old boilers were replaced by new ones purchased from Steel & Radiation Ltd., Montreal for $781 and installed by R. A. Butterworth of Granby for S172. In March 1929, an oil burner was installed on these boilers by Alonzo Lemieux of Granby at a cost of $900.


RADIO SUPERVISOR, PICTOU
Mr. DUFF:: 1.	Who is radio supervisor for the county of Pictou?
2.	When was he appointed?
3.	Who recommended him for the position?
4.	What is his salary or compensation? '
5.	What are the duties and position of D. R. Sutherland of Pictou in connection with radio matters?
6.	On whose recommendation was Mr. Sutherland employed?


Mr. DURANLEAU:: 1.	George Brownrigg.
2.	7th October, 1932.
3.	The honourable member for Pictou.
4.	Ten cents commission on each licence he was responsible for selling in Pictou county.
5.	Vendor of radio receiving licences. .
6.	Mr. George Brownrigg.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. DUFF:: 1.	What was the cost of the material supplied for erection of breakwater on south side of Glace Bay harbour in March, 1932?
2.	Were tenders called for the supplying of that material?
3.	What lumber dealer or dealers supplied the material, and at what price?
4.	Did the contractor, the late Neil N. MacDonald have full authority to purchase material, or was it supplied by orders of the Department of Public Works, or was it supplied without consulting Mr. MacDonald?
5.	What portion of the proposed break-water was completed, and is a further extension proposed ?


DREDGE, NEW WELLAND
Mr. GARDINER:: 1.	Who are the owners of the dredge, New Welland?
2.	How long have they owned it?
3.	What work has been done by this dredge, directly or indirectly for the government (a) before'July 28, 1930; (b) after July 28, 1930?
4.	What payments have been made for such work ?
5.	To whom were these payments made?
6.	On -what dates -were these payments made?
J. P. PORTER & SONS-DREDGING


Mr. GARDINER:: 1.	What dredging work has J. P. Porter & Sons Limited done directly or indirectly for the government from April 1, 1928, to July 28, 1930?
2.	What amounts have been paid for this work ?
3.	To whom were these payments made?
4.	On what dates were these payments made?



MOTIONS FOR PAPERS


Mr. HURTUBISE:: For a copy of all correspondence, letters, telegrams, petitions, reports and other documents in the possession of the government, respecting the mail service between Pointe au Baril, Ontario, and railway station, since 1930.



GARSON, ONT., POST OFFICE

Joseph Raoul Hurtubise: For a copy of all correspondence, letters, telegrams, petitions, reports and other documents in the possession of the government, respecting the post office of Garson, Ontario, since 1930.
3408	COMMONS
Royal Canadian Mounted Police



ROYAL CANADIAN MOUNTED POLICE

[Stage Direction]
Hon. HUGH GUTHRIE (Minister of Justice) moved that the house go into committee to-morrow to consider the following proposed resolution:
Resolved, that it is expedient to amend the Royal Canadian Mounted Police Act to provide that money paid by the provinces for services of the force may be utilized for its maintenance; and for the disposition of moneys earned by any member of the force over and above his regular salary, pay and allowances; and to authorize the governor in council to determine by regulation the amount of allowance for pension purposes; and to make further provision respecting the counting of service in South Africa by officers and constables for the purposes of pension.
He said: His Excellency the Governor General, having been made acquainted with the subject matter of this resolution, recommends it to the favourable consideration of the house.
Motion agreed to.

[Stage Direction]
On the orders of the day:
Hon. J. L. RALSTON (Shelburne-Yar-mouth):: I should like to address a question to the Minister of Fisheries, as to whether or not any decision has been arrived at with regard to the refusal of licences to trawlers after the present licences expire. If any decision has been arrived at I should like to know what it is, and if not I should like to know when we may expect an announcement in this connection.


Hon. ALFRED DURANLEAU (Acting Minister of Fisheries):: The matter is still under consideration, and a decision will be arrived at before the end of the month.



BUSINESS OF THE HOUSE


[Stage Direction]
On the orders of the day:
Richard Bedford Bennett: I promised the right hon. leader
of the opposition (Mr. Mackenzie King) that I would advise him with respect to other business that might engage the attention of this house during this session. In addition to what I mentioned the other day, that is, the amendments to some existing statutes, there is only one measure, which I do not think it necessary to name at the moment, that may require the consideration of the house, but I do not think it will come up. As soon as I have definite information I will advise the house.



INQUIRY AS TO LENGTH OF EASTER ADJOURNMENT

Right Hon. W. L. MACKENZIE KING (Leader of the Opposition):: The Prime
Minister has just said a word with regard to the business of the house. Perhaps it is a little early to put a certain question to him, but I should like to ask him to have it in mind: A number of hon. members desire to know the plans of the government with regard to the Easter recess, and if these plans could be announced at an early date, it would, I think, meet the wishes of many hon. members of the house.


Richard Bedford Bennett: The right hon. gentleman is quite correct in his suggestion that no definite conclusion has been arrived at with respect to this matter, but so far as it is possible to say at the moment I think we will adjourn over Friday and continue our proceedings as usual the following week.


William Lyon Mackenzie King: On Tuesday?


Richard Bedford Bennett: I say this, of course,
subject to any change that may be made, but I fancy it will be from Thursday evening until Tuesday afternoon. That is the intention at the present moment.



PRICE OF SUGAR


[Stage Direction]
On the orders of the day:
Jean-François Pouliot: I thank the Minister of Finance
(Mr. Rhodes) for the statement he made a moment ago, and I should like to direct the attention of the government to the fact that on December 6 the price of sugar at Riviere du Loup was $4.85 per hundred pounds.


Mr. SPEAKER:: I am afraid that is not
a proper statement on the orders of the day. If the hon. member wishes to direct a question to the government he should do so.


Jean-François Pouliot: That is what I am doing. Now the price has been raised to $7; there are several cars on the siding at Riviere du Loup, but no merchant can get sugar from the wholesale store which is owned by a profiteering company, which was well known during the war for the sale of still bom calf sausage. I hope the government will take some action to see that sugar is sold to the stores of Riviere du Loup.


Some hon. MEMBERS:: Order.

Dominion Notes Act-Gold Standard



DOMINION NOTES ACT AMENDMENT


[Stage Direction]
Hon. E. N. RHODES (Minister of Finance) moved the second reading of Bill No. 54, to amend the Dominion Notes Act.
William Lyon Mackenzie King: Mr. Speaker, this bill is very brief; its purport is to give the governor in council power to suspend that section of the Dominion Notes Act which sets forth that dominion notes shall be redeemable in gold on presentation at branch offices established or at banks with which arrangements may be made for the redemption thereof.
I believe it is a fact that already the government has been exercising the power for which it is now asking. If that is the case the government must have had some authority for so doing, and if it had such authority presumably that authority was sufficient and is still sufficient. So under the circumstances I do not see why this measure need be introduced at all. I might add that the introduction of a measure of this kind, unless it is absolutely necessary, would seem to injure rather than aid the credit of the country. Perhaps the Minister of Finance (Mr. Rhodes) who has the matter in hand has good and sufficient reasons for further taking away from parliament its control over this allimportant matter, together with the other matters that we have been considering of late. It would seem that the parliament that laid down the special conditions under which this power should be exercised took a safer and sounder view of the authority and wisdom of parliament in the matter than the minister is taking at the moment. However, the minister may have special reasons for asking that this authority should be given at this time, and if so the minister might give us the reasons before we are asked to vote on the second reading of the bill.


Edgar Nelson Rhodes: Technically I exhausted my right to speak when I made this motion, although I did not speak at that time, due entirely to the belief which I perhaps mistakenly held that no exception could be taken to the principle of the bill, and that any questions that might arise could be dealt with more properly in committee of the whole. I have, however, no objection to saying a word or two. I have not any doubt that this bill legally follows the one which was passed last year and which prohibited the export of gold. It is really a companion bill and if it
had been introduced at that period, I do not think any exception would have been taken to it. That it was not introduced at that time is due largely to the fact that the provision for redemption in gold was, in view of the fact that the gold could not be exported, an empty one.
I do not agree with my right hon. friend that by my bringing in this bill any question could be raised which would be prejudicial in any way to the credit of the country. It means merely that we recognize in the statute laws a situation which is virtually in effect. There can be no good object in an individual seeking to have notes redeemed in gold if he may not export the gold, and the measure is largely of advantage in preventing frivolous attempts to invoke the provisions of the statute as it at present exists. My right hon. friend is aware of the fact that under the Finance Act there is power to suspend the redemption of notes in gold, but the conditions there are so rigorous that the mere application of them would occasion a critical situation. The words used in the Finance Act are:
In case of war, invasion, riot or insurrection, real or apprehended, and in ease of any real or apprehended financial crisis.
Certain powers rest with the governor in council, amongst others being:
(d) Suspend the redemption in gold of dominion notes.
In the case of this bill, that should apply under conditions far short of those which are provided in the Finance Act. We do not for a moment admit that there is any financial crisis or that one is apprehended, but at the same time, as a matter of proper conservation of our gold supplies for the country's purposes, we propose asking that this bill should be enacted and in doing so I may say that we are only doing in effect precisely what has been done in Great Britain and in the United States. I have under my hand if, when we are in committee, it should be desired, the exact wording of the statute so far as the United States is concerned and also so far as the law in England is concerned. This is a measure decidedly in the public interest and I do not think any reasonable objection can be taken to it. My right hon. friend has intimated that there seems to be a desire on the part of the government to take more power unto itself. Necessarily a provision of this kind should be elastic unless we are prepared to take the ground that for all time we shall do away with the redemption of dominion notes in gold. That perhaps is a debatable question, but it need not arise at this stage. Certainly, we are seeking no
3410	COMMONS
Dominion Notes Act-Gold Standard
more power in this bill than, as I have intimated, already exists in both the United States, and Great Britain.


Mr. G. G. COOTE (Macleod):: Mr. Speaker, I have no idea of objecting to the bill now before us which, I think, is long overdue, except to say that I believe the section which is intended to be amended, should be struck out altogether. I am informed there is today no country in the world where legal tender notes are redeemable in gold and I do not see why we should continue any longer to keep this section of the Dominion Notes Act on the statute books. While it is there, I am in favour of the amendment moved by the minister to the effect that the government should have power to suspend it. It has actually been suspended since September, 1931, and it was suspended perhaps two years before that time. I think it was Professor Curtis who said that the test of a gold standard is the foreign exchange rate and when a premium on foreign exchange as high as two per cent obtains in Canada, this is a clear indication to me that we are no longer redeeming our notes in gold. In September, 1931, Great Britain was forced to abandon the gold standard. The action taken in Great Britain at that time, and taken by act of parliament, I may say, was to relieve the Bank of England from liability to redeem their notes in gold. I might quote Mr. Snowden, Chancellor of the Exchequer, who said, in introducing the bill:
This will not affect the free gold market in London. There will be no restrictions on the importation or exportation of gold and any gold sent to London for sale, for example from the South African mines, will like any other commodity fetch its market price whatever that may be.	.
All that is changed is that the right under the subsection of the 1925 act to take from the Bank of England gold bars, is suspended. Finally and I only say this because of an unreasoning fear that appears to prevail abroad where we are under obligations to make payments in dollars or other foreign currencies, as for example some of the war bonds that were issued in New York, we shall of course continue to meet our obligations punctually in those currencies.
That was the action taken by Great Britain when she abandoned the gold standard. She suspended the redemption of notes in gold. She did not take the action now proposed by the Minister of Finance of giving the governor in council power to suspend redemption, but she did actually suspend it by law, and I think that is the action which should be taken in Canada at this time. This should have been done in September, 1931. At that time the government had power, under the Unemploy-
ment and Farm Relief Act, to pass an order in council suspending redemption in gold. That action was not taken, but so far a3 I can find out, the government have refused almost consistently to redeem on presentation dominion notes in gold. We have done extra legally that which we would not do legally. Although bound by law to redeem these notes in gold the receivers general have refused to do so. To make sure of that I applied on two different occasions to the Assistant Receiver General at Calgary for gold and I was refused. I was handed an application form. Such action could not by any stretch of the imagination be taken as compliance with the law and I think it is regrettable the government has waited eighteen months to do this thing legally. The government, however, should go further and suspend that section of the act. We have no intention of redeeming notes in gold; it is impossible to do so and no country in the world is doing so. In fact, dominion notes should not be convertible at all, because when the public or any large section of it desires to make our notes convertible, they become inconvertible. Every existing currency becomes inconvertible when any large section of the public attempts to. convert it, so why continue to pretend that our currency is convertible. There is only a small amount of legal tender in the country compared with the total deposits in the- banks. The situation is sound while the people have confidence, but as Lord Melchett said in a recent book Modern Money:	"Confidence is suspicion
asleep," and whenever confidence' is shaken, suspicion wakes up and the bankers always get suspicious first. They curtail our credit and they bring about the very terrible depressions one of which we are now experiencing.
I did not intend to say very much about this measure until it got into committee, but I might quote Sir Basil Blackett who, when speaking at a meeting of the members of the Royal Institute of International Affairs at London in 1931, on the international gold standard, on this very question of convertibility into gold said:
The question, why do banks keep gold? can be answered, I think, frivolously, in several ways. I think the first and perhaps the most important answer is because other central banks keep gold. Perhaps another answer would be because the banks think that people think they ought to keep gold, or even because the banks think that people think and the banks think they ought to keep gold. Possibly another answer would he because the central banks are not clever enough to manage any system other than the gold standard, or they are not clever enough to persuade people to think they are clever enough to manage any such system.

Dominion Notes Act-Gold Standard
He says further:
The amount of gold that is required ought not to have any direct relation to the amount of currency that is out.
Gold is only used, he points out, not for the purpose of converting internal currencies, but to meet exchange balances with foreign countries. He says further:
The amount of gold that a central bank requires, if we could persuade public opinion to see the truth, is the amount that will make it perfectly safe for meeting an external balance of payments against it at any given moment. That ought to be the sole purpose in a peaceful world for which a gold reserve is kept,-to meet an external balance of payments that is against that country.
In the last paragraph he says:
The main purpose I had in rising to-night was to say that I believe the first and foremost principle that we ought to get driven home, and on which we ought to concentrate, is the truth that no currency note in the world is convertible, and that no sensible central bank ought to regard it as such.
Sir Basil Blackett, I think, is one jf the best-informed men in regard to monetary matters in the whole British Empire. He is a director of the Bank of England. He says:
No currency note in the world is convertible and no sensible central bank ought to regard it as such.
If no sensible bank ought to regard it as such, why should a sensible country regard its
currency as convertible? The reason it is not convertible is I think pretty well known, but
perhaps a quotation from Doctor W. H. Coates might help to exemplify that point.
There are probably twenty thousand millions' worth of transactions carried on in Great Britain each year on a base of one hundred and fifty1 millions of gold. That fact gives some measure of the credit structure the whole world uses. The central banks determine how much credit there is to be. They look in a cupboard to see how much yellow metal they have got! They might as well look to see how much coal they have. Gold should be put in its proper place.
While I am on my feet I should like to quote a paragraph from the report issued by a joint committee of the Federation of British Industries and the. British Economic Union last year:
Make it clear we are not in disagreement with the view of the Macmillan committee referred to below that in a stable and financially highly developed community neither gold nor any other metallic backing is required to support an internal note issue and that a metallic reserve is needed for no other purpose than to meet a foreign drain and provide an international standard of value.
I would suggest that as our dominion notes are used only for internal purposes we should 53719-216
strike out altogether the subsection referred to in this bill so that the amount of legal tender which we might have in Canada is not dependent on the amount of gold which we have in a cupboard over in the east block. I know that some people think that this would make it more difficult for us to meet our obligations in New York, but so far as this house is concerned I do not think there are very many members who any longer put much stock in that theory. I know that on February 29 of last year the Prime Minister said:
Now, if I ship down to New York nineteen one million dollar Canadian bills, would that pay the debt? Obviously it would not. Because those nineteen one million dollar bills could not be converted into nineteen million dollars of gold, there being no free market in respect to it. That was the position. It put upon us the tremendous obligation of making the necessary arrangements to carry over.
I think the Prime Minister was indulging in a little flight of fancy there because I do not think there are any one million dollar notes issued; if there are I hope the minister will correct me. But we can take it from the Prime Minister's own words that we do not meet our obligations in New York with our dominion notes, and therefore the question whether we have gold behind our dominion notes or not, or whether we are willing to convert dominion notes into gold, does not affect our ability to meet our obligations in New York. I wish we could dispose once for all of that fallacy which is in the minds of some of the people of this country, but which I hope by this time has disappeared from the minds of the members of this house. If it has not, I hope that when we are in committee this afternoon the minister will assure us that this change in the act would not in any way interfere with meeting our obligations in foreign countries.


Mr. MARCIL:: Would the minister explain whether a bank can be called upon to give up its gold for its bills?


Edgar Nelson Rhodes: If my hon. friend from Bonavemture (Mr. Marcil) will not think me discourteous, I shall be very glad to attempt to answer any questions when we are in committee. My hon. friend from Macleod (Mr. Coote) was strictly in order in his discussion, but he raised the whole question of the gold standard which I submit is one which does not of necessity have to be dealt with in connection with this bill, and therefore I hope he will not think me discourteous if I do not follow the general lines of his discussion. I rise merely for the'purpose of correcting a mis-

3412	COMMONS
Dominion Notes Act-Gold Standard
apprehension under which my hon. friend is labouring. If I understood him correctly I understood him to say that in England they had eliminated from their law the provision for the redemption of notes in gold. But if my hon. friend will refer to the Gold Standard (Amendment) Act, 1931, chapter 46 of the statutes of Great Britain for 1930-31, he will find that section 1 provides as follows:
Unless and until His Majesty by proclamation otherwise directs, subsection (2) of section one of the Gold Standard Act, 1925, shall cease to have effect, notwithstanding that subsection (1) of the said section remains in force.
Put in layman's language that simply means that the governor in council may by proclamation restore the provision for the redemption of notes in gold. The provision that we are seeking by an amendment to our act is that if the occasion should arise when we wish to revert to the previous position, it will be competent for us to do so by order in council.
Just one more word which I might have said in answer to my right hon. friend the leader of the opposition (Mr. Mackenzie King) with respect to the governor in council taking authority by statute for such a course. I might point out that it is the logical step to take in view of the fact that the act respecting the export of gold which we passed at the last session contains this paragraph:
The governor in council may prohibit, from time to time and for any period or periods, the export of gold, whether in the form of coin or bullion,-
And so on. Parliament in its wisdom granted that authority to the governor in council. It follows, I think, as a logical consequence that in respect of the redemption of notes in gold the same course should be pursued; otherwise we should find ourselves in an impasse.
I have nothing more to say, Mr. Speaker, because as I intimated when I first rose, my sole object in speaking was to reply to the one phase of the matter, namely the point raised by the hon. member for Macleod.
Motion agreed to, bill read the second time and the house went into committee thereon. Mr. Cowan (Port Arthur) in the chair.
On section 1-Redemption in gold.


Edgar Nelson Rhodes: Would the hon. member
for Bonaventure be good enough to repeat his question; I did not hear it.


Charles Marcil: What rule applies to the
banks, as to whether they are required to redeem their bills in gold or by legal tender?


Edgar Nelson Rhodes: By legal tender.
[.Mr. Rhodes 1
Mr. COOTE-: Since September, 1931, I take it for granted that the department has been refusing, on most occasions at any rate, to pay out gold for dominion notes. I should like to ask the minister to tell us, if he will, what steps have been taken at different times since September, 1931-using the language of the department-to preserve our gold supply. What orders have been issued to the Receiver General?


Edgar Nelson Rhodes: The licences for export, in the great majority of cases and involving the preponderant amount of gold, have been issued only in those oases where gold has been exported for the purpose of meeting our payments abroad. Individual instances have been few in number, and the amount of gold involved has been comparatively trifling. In the main those individual licences have been granted in the case of certain types of jewellers' and dentists' sweepings which were of such a complex character and mixed with other valuable metals to such an extent that there* was not any provision in Canada for their being properly refined. Consequently, in the main, they have been exported to the United States where there are refining facilities.


George Gibson Coote: My question is this:	How
many applications for gold have been received by the department? At least, have not applications been received by the department which were refused?


Edgar Nelson Rhodes: Mr. Chairman, I should
not like to answer that question either by direct negative of affirmative. But I shall answer it by giving a concrete illustration. A request, which came before me for review, was made to the department by a corporation which wanted to present legal tender and receive a substantial amount of gold. The intimation which came in the letter was to the effect that they wanted to export it to pay their bondholders in foreign countries. It was pointed out by the department that if the redemption had taken place it would be of no value to the recipient for the reason that they could not export their gold, except under licence, and that under those conditions a licence would not be granted. The effect of the answer was that while the application was not withdrawn, no action was taken. I hope the illustration I have given will serve as an index. I do not believe we could go so far as to say that the department has refused to redeem notes in gold. It always has been at pains to point out the circumstance that the redemption would be of no value inasmuch as the gold would not be exported.

Dominion Notes Act-Gold Standard


Mr. EULER:: Would you have refused, if
permission had been asked?


Edgar Nelson Rhodes: I say to my hon. friend
from North Waterloo that the department has endeavoured jealously to guard our gold supply.


Mr. STEWART (Edmonton):: I had intended to ask the minister a similar question. If that is the case, the department were refusing not on the ground that they refused to redeem in gold, but on the ground that they would not allow export. So it is not a fact that during the period of suspension of export they have actually been refusing to redeem their notes in gold.


Edgar Nelson Rhodes: That has been largely the effect, Mr. Chairman. Of course, the committee will readily understand that if there were not an embargo on the export of gold, and were it not for the fact that it could only be exported under licence, our gold supply in Canada would not last one day; there would not be a dollar left.


Charles A. Stewart: But we are not discussing that point. The point I wish to get clear is this: During the period of suspension of export were the government refusing to redeem their notes in gold? I understand the desirability of prohibiting export, and having the government control the gold supply. On the other hand, the government have a contract with the holders of the notes. And whether or not export would be allowed does not appear to me to be an important factor. The point is: Did the department refuse to redeem notes in gold, according to contract set out in the Finance Act?


Edgar Nelson Rhodes: As I said to the hon. member for Macleod, I should not like to answer the question categorically. I know that in one instance not long ago we redeemed notes to the extent of some S3,000, but the circumstances were regarded as rather unique. Even if we did not refuse, the operation of the Gold Export Act is sufficient to render nugatory the provisions of the statute for the redemption in gold, because it would be of no use to the individual to carry gold if he could not export it.


Mr. YOUNG:: Could he not sell it at the market value?


Edgar Nelson Rhodes: Not in the form of coin.


William Daum Euler: Ordinarily I would judge that people do not demand gold. Ordinarily if they have federal currency or bank currency they never question it, and would not demand 53719-216i
gold. But I was going to ask the minister- perhaps he does not desire to answer the question-whether, due to recent difficulties in United States banking operations, people in Canada holding federal currency did not feel quite so certain that our currency, that is, bills, bank notes or federal notes, were absolutely reliable and had any value? They might think that gold would be a much safer commodity to hold. I was wondering whether at that time applications had been made to the Department of Finance to pay in gold or to redeem in gold some of the federal notes?


Edgar Nelson Rhodes: I am very happy indeed to answer the question of the hon. member. As a matter of fact I am glad he has asked it, because in the answer will be found a tribute not only to the sanity of Canadian people but to their absolute belief in the stability of conditions in Canada. I am happy to answer that I came across no evidence of any kind indicating the slightest change of attitude on the part of any indivdual or company arising out of or even coincident with the situation which developed in the United States. I am speaking from memory, but I think with accuracy, when I say I do not recall a single request for the redemption of notes in gold during that period.


Mr. MALCOLM:: Can the minister inform us if his gold reserve represents one-fiftieth of an ounce of gold for every dollar of dominion currency in circulation?


Edgar Nelson Rhodes: The figure I have in mind -I am not speaking from the record-is that we (have the full gold cover. With respect to our total issue we have that figure which is generally regarded as adequate, namely, about forty per cent.


William Daum Euler: In connection with the gold reserve, I understand that, under our act, for the first $50,000,000 of federal currency there must be twenty-five per cent gold backing; and above that, dollar for dollar in gold. I would like to ask the minister upon what principle that percentage is fixed. Is it purely arbitrary? Why, for example, is it twenty-five per cent up to $50,000,000; why is it not twenty per cent, or thirty per cent, or some other percentage? And why at the $50,000,000 point does the requirement become dollar for dollar? These are questions which a great many people are asking. I have wondered about them myself; perhaps the minister could give us a little lecture on monetary economics.	[DOT]


Edgar Nelson Rhodes: The minister admits in
all humility that neither as an individual nor
1414	COMMONS
Dominion Notes Act-Gold Standard
as a minister does he feel capable of giving a homily upon the gold standard. I can only say to my hon. friend and to the committee that that provision has remained in the statute for many years, presumably because it crystallizes in the form of legislation the best judgment of the best brains of the country as to what cover there ought to be for our note issue. I am the first to admit that it may be a debatable question. It may be subject to variation. I think that subject may be one which could with advantage be considered by the royal commission on banking, and no doubt will be. But the answer I have given, which I admit is perhaps inadequate, is the best answer I can give in the circumstances.


William Daum Euler: Then supposing the government decided to issue federal currency beyond what is allowed under that provision, it would be called inflation?


Richard Bedford Bennett: It could not validly be
issued.


William Daum Euler: I would like to ask whether
the basis of our currency, that is the percentage of gold reserve, is in accord with the basis in other countries, Great Britain, for example, or the United States?


Edgar Nelson Rhodes: Our total issue to-day in
its relation to gold is, I understand, in proper orthodox proportion according to the opinion of bankers and economists.


Charles A. Stewart: That is as
far as the federal issue is concerned?


Edgar Nelson Rhodes: Yes.


James Malcolm: The minister referred to the gold coverage which is considered orthodox as being forty per cent of the note issue. In other words with gold ait S20 an ounce, forty per cent coverage would mean one-fiftieth of an ounce of gold for every federal dollar issued. It is said that if we got away from that orthodox ratio it would disturb our foreign exchange. In other words, if Canada issued a dollar for every one-hun-dredith of an ounce of gold in reserve it would injure our foreign credit? Can the minister explain why, if we are not to redeem our notes in gold. We have not enough gold in the treasury to redeem more than forty per cent, and it is purely an internal matter as (to how much currency we issue, that should have any bearing at all upon our foreign credit, so long as we agree to redeem our foreign held securities in gold?


Edgar Nelson Rhodes: Mr. Chairman, I should
find that a very difficult question to answer. I have no doubt that the value attributed
[Mr. Rhodes.)
to our dollar by foreign countries may be governed by various factors. But I am quite certain that one of the first tilings they would look at, apart from their faith in the credit and integrity of Canada, would be our set-up with respect to gold coverage.


James Malcolm: That is admitted. But I submit that 75 per cent of the thinking people of Canada to-day are asking the question why our position respecting our foreign obligations, which we certainly agreed to pay in gold and which W'e intend to honour, should be injured by any internal arrangements as to the percentage of currency we issue to meet our domestic needs. That is the point on which I wish the minister would give the house some light. I see no connection, providing we are willing to recognize our foreign obligations in gold.


Edgar Nelson Rhodes: That may be so.


William Daum Euler: I may be exposing my
ignorance but I am willing to do so if I can get an answer to this question, which I think is in the minds of a great many other people. Say, for example, that we are up to the full coverage with our present gold reserve; we have issued as much federal currency as we may under the present regulation, but the government decides to issue, say, an additional $100,000,000; that would be called inflation. I daresay our exchange with the United States would immediately suffer.


George Gibson Coote: It might improve.


William Daum Euler: But suppose, instead of
issuing more currency, the government decided to issue short term treasury notes, or even bonds, which would have the disadvantage of calling for the payment of interest, I suppose that would not be called inflation. I would like to know why it is not inflation in the one case and is in the other, because they are both obligations of the government.


Edgar Nelson Rhodes: Mr. Chairman, my hon.
friend from North Waterloo (Mr. Euler) realizes that he is putting a purely hypothetical case when he speaks of our issuing SI 00,000,000 new currency.


William Daum Euler: You might choose to do it.


Edgar Nelson Rhodes: Not without coming to
parliament and getting the necessary authority.


William Daum Euler: We are in parliament now.


Edgar Nelson Rhodes: At the moment we are
absolutely restricted and limited as to the method of issuing currency. If I understand the remaining portion of the question, to the

Dominion Notes Act-Gold Standard
extent that a country over-extends itself in the matter of credit, to that extent it is inflation, if you choose to call it so. If a country borrows more than it oan pay it is getting itself into the same position as a country which does unduly inflate, there is no doubt about that.


William Daum Euler: 
Edgar Nelson Rhodes: Mr. Chairman, I do not
know that any good purpose can be served by following this discussion-


William Daum Euler: A lot of people would like
to know.


Edgar Nelson Rhodes: -even if I felt competent to pursue it with any degree of authority. For the purpose of this measure I am prepared to admit at once that my hon. friend may be quite right, but with all deference I submit- it has no bearing.


James Malcolm: I quite agree with the minister that it has no direct bearing on the question whether or not the government is to be given authority to refuse to redeem our currency in gold. At the same time may I point out that there are in this house a great many members who are trying to remove the stage setting surrounding the whole -monetary system and get at the naked truth of what it all means. Our currency is simply a promise to pay by the government, without interest, and it is not backed by gold to the extent of one hundred per cent but only to the extent of forty per cent, or one-fiftieth of an ounce per dollar in circulation. If a show-down were called for, we would get one-fiftieth of an ounce of gold for every Canadian dollar. And I quite agree that that is the orthodox ratio. As my hon. friend from North Waterloo puts
it,	the government could issue another $500,000,000 or $1,000,000,000 of securities if they could be marketed and New York would not consider that Canada had inflated, although the securities would cost the Canadian taxpayers millions of dollars a month in interest, and eventually would have to be redeemed as
to principal in gold; whereas, if Canada wished to do some constructive work in the dominion, and the minister, under the Finance Act, issued currency on which he did not have to collect interest from the taxpayers, and which by statutory enactment he could redeem over a period of years, why that action should be considered inflation and our dollar should be discounted further in New York is a question which is worrying many hon. members here.
Now this bill provides that we give the government power to suspend the redemption of notes in gold. If the government does that, then our currency has nothing behind it except the promise to pay-the promise to pay in what? In another bill which likewise has no metal behind it. As my hon. friend from North Waterloo has said, a dollar bill is a promise to pay without interest while a bond is a promise to pay with interest; and so far as these bonds are redeemable in New A ork we must pay them in gold.
The minister is faced with the problem of taking out of business the taxes he needs; he has no other way of getting it. He has no resources which he can sell, because the resources of the dominion belong to the provinces. Every promise to pay which he has issued in New Aork or in Canada is predicated upon the ability of the business men of the country to pay taxes to him in the future. He can assess by business profits tax, by excise, by customs, by income tax and by sales tax, and these five cover practically the whole field of his taxation. Federal revenues depend on the success of business and must come from business in some form or other.
Suppose the minister wishes to construct a federal building to-morrow. It is perfectly legitimate and will not interfere with the standing of our credit in New York if he issues bonds and sells them. Supposing he puts up a $6,000,000 building this year and issues $6,000,000 worth of bonds at five per cent. He will need $600,000 a year of the taxpayers' money for twenty years to pay for the building.


An hon. MEMBER:: 


James Malcolm: No, S600.000, He will spend $300,000 for principal and $300,000 for interest for twenty years. In other words, he must load Canadian business with $12,000,000 worth of taxes in the next twenty years to pay for the building. If he issued $6,000,000 worth of treasury notes redeemable through taxation by statutory enactment-I am not advocating inflation, far from it; nor am I advocating fiat money-if he issued $6,000,000 worth of treasury notes, and by statutory
3416	COMMONS
Dominion Notes Act-Oold Standard
enactment redeemed them at the rate of ten per cent per annum, he would have the notes redeemed and out of circulation in ten years and the taxpayers would pay 86,000,000 instead of $12,000,000. If the minister suspends gold, as called for in the act, the dollar bill has nothing behind it except the promise to take from the taxpayers that amount of money. Why should the issuance of $6,000,000 of treasury notes to erect a federal building, which would save the taxpayers another $6,000,000, be considered inflation? It is a purely internal matter in no way relating to the minister's promise to pay any foreign obligation in gold. Yet the hon. gentleman fears that the moment he withdraws the provision with respect to the redemption of notes in gold we shall have inflation and our dollar will sink further in value in New York. I wish he would explain this to the house. Hon. friends to my left, most members on this side of the house and some hon. members opposite, are wondering why, when only one-fiftieth of an ounce of gold is held for every dollar-and ' by this legislation the minister proposes to remove even that guarantee-it should not be possible for us to treat our own currency as good, based on our faith in our dominion, and proceed to use our currency for the upbuilding of Canada and for the relief of the taxpayers.


Richard Bedford Bennett: I do not propose to
enter into an elaborate discussion this afternoon of the matters raised by the hon. gentleman (Mr. Malcolm). His remarks will certainly be received with favour in some quarters, but not in any quarter where men have regard for obligations or a desire to conduct the business of the country on a sound basis.


Mr. McINTOSH:: With you starting it.


Richard Bedford Bennett: If my hon. friend will
look at page 2161 of the Canada Gazette he will find that we already have outstanding $67,000,000 that has behind it no metal coverage. It is not a new thing that there should be currency issued without metal coverage in this country. This is the state of the finances of the country on March 13, 1933:
Dominion Note Circulation and Gold Holdings
Provincial	
Fractional	
$1	
$2	
$4	
$5	
$50	
$500	
$1,000	
Legal tender notes for banks-
$1,000	
$5,000	
$50,000	
$	27,591 83
1,281,175 86 17,797,116 00 12,300,136 50 30,803 00 5,035,130 00 650 00 2,491.500 00
6.506.000	00
1,000 00
8.430.000	00 121,800,000 00

That makes a total outstanding of $175,701,103.19 of promises to pay, on demand, by the Dominion of Canada, as indicated in each case on the face of the bill itself.


James Malcolm: Will the Prime Minister segregate the amount that is used purely as treasury notes from the amount used as circulating currency?
Mr, BENNETT: I shall come to that.
Statutory Authority for Issue
Chapter 4, 1915	$ 26,000,000 00
Finance Act, r.s. 1927, c. 70..	41,944,000 00
Dominion Notes Act, r.s. 1927, c. 41	 107,757,103 19


James Malcolm: The Prime Minister will appreciate the fact that my remarks were in. the form of a question and not of an opinion.


Richard Bedford Bennett: The last part of the hon. gentleman's remarks expressed an opinion.


James Malcolm: I asked why.


Cameron Ross McIntosh: He wants information.
Give it to him.
Under our Currency Act the banks are called upon to hold in legal tender a certain proportion of their liquid assets. The exact figure I have not in mind at the moment-


Mr. SPENCER:: Forty per cent.


Richard Bedford Bennett: I thought it was fifty,
but my hon. friend says it is forty. That is included in the items to which I have already referred:


Jean-François Pouliot: Put a question mark.


Richard Bedford Bennett: The impertinence of the hon. member for North Battleford (Mr. McIntosh) is again in- evidence-


Cameron Ross McIntosh: No worse than yours.


Richard Bedford Bennett: -but it is so commonplace that it is now regarded as one of the attributes of debate.

Gold held by the Minister of Finance- Against savings bank deposits (10 per cent on $22,335,022.24) under -the Savings Bank Act.$ 2,233,502 22 Against notes as required by
Dominion Notes Act, r.s. 1927. 70,257,103 19 In excess of statutory requirements	 91,222 41

Dominion Notes Act-Gold Standard
The $70,257,103.19 is made up as follows: First, $50,000,000 at twenty-five cents on the dollar; that is $12,500,000. Then the $50,000,000 deducted from the total outstanding, exclusive of the special sums authorized by statute, leaves a balance of $57,757,103.19 for which there is put up dollar for dollar. This gives a total of $7(J,257,103.19 which is covered by gold. But there is no gold deposited for the purpose of securing the $68,000,000, in round figures, issued under conditions exactly similar to those mentioned by the hon. member for North Bruce (Mr. Malcolm) though not for the purpose he indicated. That money in part went to pay loans and advances to the railway companies during the war and in part to the banks under the Finance Act and has no metal coverage. Therefore, so far as this country is concerned, there is now outstanding some $68,000,000 of money that has behind it no metal coverage at all, nothing but the promise to pay of this country. That has been so since the days of the war, and that was one of the factors that had to do with some of the difficulties experienced by this country in the depreciation of its dollar in foreign markets, to which I shall presently refer.
If any of the hon. members of this house are interested in reading the story of gold they will find it in the library in a book published about twelve years ago. I am not going into that question except to say that, gold being the rarest and most valuable metal for its weight and volume, by universal consent has become the yardstick by which to measure the issue of paper money. Without going into details I think that is a fair statement. Practice and custom have determined just how much gold should be held to meet the situation. Roughly speaking, as the hon. member said a moment ago, forty per cent is regarded as a reasonable coverage for the issue of paper money. All paper money issued, as will be observed by looking at the paper itself, says that the Dominion of Canada promises to pay to the bearer on demand the face value of the bill. We will take a hundred dollar bill; the promise is that on presentation of the bill at a particular point the country will provide $100 in gold. The practice of the banking world has established beyond question that if we had the normal movement of trade and exchange there would be no difficulty in meeting every demand that might be made upon the central authority for gold. That is the reason the coverage is not dollar for dollar. If money is circulating and revolving in the hands of traders and discharging its normal and proper functions there is no inclination on the part of the traders to
ask for gold except for specific purposes, such as for use in the arts, or where tenders must be made, or where international obligations must be met under terms of contract that compel the production of gold either in bullion or in coin to discharge the obligations. Forty per cent is regarded as a reasonable ratio of metal coverage for the paper money issued, and it is believed that if normal conditions prevailed this process could be kept go-;ng interminably.
The very essence of the value of the promise on the bill that the dominion will pay on demand is convertibility into something that has a known international value. If that thought is once in our minds I think we will have no difficulty in following what I desire to say during the balance of this short statement. Convertibility into what? Into gold, because gold is a medium of international exchange that can bd relied upon as a universal and fixed standard in every country of the world. That is what is meant by the fact that all countries have had what in theory we call the gold standard, because it is the standard that thus far has been fixed by mankind for universal values between nations. Convertibility, therefore, has become the essence of the issue of paper money, and convertibility means convertibility into something available to meet international charges or obligations however they may arise, whether in the form of contracts by the nation itself or in the form of trade balances that may arise by reason of an excess of purchases over sales.
I forget how long ago this was started, because I have not looked into the matter carefully for some time, but we gradually provided that our metal coverage should be what it now is, namely par over $50,000,000, and that amount of $50,000,000 was an arbitrary figure. The hon. member for West Edmonton asked whether that was so. It was not always $50,000,000; that figure was fixed by parliament, and it was felt that having regard to the practice of banking and the call for conversion that figure would meet any demand that might be made on the basis of convertibility, and of twenty-five cents on the dollar to convert. It might have been, and at one time it was, a smaller figure, but with the expansion of the country, the undesirability of men carrying gold instead of bills, the undesirability and practice of keeping gold in safes instead of bills, and what you might call convenience in business, it was felt that the figure might be fixed at $50,000,000, and that twenty-five cents on the dollar in gold up to that figure would meet what you might call the reasonable demands of trade and commerce.
3418	COMMONS
Dominion Notes Act-Gold Standard


James Malcolm: Would the Prime Minister state whether or not it had an adverse effect upon our exchange at that time?


Richard Bedford Bennett: I was going to say that this was a gradual change. I dare say my hon. friend from Battle River (Mr. Spencer), who has been giving a good deal of attention to this question, could trace that change better than I could. There came a time when, having fixed $50,000,000 as the maximum for which a coverage of twenty-five per cent, which is a very low coverage, should be provided, the question was asked, what about more if it is required? We did what the great banks of the world have done since time immemorial; we decided by statute that there should be a gold dollar behind every paper dollar issued in excess of that amount; that is, that every paper bill should have behind it full coverage for its face value.
That is the history of the currency issue, but during the war we were confronted with difficulties and the government of that day, with the aid of the War Measures Act and subsequently by statute, issued $26,000,000 of paper in payment of obligations, just as my hon. friend mentioned, for which there was no coverage at all, and for which there is no coverage now. In that regard let me direct the attention of the committee to the fact that in the post office savings bank the coverage required is only ten per cent. Why do we require only ten per cent for a savings bank and either twenty-five per cent or full coverage in our ordinary currency? The reason is that one is a savings bank and the other is not. In the one case notice is required and time is given thereby in order to provide whatever money may be necessary for the purpose of meeting the obligations. That is the real reason why it is ten per cent in the one case and twenty-five per cent and one hundred per cent in the other case.
Of course I can only speak from the inferences that others have drawn, because obviously I am not an authority or an economist, but the right hon. leader of the opposition will remember that his old preceptor, in his book on tariffs, said that it is very difficult for anyone to say that a given result followed from a given cause when dealing with tariffs. He says that you can say inferentially that this is so, but that it is very difficult to prove it.


Edward James Young: We have the proof now.


Richard Bedford Bennett: Well, there are differences of opinion as to that. But with respect to the $26,000,000 of paper money issued by this country, naturally I have inquired, as I fancy other hon. members of this committee

have inquired, as to what has been the general effect of that action. I am informed that this at once had an injurious effect upon our credit, but that owing to war conditions the full force of it was not felt, though it was a substantial factor, as I shall presently show, in fixing exchange values for our money. I give that obviously not as an opinion of my own that has any value, but from information I have ascertained from sources to which one looks for real information with respect to a matter of that kind. Therefore all these years our currency is inflated by $26,000,000 under the authority of the statute of 1915. Every fall, during the grain crop movement, we have inflated our currency.


James Malcolm: The 40 per cent coverage does not cover that amount.


Richard Bedford Bennett: No; I tried to make it
clear that the $67,000,000 paper money is not covered by gold deposits. During the fall we have sometimes, under the provisions of the Finance Act, issued money to the extent, if my memory serves me correctly, of upwards of $100,000,000. What did that mean? It meant merely that under the provisions of our statute by which the Dominion of Canada becomes a central bank, the banks of the country, by depositing with the Minister of Finance or wiith his agencies in the cities in which agencies are maintained, bonds, usually of the dominion, or securities to which a-fixed value has been attached by order in council, were lent by the dominion in paper, promises to pay of the dominion, sufficient money to enable them >to meet the situation. The movement of this money in normal times never suggested any demand for conversion into gold, but in the narrow sense of the-term it was inflation; in the wide sense of the term it was fiduciary currency issued upon the security of the securities held by the banks, namely, bonds or whatever they might be. Commercial paper might be and is permissible.
There is a conflict of opinion among bankers in this and other countries and individuals as to the value of a central bank as distinguished from the Finance department for the purpose of making such an arrangement. The arrangement, whether it be by a finance department or a central bank, is the same, that by deposits with the central authority, whether it be a central bank or the dominion, of certain approved securities, the central reserve authority, or the nation, as the case may be, issues its notes which at onice go into circulation for the purpose of' discharging the real function of money. That is the story prior to this moment.

Dominion Notes Act-Gold Standard


George Gibson Coote: In most cases is the security which the banks give to the government not the government's own bonds?


Richard Bedford Bennett: If the hon. member for
Macleod was following me, I said the bonds of the country or of the provinces, sometimes municipal bonds and sometimes commercial paper. There is a regulation which, of course, is embodied in an order in council, whereby fixed values for the purposes of advances are established upon these securities. For instance, securities of the dominion are fixed at, let us say, ninety-five; those of the provinces, say at ninety-two; other securities at ninety, and so on. These are the determining values upon which the appropriate advances are made by the central bank or by the nation in this case uhder the Finance Act. My colleague, the Minister of Finance, directs my attention to section 5 of part II of the Finance Act which provides:
At any time when there is no proclamation in force under the authority of paragraph (a) of section 4 of this act, the minister may make advances to the chartered banks and to the savings banks to which the Quebec Savings Banks Act applies by the issue of dominion notes upon the pledge of the securities hereinafter mentioned:-
(al treasury bills, bonds, debentures or stocks of the Dominion of Canada, Great Britain, any province of Canada, and of any British possessionlb) public securities of the government of the United States?
(c)	Canadian municipal securities;
(d)	promissory notes and bills of exchange secured by documentary title to wheat, oats, rye, barley, corn, buckwheat, flax or other commodity;
, (e) promissory notes and bills of exchange issued or drawn for agricultural, industrial, or commercial purposes and which have been used or are to be used for such purposes.


Mr. WOODSWORTH:: Is there any limit to the amount that may be so issued?


Richard Bedford Bennett: Section 6 reads:
Such securities shall be deposited with the minister or with an assistant receiver general; and the minister may request the trustees of the central gold reserves to make a valuation of and recommendation as to the amount which in the judgment of the trustees may properly be advanced on any securities offered in pledge under this part.
That I think is the answer.


James Shaver Woodsworth: No limit?


Jean-François Pouliot: Not exceeding 15 per cent.


Richard Bedford Bennett: That is not the matter with which the hon. member is dealing. The test, of course, is the value of the securities deposited and there is provision that the valuation may be made by an independent source.


James Shaver Woodsworth: Would the Prime Minister say who the trustees are?


Richard Bedford Bennett: 
George Gibson Coote: Might I ask the Prime Minister if he is now speaking of international creditors or internal creditors?


Richard Bedford Bennett: I am just starting to deal with the international side of it to show its relation to the internal side.
That being so, it follows-this is the experience of the commercial world at any rate-that if within a country you have no such common standard, no such universal measuring yardstick, you are bound to have a greatly depreciated currency, depreciated from the value of the standard, and depreciated in terms of the currency of your creditor if you have to pay him in accordance with the terms of the standard. That looks so reasonable as not to require much argument.
What Canada might do with respect to her currency if she did not owe a dollar outside of this country is a matter for Canada to determine, and nobody else. One of the reasons the United States can do what she pleases with respect to gold at the moment is that she has no external creditors to whom she must pay. People owe her; she does not owe them. But when you reverse the process and have a country that has to provide for the payment of its debts in other countries a different situation arises. I am going to point out to my hon. friend from Macleod that he is not right in saying that they provide payment of the debts in gold because if they did there would not be enough gold to go around for very long, but they pay in terms of gold; I think that is the position he intended to take. Now that gold is provided either by services which must be payable in terms of the currency of the creditor country and therefore go at par to satisfy the debt, or it is provided in goods payable in the same terms to satisfy the debt due by the debtor to the creditor country, or it must be paid in gold itself. That is *the reason we have been shipping one million dollars' worth of gold at one time and another million dollars' *worth of gold at another time to New York. That is the reason why the sixty million odd dollars of gold in this country played so large a part last year in sustaining the credit of the country. The Dominion of Canada paid for the gold the price it would bring in the United States, and then we shipped the yellow metal itself down to the United States where i't went to the central reserve bank, and from that bank issued gold certificates which paid the debts of this country, the interest on our debts, the interest owed by the provinces, and matters of that kind.

Dominion Notes Act-Gold Standard
You might ask, why should what we do here as to metal coverage have any effect upon our international situation? That again is a question that you can only answer in the light of what the experience of the world has been.
I cannot answer that; I do not know anybody who can. But we know what the experience of mankind has been when you use a currency in your own country that has no convertibility into any standard that is useful in discharging your obligations in other countries. Your currency can then only be used in your own country, and what it is worth in any other country is a matter of conjecture and guess. That is the story. Whether there is anything in it or not, whether, as my hon. friend says, if you come down to the ultimate analysis you find that that is all nonsense, I can only say in reply that the history of mankind has been this, and you do not have to take my assertion-you can read any standard book upon the history of it-that if there is no value that can be put upon a Canadian one dollar bill in terms of a universal standard or yardstick of measurement or value, at once there is a direct reflection upon the value of the obligations of a country that owes money in other countries.


William Lyon Mackenzie King: It is all a
matter of confidence.


Richard Bedford Bennett: Yes. My right hon. friend has anticipated what I was going to add. It therefore follows that it is confidence plus something. I heard Sir Josiah Stamp say here what most of you will remember, that mankind had not yet reached that state of confidence in one another where they were prepared in one country to accept in confidence the promise to pay of another country at par of the country in which the debt was being discharged, and he said it would probably be some time before that condition came about. I dare say that some hon. gentlemen will remember what he said in that connection.
I am sorry to be so long about this, but I put this to the committee. There, as the right hon. leader of the opposition has said, is a dollar bill which in Canada passes for one hundred cents. When it goes across to the United States they say, "We are not prepared to give one hundred cents for that dollar because we have not confidence in the mere promise to pay unbacked by security that it will pay one hundred cents for that dollar."


James Malcolm: In gold.


Richard Bedford Bennett: No, gold does not come
in at the moment. I am just trying to establish my position by steps. Gold has been
selected as the universal standard of measurement. It might have been platinum, but gold has been selected as what is to be deposited in the country of issue to give value, in confidence, in the country that accepts your money in payment of your obligations. I go to the United States to pay a one thousand dollar debt, and I produce a one thousand dollar bill of the Dominion of Canada and hand it to my creditor. He has a bond of this country, and the time has come to pay. I hand him my one thousand dollar bill. Every Canadian says that that one thousand dollar bill is just as good as his one thousand dollar bill.


Mr. STITT (Selkirk):: Better.


Richard Bedford Bennett: There you have it at
once. I have been trying, to point out, and I am afraid that I have not succeeded as I should have liked, that confidence in the Dominion of Canada by a people who are not Canadians is essential to make our one thousand	bill worth	one	thousand dollars	tothem. If their confidence is lacking, then the hill is worth just what their lack of confidence gives as its value-nothing more or less. We	must remember that this	is	notso old a matter as to be lost in the cloudland of doubt and conjecture-this fixing of the value of gold is of comparatively recent origin, and in	my	judgment	there	isnothing to hinder nations meeting together and determining that gold should have a different value from what it now has.	Remember	that	the value	of	gold
was fixed when the population of the world was less numerous than it now is, and when the conditions of trade and commerce were entirely different from what they are to-day. But there must be some universal recognition of a standard. There must in addition be something more than that. There must be a recognition by confidence that a mere inconvertible promise to pay, of a people, expressed on a piece of paper has equal value to the people to whom it is tendered as has their own promise to pay of an equal amount.


James Malcolm: Will the Prime Minister
answer this question: If it is based on a metal coverage, and not entirely upon confidence, why in heaven's name should we accept eight silver certificates for one ten dollar Canadian gold bill?


Richard Bedford Bennett: I did not get the question.


James Malcolm: On the exchange market to-day we accept eight American one dollar bills, which are simply promises to pay in

Dominion Notes Act-Gold Standard
silver, silver certificates, for a ten dollar Canadian bill, which is a promise to pay in gold. It must be a matter of confidence, altogether.


Richard Bedford Bennett: No, it is not confidence
altogether. The question of silver has something to do with the practice. It will be within the memory of hon. members that by statute of the congress of the United States it is provided that either $360,000,000 or $420,000,000-I am not just sure of the figure -could be minted in silver for which there would be a paper certificate issued indicating on its face that there 'has been deposited in the treasury of the United States so many silver dollars as against that paper. I made inquiries in that connection. Certainly anyone who receives a silver certificate in times like this would ask hdmsalf why it is that a silver certificate should be worth $1.10 in Ottawa, When the silver dollar for which you would exchange it in the United States was only worth' something like forty-three cents in actual metal value.
My informant in the United States told me that in practice they redeem them in gold.


James Malcolm: They are not bound to, though.


Richard Bedford Bennett: But he said they were
bound to retain their gold standard position. That is 'the answer, or that is the story as told to me, because I desired to have the matter cleared up for my own satisfaction.
Now let us get back to the point we were discussing. If a country issues paper money in which it promises to pay the sum indicated on the paper that is issued, and that is without security, it is worth in your own country just what you determine-probably the face value of the paper itself. It is worth abroad just what the confidence in that inconvertible promise to pay gives to it. Sir Josiah Stamp said-and I can but repeat what he said, because I do not pretend to know, that man had not reached that stage of perfection in which he was prepared in one country to have such confidence in that inconvertible promise to pay as to value it at its indicated value in all countries.


William Daum Euler: Who fixes the degree of
confidence of the other country? Isn't it the bankers?


Richard Bedford Bennett: Recent events seem to
show that is not so.


James Malcolm: It is trusting metal
rather than men.	[DOT]


Richard Bedford Bennett: Undoubtedly that is so.
And, undoubtedly, as the hon. gentleman has said, that has been so for ages. Not for twenty-five, thirty, fifty or even hundreds of years, but it has been so for ages. That is the reason we have our whole banking system. The whole basis of it is that. And the fact that man was moving from place to place, and for that reason must carry with him his own currency-doing that has created that measure of lack of confidence which induced, for instance, the paymasters of the British army always to carry gold sovereigns in their chests and not paper money. Why?' Because the sovereign was worth in the country in which it was paid out to soldier, sailor or anybody else its par value always, or more, in the currency of the country in which it was paid. That is the reason.
We cannot get beyond the fundamental basis of the whole business of currency, and that is this, that mankind saw fit to issue paper as being more convenient to handle and deal with than metal, for the purpose of disposing of obligations and debts, and for trade facilities. He did not base it entirely upon confidence. If he had based it entirely upon confidence the trade of the world would have been sadly disturbed by now, would it not? History has taught at least that you cannot rely upon confidence alone. And it is international agreement and arrangement among nations of the world that determine to what extent confidence shall be supported by something else. Confidence plus is what gives value to my dollar in New York to-day.


James Malcolm: How much good was the "plus" in the case of Russia?


Richard Bedford Bennett: What does the hon. member mean?


James Malcolm: How much good was it? Russia had gold behind her currency before the revolution.


Richard Bedford Bennett: Her money before the revolution was good money, in London, Paris or anywhere.


James Malcolm: What good was the "plus" when Russia upset its government?


Richard Bedford Bennett: She destroyed the "plus"; that is the reason, exactly, that it had little value-because she destroyed the "plus." I wish to make clear to the committee that I am only voicing my own conclusions which have been based on fairly extensive inquiries that I have made when I have met men who were in a position to give me information. I have been told by a great many men from

Dominion Notes Act-Gold Standard
many countries, and it is my own conclusion, for what it may be worth, that so far as a country's own domestic currency is concerned, it is true that if we were on an isolated island and had no one to think of, except our own people, so far as currency is concerned we could use iron ringers. But as the loud applause by hon. members opposite in this house indicated the -other day, we realize no man liveth unto himself, and no people can live entirely unto themselves. Therefore, the iron ringers have sometimes to go into other countries. And when they go into other countries, while they may not be in the form of iron ringers, but in the form of an oblong piece of paper containing the words "Dominion of Canada will pay to the bearer on demand" so much money, what does it mean? How will they pay it? If the answer is "I will give you another piece of paper," the reply is: "My confidence is not sufficiently strong for that, and although I like that country well, and like its people, I have got to have something more than that, because there are times in which nations have been known to repudiate their obligations." That is the reason that even those in this committee who are not capitalists-and I take it there are very few-if they desire to lend -money they very often require an endorser on the back of the note. And if they go to borrow from a friend very frequently it is suggested that an endorser would not be out of place, and that guarantors might be of assistance. Sometimes they have been known to ask for the deposit of securities for the purpose of securing obligations. That is what is meant by the "plus" to confidence. The plus enables us to expect our paper money to be worth something more than its mere weight of paper in the markets of the world.


George Gibson Coote: In regard to obligations payable in Canada from one private person to another, if they are stated to be payable in gold, would dominion notes be legal tender for settlement of that obligation?


Richard Bedford Bennett: I am bound to say to the hon. member for Macleod that it is difficult for one to become an adviser on a doubtful question of law. I prefer not to express an opinion until the courts determine exactly what it does mean. This is a matter which has to be litigated by the courts? I am only a lawyer, not a judge, and therefore I am unable to speak with authority upon the point.
The hon. member for Stanstead- (Mr. Hackett) has handed me a statute showing the change from 1886 to 1933:
The amount of dominion notes issued and outstanding at any time may, by order in council, founded on a report of the treasury board, be increased to, but shall not exceed twenty million dollars, by -amounts not exceeding one million dollars at one time, and not exceeding four million dollars in any one year: Provided that the Minister of Finance and Receiver General shall always hold, for securing the redemption of such notes issued and outstanding, an amount in gold, or in gold and Canada securities guaranteed by the government of the United Kingdom, equal to not less than twenty-five per cent of the amount of such notes,-at least fifteen per cent of the total amount of such notes being so held in gold: and provided also, that the said minister shall always hold for the redemption of such notes an amount equal to the remaining seventy-five per cent of the total amount thereof, in dominion debentures issued by authority of parliament.
That was passed in 1880. So that between 1880 an-d 1933-or as a matter of fact the last amendment I think was made in 1927 -you have a statement of the gradual change that has taken place in what I might call the necessity for adding to confidence something other than confidence.


James Malcolm: But the Prime Minister does not answer the question. I may have expressed myself badly, if so I am sorry. An interest bearing security which has no metal coverage, namely a bond, having nothing but the confidence of the holder of the bond in New York that we will fulfil our obligation, seems to be more valuable than that which has the metal coverage.


Richard Bedford Bennett: But the one is a promise to pay in gold at 100 cents on the dollar, the other has a metal coverage which amounts to a-bout 40 cents on the dollar. That is exactly the reason. The reason our bonds sold in New York had to be expressed in terms of gold was just what the hon. gentleman has now drawn attention to. A dollar bill, -which is a demand bond we will say, has behind it forty per cent of gold, but the promise of the bond is to pay the whole amount at maturity in gold coin of the current weight and fineness.


William Daum Euler: But the dollar bill is a
promise to pay the whole dollar as well.


Richard Bedford Bennett: Yes, but the confidence
in the one is in the good faith of the promis-sor to pay in terms of his promise.


William Daum Euler: In terms of New York
funds.


Richard Bedford Bennett: And in the case of bonds 3'ou have the history and practice of centuries, which have given to them a value dependent upon what people regard as the general con-
3424	COMMONS
Dominion Notes Act-Gold Standard
dition of the country that emits or issues the bonds. This country at the present moment has reached a margin of borrowing which under the ordinary rules that govern, according to the books, is almost its maximum borrowing power, unless you have a rapidly increasing population or great natural resources that are being rapidly developed. That is the reason that the increase in gold production in this country has added relatively so greatly to confidence in the country. And the reason is obvious.
Now take the case of constructing the building. I have very little doubt that the issue of 85,000,000 or 86,000,000 additional paper currency by this country would not greatly prejudice its currency.


William Daum Euler: Under statutory control.


Richard Bedford Bennett: Issued under statute, as this was. But it will be observed that on the very threshold of the issue of paper we are not keeping to what is called sound banking practice. That practice, not national, but intea-national, is that there should not be paper issued unless there is some provision for its payment. That is the reason why sinking funds were so strongly urged by Pitt as being a sound basis of the country's borrowing, and the reason that sinking funds in domestic issues of bonds are regarded so highly. If we issued 85,000,000 or $6,000,000 of our promises to pay by statutory authority I do not think it would greatly hurt-


James Malcolm: We have issued 867,000,000.
Mr.BENNETT: Yes, 868,000,000.


William Daum Euler: May I ask a question at this point? The Prime Minister has stated that there was some 867,000,000 of federal currency issued during the war for which there is no gold coverage whatever. I would like to ask whether the 867,000,000 so issued is identifiable in the hands of the public, and if it is not, if it :s merely part of the general issue, whether our coverage is not a great deal less than forty per cent?


Richard Bedford Bennett: Last year I pointed out that fact to this committee. There is no difference between the thousand dollar bill issued under the act of 1915 and the thousand dollar bill issued under the Currency Act. And as bankers put it to me, one of the factors that reduced the value of our currency is the effect of these outstanding obligations in lessening the amount of metal coverage. But there are differences of opinion about 
tnai. There1 Are gentlemen in this committee who say that that cannot be so. I am only saying that the inquiry I have made-and like everyone else in this house I am dependent for my information on the inquiries I make-my information is that the depreciation in value of our dollar is traceable to the fact that we had inflated our currency by 868,000,000, which reduced the coverage beyond the point mentioned in the statute, so that instead of it being twenty-five per cent up to $50,000,000 and dollar for dollar thereafter we have an average coverage at this moment of forty per cent.


William Daum Euler: But since that 867,000,000 was issued some fifteen or sixteeen years ago our money has been at par.


Richard Bedford Bennett: Surely it has.


Charles A. Stewart: Before the
Prime Minister continues, may I ask this question: for the past twelve or fifteen years at least, every fall banks come to the treasury and secure additional currency on the deposit of securities. That has had no appreciable effect upon exchange.


Richard Bedford Bennett: The hon. gentleman is
entirely right about that. And I have tried to indicate the reason why. It is ail predicated upon-


Charles A. Stewart: The requirements of business.


Richard Bedford Bennett: Not only upon the requirements of business, but as the business is completed the withdrawal of the money from circulation is ensured. Therefore it is a temporary movement of money, and it is secured by such ample security that no question as to its value could arise.


Charles A. Stewart: In that connection I want to ask this other question; that security, or the proceeds of it have been in circulation before?


Richard Bedford Bennett: No, not the proceeds of
the security.


Charles A. Stewart: Oh, yes.
These securities that are deposited by the banks are securities against whioh currency has been issued.


Richard Bedford Bennett: No, they are bonds that
the banks buy. If the hon. gentleman will take the bank 'returns, the last one, and look at the assets he will find under the appropriate column the amounts of dominion government and provincial government securities; Cana-

Dominion Notes Act-Gold Standard
dian municipal securities; British, foreign and colonial public securities other than Canadian; and railway and other bonds, debentures and stocks; in all some $700,000,000 odd.


Charles A. Stewart: I am speaking particularly of Canadian securities. But I do not want to divert the discussion in that direction, I merely ask whether or not the inflation, if you may call it such, affected our exchange?


Richard Bedford Bennett: It affected our exchange
in this sense. As long as we were doing business necessitating the release of currency in order that the business might be transacted there was no question of depreciation because it was largely an internal matter, and the balances that arose took oare of the situation at the time of maturity. But I was going a step further. What happened in 1929? We had $40,000,000 due in New York. How did we pay it? The late Mr. Robb paid it with gold shipped from this country, substantially that. And from that moment this country ceased to be on the gold standard. That is the position.


Edward James Young: Because we paid in gold?


Richard Bedford Bennett: No, because we depleted our gold coverage, lessened the amount of gold we had for the purpose of meeting our obligations, under the Finance Act or otherwise. I can only say this, that as far as the issue of $5,000,000 or $6,000,000 in paper money by statute is concerned, it would not affect the credit of this country, technically. In reality it would greatly affect it, as it did in 1915. If one will take the trouble to look at what happened during the war, when enormous quantities of goods were being sent out of this country, creating favourable balances, one will realize how easy it was to emit these sums of money at that time without affecting the national credit structure. But when there is a depression throughout the world, such as there is to-day, you have exactly that situation developed that curbs and lessens your ability to do it without affecting the whole credit structure. I had a letter the other day from a gentleman who said this to me: "I have this matter completely arranged. All you need do is just simply tell everyone holding the $2,500,000,000 of Canadian bonds that you will hand them Dominion of Canada bills, and that will stop interest at once." The committee smiles; but as you see, this man had in his mind the same idea, carried to the extreme, as the suggestion made by the hon. member for North Bruce.


James Malcolm: Quite a different idea.


Richard Bedford Bennett: Exactly the same.


James Malcolm: No. The Prime Minister will pardon me if I say that it was a different idea that I advanced, for this reason. We issued $68,000,000 of treasury notes for the complete destruction of property. There was nothing left of the property for which the notes were issued-no assets whatever. In the case of using the credit of the nation to issue currency instead of bonds for construction you decrease the cost to the taxpayers of the public building, and when you have spent the money you have a physical asset, the property of the dominion, which represents something for the money that has been spent and which will be redeemed through taxation by statutory enactment over a shorter period of years than if interest rates were charged.


Richard Bedford Bennett: It is entirely erroneous
to say that the issue of money in this country was for non-physical assets. I think it should be at once explained that the money issued in connection with the expansion of our currency in 1915 was to the railways; and so far as-


James Malcolm: I thought it was war
purposes.


Richard Bedford Bennett: No, that was for railways. When you come to the question of money issued for war purposes, I think the hon. member for West Edmonton, who made the statement, will realize that instead of being injurious so far as we in this country were concerned, it was the basis of expansion of our industrial development. Every shell order that came to this country served that purpose, and so did every munitions order and every order for wheat. Everything of that kind meant a permanent addition to the wealth of the country.


William Daum Euler: Over-expansion in many
cases.


Richard Bedford Bennett: I wholly agree with the
hon. member in that regard, but it did represent tangible assets. Now, I was going to answer the question which the hon. gentleman put to me-the last question-with regard to putting up a publio building for six or seven million dollars. I dare say it will come as nothing new to him when I say that I discussed with the Minister of Public Works the question whether it might not be possible under certain conditions to do the very thing that has been suggested. Then I discussed it
3426	COMMONS
Dominion Notes Act-Gold Standard
with others, not in this country but in other countries, and they informed me that in their opinion-it is an opinion of course-a small sum of money would not perceptibly affect the credit of this country; but, to use the words of the right hon. gentleman opposite a moment ago, reflecting the same thing Sir Josiah Stamp had said upstairs, the minute you do that you have lessened the degree of confidence which people have in this piece of paper.


James Malcolm: You have improved the
farm on which they have a mortgage.


Richard Bedford Bennett: But that is not so. All these cases consist of adjustments between advantages and disadvantages. In the ultimate analysis, whoever is responsible for the government of this country has to weigh every advantage that would come from carrying out the course suggested. There are these disadvantages: the effect in lack of confidence; the effect in depreciation; the effect in deteriorating the values of the things with which we have to pay in terms of creditors' demands upon us. On the other hand, you have the accumulation of the advantages that accrue to the nation: non-payment of interest; the effect of the retirement of securities over a given period of time, resulting in the asset created by money being free from encumbrances after the expiration of a certain number of years. And after you have weighed all the advantages and the disadvantages you must come to a conclusion, which in my judgment must be a conclusion that is consonant with general world currents of thought.
I do not believe that the ten and a quarter or ten and a half millions of people on the northern half of this continent, living side by side with the richest nation in the world, carrying on business in a given way, can afford to depart from generally orthodox views with respect to financial matters, when we have obligations aggregating so large an amount payable abroad. One of our insurance companies has a billion dollars at risk in the United States. We have, in the Canadian National, guaranteed securities amounting, not to millions but hundreds of millions, all held by people on this continent in the United States. Our own national debt to the extent of hundreds of millions is thus held.
The problem is one that is simple yet complex; simple because the factors are known, complex because you cannot value those factors. I cannot place a value in terms upon the injurious effect which there would be upon the issue of new dollars by this coun-

try, upon all the hundreds of millions of bonds outstanding. I cannot say with absolute certainty, nor with anything approximating such certainty, just what destruction of confidence would come about through emitting bills of that character in Canada. Can anyone? Has anyone the vision to make such a prediction?
I have been fair enough to say that I am not one of those who believe that there are not honest douibts in the minds of some people. There are doubts in the minds of hon. gentlemen apposite, w'ho entertain an entirely different opinion from mine. But weighing the advantages against the disadvantages, the benefits against the injuries, it is my conviction, and my profound conviction, that if we are to maintain our structure intact against any attacks that may be made upon it from all sides, not purposely, but attacks in effect, we cannot do so unless we maintain to the uttermost that confidence in our promise to pay which is involved in our attorning to the general principles that have governed man in seeking security when he asks for payment, whether it be in his own money or in the money of another country, and insists that there shall be something more than the good faith of individuals to support his confidence, and that his confidence is placed in something tangible rather than in mere faith in mankind itself.


Jean-François Pouliot: 
Edgar Nelson Rhodes: Assuming this bill passed and an order in council were passed by virtue of it, it would mean that the individual with a dominion note would not be able to demand gold. My hon. friend will realize that even under our legislation as it exists to-day, by the provisions of the Finance Act we can make notes legal tender. So a man would merely change one kind of note for another kind.


Jean-François Pouliot: But if I understand the minister correctly those notes are issued for circulation and not for redemption. They are issued as a convenience in business, so that they may be easily transferred from one individual to another or from one firm to another; they are backed by the credit of the dominion but have no gold behind them.


Edgar Nelson Rhodes: We will still have to provide the amount of gold called for under our existing legislation.


Jean-François Pouliot: That is forty per cent?


Edgar Nelson Rhodes: We have t/hat to-day, and
under our statutes we would have to keep that amount, but assuming that this bill becomes law and we pass an order in council under it, then an individual could not come and ask for gold for legal tender; he could only get dominion notes.


Jean-François Pouliot: He would get other dominion notes?


Edgar Nelson Rhodes: That is all.


Jean-François Pouliot: Then I imagine we have
had inflation in this country since parliament approved of the issue of $68,000,000 in notes with no gold coverage. With regard to inflation, as the Prime Minister has said there is usually some sort of inflation every fall, due to the fact that the law authorizes the banks to issue notes, during the movement of the wheat crop, to the extent of fifteen per cent of their total note issue. Bankers have told me that last year the banks did not ask the minister for permission to issue those extra notes, that the money in circulation was sufficient to meet the need. The right hon. Prime Minister also said that if the Canadian' dollar is not on some international basis some difficulty might ensue. I am not familiar with all the economists who have written on this sub-53719-217
jeot; I try to keep a clear mind, but it strikes me that gold is used to regularize the exchange of trade, and if, as the Prime Minister has said, we have reached the limit of our borrowing power, it means that other countries have lost confidence in Canada, which is very serious. The Prime Minister in his speech also said that if we cannot pay in gold we must pay in terms of gold. As the right hon. gentleman spoke in rather a low tone I could not catch the first definition he gave in regard to terms of gold, but in the second place he mentioned goods.


Edgar Nelson Rhodes: The first was service.


Jean-François Pouliot: Thank you. The first was service, the second goods, and the third gold. The Prime Minister may be quite right in this respect, but gold is used to regularize exchanges, and when there are no more exchanges and our foreign trade is falling, the value of currency falls accordingly. May I remind you, sir, that during a debate that took place some days ago I asked the hon. member for Macleod if inflation would be necessary if the tariff were not so high. The hon. gentleman, who is the official financial critic of the group in the corner, answered that if tariff barriers w'ere lowered to normal there would be no need for inflation. The right hon. gentleman spoke about normalcy. When our trade was normal the Canadian dollar was above par.
I will not discuss the question at greater length, but I would suggest to the right hon. Prime Minister and the government that they reconsider their tariff policies, and then there will be no need for legislation such as we have before us to-day.


Mr. IRVINE:: A few minutes ago I directed a question to the Prime Minister, and I should be glad if he would be kind enough to answer it now, because I want to make sure I understood exactly what he was saying in this connection. I understood him to say that our Canadian bonds were worth more than our Canadian dollars, because there was only 40 per cent of gold behind the dollar and the bond was worth 100 cents. I wish to make my question a little clearer. Canadian bonds held by citizens of the United States amount to a great deal more than all the dollar bills we have in this country, and we have only 40 per cent of gold behind our dollar bills. How then could we have 100 per cent behind our bonds? It seems to me that in that case the bondholders would have confidence in neither our dollar nor our bond.

3428	COMMONS
Dominion Notes Act-Gold Standard


Richard Bedford Bennett: I aim afraid my hon. friend misunderstood me if he understood what he indicates he did. I said that they had 100 per cent confidence in our ability to pay the bond in conformity with its terms, which meant payment in gold.


William Irvine: My point was that we have less chance of paying these bonds in gold than we have of redeeming the dollar in gold; because we have only 40 per cent gold behind our dollar and not nearly that behind the bonds.


Richard Bedford Bennett: The fact that so far we have paid fully all our obligations in the terms of the contract is in itself sufficient reason for the confidence that we shall continue to do so, and to the extent that that confidence lessens, to the same extent does the value of the bonds lessen in the markets of the world. But because thus far that confidence has not been destroyed, our bonds have been selling on the terms to which the hon. member has referred, plus of course the interest provision which naturally adds to the value of the security.


Henry Elvins Spencer: Has a dominion bond payable in gold in Canada been paid in gold during the last eighteen months?


Richard Bedford Bennett: That is a question which, as I indicated to the hon. member for Macleod, I would prefer not to endeavour to answer. There is a decision of Judge Farwell in Great Britain in the last few months and another decision of an English court indicating clearly that the exact words of the instrument will determine the question of liability. In the case before Judge . Farwell, the wording was such that, in his judgment-[DOT] and I do not know whether it has been appealed or not-it enabled the obligation under the bond to be paid in English pounds of depreciated value. I cannot express a legal opinion on a matter of that kind.


Mr. REID:: I have listened very attentively to the information given to the committee, not that I am interested in what the people of the United States get on exchange from this country, but because I think, like other members, our dollar is just as good as that of the United States. Last fall a United States citizen came into Vancouver and for his $10 bill, which was a promise to pay, he received SI 1.88; for his silver money he received a premium of nine per cent. But when he tendered a S10 gold piece, all he was offered rvas ten Canadian dollars. I have 
always been puzzled why the promise to pay was worth 18 per cent and the silver dollar worth nine per cent, while the article itself was worth only par in Canadian money. Could the Prime Minister explain that?


Richard Bedford Bennett: 
Thomas Reid: That is what the banker told the man; he said: "You might as well leave it here, because we have a law against exporting gold."


George Gibson Coote: The story related by the hon. member for New Westminster shows the absurdity of the present situation. It all arises because the Prime Minister in September, 1931, refused to suspend redemption in gold, but chose to prohibit the export of gold, and through arbitrary measures, I think extra-legally, to refuse to pay out on demand, gold for dominion notes. The law clearly entitled the holder of a dominion note to get gold for it, but certain instructions were issued from the office of the Minister of Finance at that time to the receivers general throughout Canada that they were not to pay out gold on demand without permission from Ottawa. A friend of mine went to the Assistant Receiver General in Calgary in October, 1631, and asked for $500 in gold to send to the United States to meet a liability which he owed there. So far as I know, there was at that time no prohibition by order in council of the export of gold, but the man was refused the gold. For that reason I think it is a proper move on the part of the Minister

Dominion Notes Act-Gold Standard
of Finance now to take authority to suspend redemption in gold, although the government did have authority in 1931 and refused to exercise it. One of the objections I have always taken to the policy pursued by the government under the very wide powers which were given to them under the act of 1931 is that they did not exercise this power when they should have done so.
One important question which has arisen here this afternoon is that of meeting our foreign obligations, and to what extent, if any, the value of our dollar, in gold countries affects our ability to meet those obligations. First of all I want to say that the value of our dollar in New York is determined by the supply of and the demand for foreign exchange. It is decided for all practical purposes on the New York exchange market; it goes up or down according to the supply of and the demand for this exchange. The supply arises from several different sources, mainly our exports of goods which are sold for foreign exchange. The proceeds of our exports are always available to purchasers of foreign exchange. The supply of and demand for our foreign exchange are of course affected by the sale of foreign securities by Canadians or the purchase by foreigners of Canadian securities or the sale of our securities by foreigners. We have no way of controlling this. So far as confidence is concerned and the extent to which confidence affects the value of our dollar in New York, this is mainly in connection with the transfer or investment of capital, the sale and purchase of securities by people in Canada and outside, the transfers which must be made because of such transactions. Confidence after all depends upon our record in meeting our obligations. If we meet them in gold, regardless of whether we have gold behind our internal currency, that will largely determine the confidence of investors in New York. As was stated by Viscount Snowden, when England abandoned the gold standard, although they abandoned redemption of notes in gold-and I say to the Minister of Finance that he is quite correct in what he said regarding that act-they simply suspended the act until such time as the government of England might take further action by order in council. Mr. Snowden said they would continue to meet their foreign obligations in the terms in which they were due. But they did make a definite suspension of redemption in gold, so that legally the Bank of England the next day was not required to redeem its notes in gold. Canada, on the other hand, has been legally in the position of being liable to redeem its notes in gold, and we have refused to do it.
If the government would grant a fiat to anyone to whom they have refused to pay out gold on demand, or if we were in the position to go to the court and get an order compelling the Receiver General of Canada to obey the provisions of the Dominion Notes Act, then I think some of the officers of the Receiver General would have to submit to imprisonment or something of that kind, or pay over the gold. The government has simply overridden the law in that respect, and it is well that the law should be changed; it should have been done eighteen months ago. Mr. Snowden in his speech said that it was not the intention of the government in England to evade meeting their foreign obligations in gold when expressed in terms of gold, and England continued to meet her obligations in terms of gold. So has Australia. Australia has abandoned gold. She has invested part of her reserves in, sterling and she has met all her foreign obligations and the interest on them in gold.


Richard Bedford Bennett: She has ninety million pounds of floating debt.


George Gibson Coote: But her bonds are selling at a very high rate in England in spite of it.


Richard Bedford Bennett: The last issue was not successful.


George Gibson Coote: Australian government bonds, as I quoted from an Australian paper the other day were selling at more than par in their own country.


Richard Bedford Bennett: In New York Australian five per cents are 74 and comparable Canadians are between 95 and 100.


George Gibson Coote: That is not assisting Canadians to meet their foreign obligations because, as I said before, our foreign obligations are met by the export of goods which are sold for gold or foreign currency, and discriminating investors in the United States or anywhere else must look to the future to see whether we are going to continue to meet our liabilities or not. Now in order to meet our liabilities we must maintain internal prices at a level where producers can produce at a profit or at all events get the cost of production. Otherwise they will go out of business, and when they cease to produce we have just that much less to export and sell and we ean buy just that much less foreign exchange with which to meet our foreign obligations. If we are going to pay interest and principal on our debts outside this country we must export the goods in order to get the gold to pay over to the holder of the bonds.
3430	COMMONS
Dominion Notes Act-Gold Standard
We might change our currency, change the name of our monetary unit from the dollar to something else, to clear up the confusion that is in the minds of some people. We might amend the Currency Act and change the name of the dollar to crown or shekel or some other name. To have a Canadian "crown" quoted in the United States at less than an American dollar should not alarm the people of either country. If the Canadian crown was worth only fifty cents in the United States that would not give them so much concern as if our dollar was worth only fifty cents there. Our dollar is worth one hundred cents in this country because the law makes it legal tender for that amount, but once the Canadian dollar or any other monetary unit gets outside of Canada its value is fixed in the foreign money market. It becomes a commodity, in other words, and the price of our dollar goes up and down in New York according to the law of supply and demand, just as the price of wheat in Winnipeg goes up and down depending on whether the supply or the demand is the greater.
Money is distinctly national in character. Every country has its own monetary laws and establishes its own monetary unit by law. Quoting John Maynard Keynes, from memory: " Money is that which the state may from time to time fix as legal tender for all money contracts." That is the substance of what he says, and the same idea may be got frdm any other writer on this subject. Knapp says in his State Theory of Money: "The soul of currency is not the material of the pieces but in the legal ordinances governing their use."
In Canada on the present basis we can have inflation amounting to hundreds of millions of dollars without issuing another dominion note. The inflation the world has suffered from in the main, the inflation from which we suffered in Canada from 1925 to 1929, and the deflation since, has all been done on practically the same amount of gold, with comparatively little change in the amount of notes issued. The thing that varies so much is the credit.	On the same amount of gold we
may have an increase of 25 or 30 or 40 per cent in credit, and credit is 90 per cent of the money we do business on. An inflation of 30 per cent in credit is greater than a 50 per cent increase in note circulation. Notes are a very small percentage of our money.
I am sorry that this debate came on before a return that I had moved for was brought down. It asked for the total bank loans in Canada, the total deposits, bank notes out-
[NTr. Coote.]
standing, dominion notes outstanding, advances under the Finance Act, and gold reserves in Canada, If I had that return I think I could show that the amount of bank credit outstanding, which is the bulk of our money, has varied by hundreds of millions of dollars with very small variations in the amount of gold in the treasury.


Edward James Young: What caused it to shrink?


George Gibson Coote: The action of the banks.


Edward James Young: What action?


George Gibson Coote: Because we were on the gold standard, and the world's goldmongers, or the world's big bankers, decided on a deflation policy, and as soon as they practised deflation we had to follow suit in Canada, or else we go off the gold standard immediately because we could not meet foreign demands for gold if we refused to deflate to the same extent that they did.


Edward James Young: We are off the gold standard.


George Gibson Coote: Yes, because we cannot maintain the convertibility which the Prime Minister says is so necessary.


Edward James Young: Then why the contraction
if we are off the gold standard? You cannot blame the gold standard for the contraction.


George Gibson Coote: We contracted long before
we went off the gold standard, and we have continued to contract ever since because we have been endeavouring to stick to the gold standard. We have not legally been off the gold standard except that we have prohibited export of gold. Our notes are legally redeemable in gold on demand, and as long as that is so we are on the gold standard, and the government is liable to deliver gold to anyone who presents notes at the office of the Receiver General. That is in the Dominion Notes Act. Of course, the government is above the law. I do not think it should be; it should obey the law. In 1914 the government was faced with a similar situation, but of course the banks were pressing the government at that time. They came to Ottawa on a Monday afternoon. The cabinet held a special meeting that night, and suspended the redemption of notes in gold, relieving the banks of the liability of meeting their obligations in legal tender, and giving them power to meet their obligations in their own notes. That was all done by order in council passed that same night. A special edition of the Canada Gazette was issued, with the printing bureau working aid night, and next morning

Dominion Notes Act-Gold Standard
the banks were relieved of the liability of meeting their obligations in either dominion notes or gold.
Here we have gone a year and a half since England went ofi the gold standard, without removing that obligation to pay gold for dominion notes, and legally we have been on the gold standard all that time, but actually we have not because the government decided that they would override the Dominion Notes Act. I know that that is true, because, as I said before, I went to the Assistant Receiver General and asked him for gold, and I was refused. The minister said this afternoon that he did not think it was right to say that the government had refused gold, but a little later on I understood him to say that if the government were willing even to-day to hand out gold to everybody, the supply of gold would only last one day. The two statements do not go very well together. The Receiver General refuses to pay out gold. They handed me an application form to fill out. I regret I have not got it with me, but I hope the minister will lay one on the table so that it will be available to all the members.


Edward James Young: We can all fill it out.


George Gibson Coote: Before I sit down I should like to ask the minister what reason there is for retaining this gold as a reserve for dominion notes that are issued, if we tell the people of the world: "You cannot convert these dominion notes into gold."


The CHAIRMAN:: The hon. member must not wander too far afield.


George Gibson Coote: Mr. Chairman, I am sure my question is closely connected with the subject matter of the bill. The bill has for its purpose giving the government power to suspend redemption of notes in gold. I shall take this opportunity to read it:
Dominion notes shall be redeemable in gold oil presentation at branch offices established, or at banks, with which arrangements are made for the redemption thereof as herinafter provided. The governor in council may from time to time and for such period or periods as he may deem desirable, suspend the operation of this subsection.
The question I am putting is this: If the minister is now asking for power to suspend redemption in gold what is the use of keeping the gold in the treasury? Why not take some of the $70,000,000 and meet some of our obligations with it? What is the use of keeping it there?


Armand Renaud La Vergne: The fact that gold is kept does not alter the law. Gold has to remain there just the same.


George Gibson Coote: I am not sure whether I heard the chairman correctly, but it seemed to me that he was making an argument rather than stating a point of order.


Armand Renaud La Vergne: I do not wish to curtail the hon. member's remarks.


George Gibson Coote: A year ago in this house the Prime Minister, speaking of the gold held as reserve for our dominion notes, and speaking of our outside obligations, said something to the effect that we had to meet practically a million dollars a day of obligations of governments, municipalities and public corporations. I believe his words as they appear in Hansard are as follows:
There is not enough gold to pay those all at once, but gold being a medium of exchange circulates, and in its circulation lies its value.
Referring to the hoarding of gold in Europe he said:
Gold therefore must circidate in order to be useful. When it does not circulate the value disappears and it is no longer a medium of exchange.
As I understand it, this gold in Canada is not going to be allowed to circulate, and therefore it seems to me its value will really disappear. It will not be valuable because it will not circulate. I am asking the minister whether now, when he suspends the redemption of notes in gold, he will use some of this gold to meet obligations in New York, thus keeping our credit good and allowing the gold to circulate and become useful, as suggested by the Prime Minister.


Edgar Nelson Rhodes: I believe the answer is obvious. It is that under the statute or the law as it stands to-day, we must keep a certain reserve of gold. If the hon. member wishes to go beyond that and suggest that we should amend the Currency Act, that is a question which could be raised in the consideration of another measure. I submit however with all due deference that it does not arise in connection with this amendment.


George Gibson Coote: May I suggest to the minister that he consider the advisability of amending the next subsection so that we might issue up to $100,000,000 in dominion notes against a twenty-five per cent gold coverage, instead of $50,000,000 with the twenty-five per cent coverage, and release about $37,500,000 worth of gold. I believe we would still have as good a percentage of gold coverage as some other nations of the world, the credit of which is still good. Especially if we are not going to allow anybody to get this gold out, the twenty-five per cent gold reserve for the first $100,000,000

Dominion Notes Act-Gold Standard
would be quite ample, and I believe would lighten the burden which now rests upon the Minister of Finance when he is faced with the necessity of meeting his obligations in New York. Would the minister consider that matter, or has he given it any consideration?


Edgar Nelson Rhodes: I should be only too happy to consider it, and as a matter of fact have already given it a very considerable amount of consideration. However I do say to the committee in all humility and with the utmost frankness that I attach very little importance to my own views on this complex and intricate question. It is not one which can be juggled lightly by any individual, even by a Minister of Finance with one year's experience. It is a matter to which men have devoted a lifetime of study, and even they are not in agreement-men of the utmost erudition. It seems to me that the best we can do, upon balance, is to accept the experience, wisdom and judgment of individuals who have devoted time and study to it. Then, upon balance, it is for us to find out the best course to pursue in the circumstances. I have no doubt that we would do well to review many phases of our legislation with respect to banking and currency. That is one of the matters we had in mind when we suggested the appointment of the royal commission. Among other subjects I have no doubt they should and will consider this one.


Mr. MACKENZIE (Vancouver):: Is not the Minister of Finance aware that one of the findings of the Macmillan committee in England was that we should dissociate gold as a basis of internal currency from gold as a means of meeting maturing external obligations?


Richard Bedford Bennett: No, it is quite the opposite.


Ian Alistair Mackenzie: And also that was one of the recommendations of the committee of the League of Nations. I shall produce my authority for the Prime Minister any time he wishes it.


Richard Bedford Bennett: I looked it up the other evening after the hon. member had spoken.


Edgar Nelson Rhodes: I am sorry I have not the report of the committee before me, but I am almost sure mv hon. friend is in error. However, whether he is or not is immaterial to the point under consideration. The royal commission to be appointed to inquire into our currency will have its own problems to deal with.


Ian Alistair Mackenzie: Indeed, the recommendation made at the 1930 imperial conference was the same as that made by the joint committee of British industries in Great Britain, to the effect that the two should be dissociated.


William Lyon Mackenzie King: I think the hon. members are attaching different meanings to the term "dissociate". The Prime Minister said this afternoon that so far as domestic trade was concerned we could use iron rings, but as an international currency, we would have to use something else.


Richard Bedford Bennett: I think that is true.


Henry Elvins Spencer: 
Ian Alistair Mackenzie: This does not change it very much.


Henry Elvins Spencer: It openly says that they
are not going to pay gold, which I think is a very wise statement to make. I would prefer to delete subsection 3 entirely and not pretend to pay gold, because if there is a run it is not there. Our financial soundness does not depend on the one commodity, gold; our total assets comprise many other things in Canada, of which gold is only a small part.
A question has been asked as to the difference between issuing say $100,000,000 in bonds and $100,000,000 in notes: whether the notes
would be considered inflation and the bonds would not. It seems to me that it depends entirely on how the purchase of the bonds is financed. If it is financed by savings I would say there would be no inflation at all. But if financed, as most bond1 purchases are, by the extension of credit by the banks to enable the buyers to buy the bonds, then I say it is just as much inflation as the direct issue of paper money.


Mr. MATTHEWS:: Do you mean to say
that most bonds are bought with borrowings?


Henry Elvins Spencer: The bonds issued from
1916 to 1920, I think the hon. member will find, were very largely bought on credits extended by the banks to enable their clients to buy the bonds.


Robert Charles Matthews: That is during the
war?


Henry Elvins Spencer: Yes.


Robert Charles Matthews: You are confining your statement to that period?


Henry Elvins Spencer: Not entirely, but I think the hon. member will find, if he takes the loans of the banks from 1914 to the end of 1916, that there was very little difference in the level of loans, but from the end of 1916 to 1920 the amount of bank loans went sky-high at a very rapid rate.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


George Gibson Coote: 
Edgar Nelson Rhodes: I would not wish to give a yes or no answer to my hon. friend. The government will take such course as it deems wise m the circumstances. That is the best and the only answer I can give at this stage.


Henry Elvins Spencer: Before six o'clock I was referring to the effect on price levels when bonds were issued against savings, and also when credit was advanced by banks to help to

Dominion Notes Act-Gold Standard
buy the bonds. Many people think that inflation is connected only or largely with the issuance of notes, but I would remind the committee that it is no more inflation for a bank to hand $500 in bills over the counter to a customer than to credit $500 to his account against which he draws by cheque. We found only two weeks ago that the country with the largest stock of gold in the world was obliged to close every bank within its borders because when a real run was made it was found impossible to supply gold against the notes that might be presented. This afternoon the Prime Minister, in a very able speech, mentioned that the dollar was of value only as one could depend upon gold being paid for it. I would say that the dollar is of value according to the goods you can buy with it. During the last eighteen months I have not been able to get any gold for dominion notes, and therefore I say that dominion notes are of value only in proportion to what I can buy with them. I have found them perfectly good because the assets of Canada were good, whether or not she had gold behind her dominion notes. In looking through the evidence given before the banking and commerce committee in 1923 I found what I consider rather a good statement as to the basis of credit. I should like to read it to the committee; it is as follows:
The basis of a nation's credit is the number, intelligence and industry of its people, plus the capital equipment and natural resources within its boundaries.
Gold therefore is only one small part of the assets of the dominion, and I think we should give due credit to those vast assets other than gold.


Richard Bedford Bennett: Who said that?


Henry Elvins Spencer: That was said by Mr. George Bevington in the course of his evidence before the banking and commerce committee. I believe I attended practically every meeting of that committee and I did not hear that statement contradicted. We are told that gold is the most valuable of metals, but I think if we took away the statute giving gold its fictitious value it would become one of the most useless metals.


Mr. ERNST:: I wonder if the hon. member can answer a question, just for information. Dealing with any year previous to the war, I do not care what year, can he tell me the gold coverage for currency and the amount of paper issued as compared with the gold coverage and1 the amount of currency issued to-day? And for the same pre-war year for
which he gives me the gold coverage and currency issued could he give me the volume of trade as compared- with to-day, so that we may see how they compare?


Henry Elvins Spencer: I am sorry I have not
the figures with me, and I should not care to make a guess.


William Gordon Ernst: I asked for only one purpose. ' I believe that the amount of paper money was quite out of proportion to the growth of trade.


Henry Elvins Spencer: I do not know whether
or not the hon. member was in the house just before six o'clock, but I mentioned then that the statement that Canada has forty per cent of gold behind -her dominion notes simply means that she has forty per cent behind what dominion notes are printed and what we think are necessary. If there should be a real run of depositors asking for their money-and every depositor has a ri^ht to dominion notes-naturally we could not meet that run, and no country could do so.


William Gordon Ernst: My purpose in asking the
question was to see whether the increase in paper money coincided with the growth of trade.


Henry Elvins Spencer: From time to time there have been attempts made to limit our paper money to the amount of gold we have in reserve, and that is one of the criticisms I have to make in connection with gold. I believe that often it has placed a country in a straightjacket in regard to trade development, because there was not sufficient currency or credit for needed development. In support of what the hon. member for Mac-1-eod had to say I noticed that Sir Basil Blackett, speaking in Canada about eighteen months ago, said very plainly that it was quite unnecessary to keep gold behind internal currency. In that connection I should like to quote another eminent banker, Right Hon. Reginald McKenna, who, speaking to the shareholders of the Midland bank in January, 1932, said:
The time has gone by for the childlike belief that as long as a country is on a gold standard all is well.
And again:
For upwards of six years our monetary authorities fought a losing battle on ill-chosen ground.
Referring to Great Britain going off the gold standard he said:
There has been no inflation in Great Britain through her going off the gold standard. The cost of living is about the same.
3436	COMMONS
Dominion Notes Act-Gold Standard .
Just 'here I should like to make my stand clear in reference to money being put into circulation. Often it has been charged by hon. members, I believe quite innocently, that we in this corner of the house want unlimited inflation, unlimited amounts of money put into circulation. I want to say quite plainly, speaking for myself and those around me, that in not one single instance in the past ten or eleven years has any member of this group advocated uncontrolled inflation. However, I do stand very definitely for sufficient money to be put into circulation to carry on business and enable all goods and services to be exchanged that are made and needed.


William Gordon Ernst: Hear, hear; hence my question.


Henry Elvins Spencer: Until we do get that condition we have not sufficient money in circulation. Referring again to the circulation of gold and the fact that those debts payable in gold can be met, I have only to point to the world debts which are payable in gold. These debts total something like four hundred billion dollars, whereas there is only eleven billion dollars of gold in the world. Sometimes it is necessary to point out that money, or credit, is made largely in three ways; we have the mint, the printing press, and the banker's ledger. From the mint we have only about $32,000,000 or $34,000,000 of subsidiary coin; from the printing press we have obtained only a small amount of the money or purchasing power compared with the total in Canada. But, as was pointed out by the hon. member for Macleod, there is practically no limit to the extent to which the banker may go in extending and controlling the credit of the nation. We impose very severe penalties indeed upon anyone who tries to increase the amount of money in circulation, whether it is by way of one dollar bills, five dollar bills or twenty-five cent pieces; we call such people counterfeiters. A bank, however, through its bookkeeping system, can bring into existence thousands or millions of dollars of new money, drawable by cheque, simply through taking securities as collateral, and nothing is done about it. But when this new money is put into circulation it must have the effect of altering price levels, and this is where we base our complaint with regard to so much power being placed in the hands of private corporations. I think this is why we need a federal bank in the worst way. The other day someone said ito me that the Finance Act is like a slot machine; there are ten banking houses in Canada who can bring securities at any time and get in return [Mr. Spencer.l
dominion notes. In so doing the price levels must be affected, and this is something that should not be left to private institutions.
In conclusion, Mr. Chairman, I should like to put on record a statement by Professor Soddy of Oxford, a well known critic, with regard to the financial problem. He said:
Another and most important fact to be emphasized is that virtually all the money in the hands (or banking accounts) of the community originally came into existence in the form of loans from the banking system. It can come from nowhere else, nor otherwise than as loans. This fact, which reverses all the old concepts of loans as money taken out of preexisting deposits is demonstrated fully in Major Douglas's works, and, in fact, has since been endorsed by Mr. McKenna, the chairman of the Midland Bank.


Armand Renaud La Vergne: Are we not wandering very far from the subject of the bill?


Henry Elvins Spencer: I will be through in a moment. Professor Soddy goes on to say:
The order of procedure is as follows:
(1)	Money is printed or written into existence by the banks;
(2)	It enters circulation as a loan to somebody ;
(3)	Tt is then spent, and then becomes a "deposit" in the name of the receiver.
I think I am in order in reading that, because we are asked in this bill to give the government the right to suspend the payment of gold for dominion notes. I shall support the bill but I would support with better grace the elimination of the whole subsection 3 of the act.


Ian Alistair Mackenzie: Before the six o'clock recess I made a statement to the committee to the effect that the committee in England had come out for the abandonment of the gold standard as the basis for internal currency. I take as my authority for that the report of the Federation of British Industries to which I referred the Minister of Finance. I wish now to place upon Hansard the actual quotation from the Federation of British Industries in analysing the Macmillan report.


Richard Bedford Bennett: It was the Macmillan report with which I was dealing and nothing else; I did not deal with the Federation of British Industries.


Armand Renaud La Vergne: This is a bill giving the government power to suspend the redemption of dominion notes in gold. I do not think the hon. gentleman is in order.
Mr. MACKENZIE (Vancouver) I am discussing the bill. I know what it means. The report reads:
The Macmillan committee has come out boldly for the complete abandonment of the theory

Dominion Notes Act-Gold Standard
that gold is required as the actual basis of internal currency, for the maintenance of an entirely disconnected gold reserve for exchange purposes. The rigid linking up of gold and currency which compels the contraction of domestic credit is an objection to a system no longer required to maintain public confidence.
I wish to refer my hon. friend to the quotation just made by the hon. member for Macleod directly from the Macmillan report. 1 find also on page 66 of the Macmillan report the following:
In the third place, it is not necessary that the volume of note issues should continue to be regulated, as it is now, by reference to the amount of gold held in reserve.
Again on page 123, subsection (iv) of article 289:
There is also a further principle of central banking of a somewhat different character which must be observed if central banks are to be in complete control of the situation, namely, that central banks must not be unduly limited in their power to expand their deposits otherwise than against a corresponding increase in their holdings of gold or the equivalent of gold.
The sense of the report all the way through, as I have read it-and I have read it more than once-is practically, as advocated by Sir Basil Blackett, that gold is no longer required as a basis for internal currency, but only as a basis for meeting maturing obligations.
As regards the bill, to my mind it is a complete anomaly. It provides:
Dominion notes shall be redeemable in gold on presentation at branch offices established, or at banks with which arrangements are made for the redemption thereof as hereinafter provided. The governor in council may from time to time, and for such period or periods as he may deem desirable, suspend the operation of this subsection.
In my opinion the governor in council, under this bill, is taking power to do something that has been in actual operation for several years. I regret I missed some of the debate this afternoon, but the Minister of Finance suggested that this was a bill that was more or less hand in hand with the Export of Gold bill of last year. I fail to see any close alliance between the export of gold and the suspension of the redemption of dominion notes in gold. I wish to differ from my hon. friend from Macleod (Mr. Coote) who said this afternoon that this was the final abandonment of the gold standard. If he means the gold standard in the technical sense as it is known to economists and technicians, we abandoned it in the autumn of 1929. We abandoned the parity of gold with currency and when we inferentially, by arrangement with financial institutions, prohibited the export of gold, we were off the gold standard. It is quite true that since that time we have been on a gold exchange basis with regard to the alleged gold backing for our currency, which is supposed to be a 40 per cent backing, but was 39.3 when I got the last report from the department; but here we have in practice an actual abrogation of the terms of the statute because dominion notes have not been redeemable in gold since we went off the gold standard, since before October, 1931. Now the Minister of Finance is asking the house to give to the governor in council power to do something they are doing now without any authority whatsoever, just as the government in 1929, without availing themselves of the provisions of the Finance Act, effectually prohibited the export of gold by arrangement with banking and financial institutions and without an order in council under peace, order and good government legislation. So we have had a violation of this section in practice possibly by both administrations for the last three or four years. Now the government by this bill is asking the house to give the governor in council power, at whatever time it sees fit, to suspend the redemption of dominion notes in gold. We should do one thing or the other: keep the statute in force as it used to be and see that it is legally observed, or eliminate the clause altogether and do what the hon. member for Macleod suggests, namely, effectually abandon the gold standard in so far as gold is required as a basis for our internal currency. We must separate fundamentally the gold exchange standard as a basis for our internal currency and our monetary gold stocks as a basis for meeting with goods and services our external obligations as they mature.


George Gibson Coote: I should like, in reference to what the hon. member for Vancouver Centre has said, to say that I do not think I said this afternoon that we were now abandoning the gold standard legally. Prior to this time we had been legally on the gold standard except for the export of gold, but actually we had been off it. I would like to see us actually and legally off it; I would like to see legal conditions brought into accord with actual conditions.
If I might, I should like to come back to the practice in force since September, 1931. In a return brought down lately, number 239A, I find that the following telegram was sent by the Department of Finance to all assistant receivers general in Canada:
September 22, 1931.
Make no payments in gold more than $1,000 without instructions from Ottawa. Wire daily
343S	COMMONS
Dominion Notes Act-Gold Standard
amount of gold paid out and forward names and addresses of those receiving it. Urge banks when applying for notes to take small legals during present crisis.
The question I would like to ask the minister is whether the department had any legal authority to send out such an order to its assistant receivers general and, if not, why was not payment of gold for dominion notes suspended by order in council? Did the government at that time not have power under the Unemployment and Farm Relief Act to suspend the provisions of the section which it is proposed to amend by this bill?


Richard Bedford Bennett: The present Minister of Finance was not then in charge of the treasury. The question is one of weighing again the effect upon our external situation in a moment of crisis and we took the course which we thought would do us the least harm, namely, prevented the export of gold. It was that action which was taken in September, 1931, to meet the then situation.


Ian Alistair Mackenzie: Was it not October?


Richard Bedford Bennett: No, September, 1931, when England went off the gold standard and we passed the order in council preventing the export of gold.
Just one word that I think may be useful to the committee. The hon. gentleman quoted from Sir Basil Blackett's Planned Money as to what money was, and he said: "notes were of value for what they would buy in goods or services." That is exactly the point so far as our notes are concerned. We have so large an obligation to meet in New York that we have to buy United States notes or bills, gold certificates or gold, and it is just my point that that is a service which has to be bought and paid for; that the value of our dollar depends upon the service it will buy in the way of exchange on New York, and that unless metal coverage were behind our dollar to the extent it is, it would sink more and more in value to a point where it would take too many of our dollars to buy a United States dollar in exchange for the purpose of liquidating our obligations, thus rendering it impossible for us to meet the situation. A better illustration of the reason we are trying to maintain our dollar amongst the currencies of the world could not be given. Just as Sir Basil Blackett says, it is an exchange service. We have to buy American dollars to the amount of about one million dollars every working day for which we have to pay in Canadian dollars, and the simple problem is how many Canadian dollars do you need to buy New York exchange for the obligations we have there to pay?
TMr. Coote 1


George Gibson Coote: I do not know, Mr. Chairman, whether you will consider me in order if I once more discuss the possibility of buying New York exchange with Canadian dollar bills. The Prime Minister told us last year, and he said it very well too, that we do not buy American exchange with Canadian dollar bills.


Richard Bedford Bennett: We do in part.


George Gibson Coote: But these Canadian dollar
bills come back 'the next day. If we are going to continue to meet these foreign obligations, and we have been meeting them with 25 cents a bushel wheat, which is ruinous to the producer, and similarly to the producers of pulp and paper and lumber and fish and cattle and hogs, it is time the producers got a better price. If they do not, their production is bound to drop off, and it is only out of the proceeds of that production that we can get foreign exchange to meet our obligations in New York. To continue meeting our foreign obligations, our exports must be kept up because it is from that source that we get the bulk of the exchange we need to meet these obligations.
It was pretty hard to hear exactly what the Prime Minister was saying. I cannot understand why it would not have been better for the government to suspend the redemption of notes in gold by order in council than by letter to the assistant receiver general. Surely it, is better to do these things in a legal way than in an extra-legal way-I do not know if that is the correct term. We should follow the same method that was adopted in England where the law was amended. We do not yet know whether the minister will suspend the redemption of notes in gold after he is given authority. The government had this authority in September, 1931, I understand, and if I am wrong I hope the minister will correct me.
I, as a Canadian, am concerned to see government action in this matter. It is very important to us that the law governing legal tender should be lived up to. Is the government going to continue to override the law, as I am sure they have been overriding it? I think we should be given some good reason why that has been done or we should be given the assurance that from now on the government will take the necessary action to bring the legal situation into line with the actual situation. We know that the act requires the paying out of gold for dominion notes. If we give the government this authority, will they suspend redemption of notes in gold? I think we ought to have that information.

Dominion Notes Act-Gold Standard
There is one other question I would put to the minister: Has the government out of the proceeds of gold which it has sent to New York establishing credits there, given exchange to certain persons or corporations, provincial governments, municipalities or anyone else, at rates of exchange more favourable than the prevailing rate? I think the committee would like to have that information. I have met many people in Canada who think that we should have that information. I do not know whether the minister can give it or not.


Edgar Nelson Rhodes: As I told my hon. friend this afternoon, in the great majority of cases our export of gold was for our own purposes, but we have made gold available on occasion to provincial governments in part. Sometimes we have had to assist them by way of the purchase of exchange depending on the amount of gold available, but in all cases we have charged them the going rate.


Jean-François Pouliot: If I understand correctly what was stated this afternoon, there is a certain amount of gold held in reserve as backing for dominion bonds, quite a large proportion of which are not guaranteed except by the resources of the dominion. Would it not be possible for the government to adopt bimetallism so that in this country we could have both the gold standard and the silver standard working together? That would be very easy in this country where we produce both gold and silver. Then the dominion currency would be fully backed not by something mythical but by something real, by gold and silver. This is a question which has been widely discussed. It is one with which I am sure both the Minister of Finance and the Prime Minister are familiar, and every member of the house will recall that the Minister of Trade and Commerce dwelt at great length with this question in the early part of this session and also last year. In times like these, if the only backing of the dominion notes was confidence, could there be much trade? I do not believe that confidence means so much in trade. Confidence in trade is the sentiment of one party that good business can be done with another party, but when one party gets practically nothing in return how can that kind of unilateral trade bring prosperity to a nation? I would therefore ask the Minister of Finance to study this important question of bimetallism with his distinguished colleague the Minister of Trade and Commerce in order that we may have a backing of both gold and silver for dominion notes.


William Irvine: We have had one of t'he most interesting discussions on the financial question which I have heard in this house for ten or twelve years. I have been very much interested in this question both since I came here and before, and I am glad that at last it has become of such interest as to be discussed by hon. gentlemen who occupy the front benches of the opposition and to be answered seriously by hon. gentlemen on the front benches opposite.
We have had from the Prime Minister (Mr. Bennett) one of the ablest defences of the gold standard which I imagine could be put up. I do not wish now to prolong this discussion and weary the house with a dry as dust debate, but while the Prime Minister's speech was very able indeed, and while he raised every point that it was possible to raise in defence of the gold standard, I want to register my objection to his conclusions. I do not agree with them. I believe that in every fundamental point which he raised he was vulnerable. I believe that his argument could be not only successfully challenged by the facts but successfully refuted.
During the course of his remarks the Prime Minister pointed out that practically all countries of the world had adhered to the gold basis, and so forth. But it does happen that we have come to the time when nearly all the countries of the world have abandoned the gold basis because it has been discovered to be entirely impracticable. No matter how well it may have answered at certain times in the past, it has been unable to keep pace in its volume with the increase in the production of wealth in the various countries of the would. To imagine that you can increase your wealth and production ad lib, and not increase your gold correspondingly, and still have a gold basis, is on the face of it ridiculous. I cannot see why gold cannot be used for international balances as it has been used in the past without at all affecting our currency in Canada. I think that matter was involved in the question raised by the hon. member for North Bruce. In my view we are indebted to him for having brought up a matter which resulted in such full discussion. He spoke concerning the difference between the dollar and a bond, and answered his own question in that regard by saying that as far as he could see the dollar bore no interest, and the bond did. I am not satisfied with the Prime Minister's statement in reply to the hon. member for North Bruoe. As a matter of fact, so far as the obligations of Canada are concerned there is no difference between bonds and dominion notes. She must pay a dollar for the dollar, and a dollar for the bond, just the same. But there is the
3440	COMMONS
Dominion Notes Act-Gold Standard
difference of interest charges the bonds being interest bearing. I cannot see how an increase of currency in Canada, regardless of a gold basis, will affect what we have to pay abroad. In spite of the Prime Minister's argument that is not clear to me.
If, for instance, we have to pay $100 in New York and our money is depreciated by twenty-five per cent, we pay the $100 in gold. If on the other hand we have to pay S100 and our dollar is at par, and if we still pay in gold, we pay exactly the same amount of gold in one case as we do in the other, regardless of whether or not our money is at a depreciated value. Then I venture to suggest that the Prime Minister's interpretation of how we pay our obligations abroad was somewhat misleading, inasmuch as we do not pay our debts in New York with Canadian legals; we pay with goods, or with gold, if we pay at all. We would not affect the payment of our obligations abroad by an alteration in our money value, since we pay them in goods. We would not affect it if we paid in gold, because we do not affect our amount of gold by changing the value of our dollar. Therefore in either case I cannot, see how we would be jeopardized at all in the payment of our obligations in gold by making an alteration in our currency at home.
The Prime Minister stressed the point that confidence of people abroad in our bonds made our bonds more valuable than our dollar, and that confidence had been established through the years by the fact that we had paid when the bonds were due. But we paid in what? We paid in goods when the bonds were due. And unless something has occurred which has impaired the wealth of production of this country there is no reason why any foreign debtor should lose confidence in Canada, because as long as she can produce wealth Canada can meet her obligations abroad in wealth-and I imagine that is all any country in the world can do. If they cannot do it that way, certainly it cannot be done with gold. People abroad are not such fools as we imagine. The fact that we have only forty per cent of gold to back our notes in circulation in Canada is known abroad, and to think that they imagine that we can reedem our bonded indebtedness in gold is to attribute to them imbecility. They knowr perfectly well we cannot do it, and neither do they expect us to do it. But we can do it in goods, and I suggest it is a sound theory that credit and currency in our own country should be based upon the wealth of the country.
Bill reported, read the third time and passed.

UNEMPLOYMENT AND FARM RELIEF continuation for one year of provisions of RELIEF ACT, 1932
Hon. W. A. GORDON (Minister of Labour) moved the third reading of Bill No. 55, respecting relief measures.


Richard Bedford Bennett: Mr. Speaker, I promised the right hon. leader of the opposition (Mr. Mackenzie King) that before this bill was finally dealt with a provision would be inserted to prevent the possibility of orders in council being passed under the provisions respecting peace, order and good government while parliament was in session. This matter could be dealt with in another chamber, or we could deal with it here, whichever the right hon. gentleman prefers.


William Lyon Mackenzie King: I believe it
would be better to do it here.


Richard Bedford Bennett: I would move, seconded by Mr. Rhodes:
That the said bill be not now read the third time, but that it be referred back to the committee of the -whole for the purpose of amending as follows: -
"That subsection (b) of section 2 be stricken out and the following substituted therefor:
"When parliament is not in session, to take all such measures as in his discretion may be deemed necessary or advisable to maintain, within the competence of parliament, peace, order and good government throughout Canada; and at all times to take all such measures as in his discretion may be deemed necessary or advisable to protect and maintain the credit and financial position of the dominion or any province thereof."
I have given a copy of the proposed amendment to the right hon. gentleman opposite,, and I believe it covers the point he made.
Motion agreed to and the house went into committee, Mr. LaVergne in the chair.


Armand Renaud La Vergne: The Prime Minister has moved an amendment.


William Lyon Mackenzie King: Mr. Chairman, as the Prime Minister has said, this amendment does meet the point I raised the other day, namely, that unless an amendment were made we would be in the anomalous position of giving the governor in council power to-pass orders in council which would override while parliament was actually in session any legislation this house might pass. It seemed to me that that was going a bit too far. While the amendment does meet the one point raised I should not like it to be assumed that in its present form the bill is by any means acceptable.


Richard Bedford Bennett: I understand that.

Relief Act, 1933-Mr. Mackenzie King


William Lyon Mackenzie King: It is far from that. Even with the amendment now proposed we are giving to the governor in council powers with which that body should not be entrusted at any time. May I make my point clear in this way; this amendment gives to the governor in council, notwithstanding the provisions of any statute, power to-
-take all such measures' as in his discretion may be deemed necessary or advisable to maintain, within the competence of parliament, peace, order and good government throughout Canada, and to protect the credit and financial position of the dominion or any province thereof.
This afternoon we have been enacting legislation which would place the governor in council in a position to meet a financial crisis. I believe that is the proper way to proceed, namely, that parliament shall pass what enactments are in its opinion necessary to meet each and every situation. When parliament has done that it seems to me parliament has done all that can be expected of it, and the governor in council has all the powers he needs. At any rate, if while parliament is actually sitting, the governor in council needs any additional power to meet a financial crisis or any other situation, he has in parliament the agency at hand to give him that power at a 'moment's notice. The other evening the Prime Minister said that something might happen between eleven o'clock at night and three .o'clock the next afternoon which would require immediate action on the part of the government. If a situation of that kind did present itself I venture to say that if the governor in council took action which he thought necessary, though not wholly in accord with some statute, the Prime Minister with the majority he has could come to the House of Commons immediately with the utmost confidence that the house would at once legalize the action which had been taken. In fact this afternoon the Prime Minister referred to the Bank of England having taken at one time to meet an emergency, a step that was illegal, and parliament forthwith passing an act indemnifying the bank against loss for its action, and protecting the situation in that way. My thought in all this does not spring from any desire to be querulous over the powers to be given to the governor in council, but is rather due to the regard I have for the pride and security which the people of the country have in their parliamentary institutions, and for the wisdom of preserving in all things the power of the commons, and of parliament to the greatest extent possible.
The Prime Minister this afternoon in speaking of financial matters laid great stress upon
the place that gold has in maintaining the credit of a country. He spoke of the metal coverage as being all important in internal and international relations. If I may apply the parallel which comes to my mind at the moment, I would say my thought is that the brains of this House of Commons are after all the real asset of this nation in dealing with its problems, and that the common sense coverage of hon. members of the House of Commons as a whole is a much better security for the nation than the action that the governor in council may take at any particular moment in endeavouring to deal with a particular situation. I do not believe that we in Canada need these arbitrary powers, or anything resembling the dictatorships of other lands. I believe every step we take in that direction is leading us towards the abyss that we want to escape. After all the great security of British countries lies in their free institutions and in the free expression of opinion in their parliaments by the representatives of the people with regard to all questions that may arise. It is on that ground in the main that I do not like this legislation, and that I take exception to the particular section we are amending. I wish nevertheless, to thank the Prime Minister for helping to save the face of the entire House of Commons by providing that while we are actually in session the governor in council shall not be permitted to override by orders in council the legislation which we may be passing at the same time.


[Stage Direction]
Amendment agreed to.
Bill reported.
Pierre Édouard Blondin: When shall the said bill
be read the third time?


Richard Bedford Bennett: With the consent of the house, now.


William Lyon Mackenzie King: Before the bill
is read the third time, I do not wish to repeat the arguments that have been put forward so emphatically in the different stages of the measure up to the present, and with equal force and emphasis in preceding sessions of this parliament when similar measures were enacted. Especially would I' refer to what was said on April 1, 1932, on the third reading of the relief bill of that session. But I do feel that inasmuch as everything that is done here counts later as a precedent, and particularly as hon. gentlemen opposite in regard to this very measure have urged that one of the reasons it should be allowed to pass now
3442	COMMONS
Relief Act, 1933-Mr. Mackenzie King
without obstruction of any kind is that the house has passed similar legislation on one or two previous occasions, it is important that we on this side who take such strong objection to it should again register our protest against the measure in the form in which it is going through. I want to make it perfectly dear, as I have said over and over again, that we are ready to vote any sum that is needed for unemployment relief, provided the minister will name the amounts he requires for that purpose and will give reasonable grounds for naming such amounts. But we take very strong exception to violating the very foundation on which in its constitutional aspect the English system of finance, and the rules of financial administration are based, namely, the principle of supreme control by the House of Commons over taxation to which the right to control issues is a natural corollary. Viewing this bill as we do, as the negation of government by parliament, we cannot countenance its passing a single stage that it is within our power to prevent. It is the negation of government by parliament, in the first place, asking as it does this House of Commons to give the governor in council a blank cheque; giving the governor in council power to dip into the treasury for any sum of money he wishes, and, in the terms in which the bill as it now stands, for practically any purpose he wishes. That is entirely contrary to the proper procedure of parliament in dealing with expenditures and taxation. The practice should be that the objects for which the moneys are required should be named, appropriations should be definite in amount, should be voted for specific purposes, and the House of Commons should have the right and be in a position to follow every appropriation to its destination and make sure that the moneys appropriated are applied exactly as they are intended to be applied, and accounted for to the smallest detail.
In the second place, the measure gives to the governor in council blanket authority in the matter of legislation. Here again it is the negation of government by parliament. The power is given to legislate on everything respecting peace, order and good government. That might be shortened by dropping out all the words except the word "government," giving the governor in council power to do anything he wishes with respect to the carrying on of government. That is what it means. And that notwithstanding any statutes that may exist. I think that is entirely wrong. We have had recently the suggestion of giving to the war veterans the choice between continuing to receive their salaries as civil servants, where they are civil servants, and

retaining their pensions. Sir Arthur Currie the other day took strong exception to parliament dealing with a matter affecting war veterans' pensions except under the Pensions Act. Sir Arthur was perfectly right in that, but I am amazed that those who, like Sir Arthur, take exception on that score, which relates to but a single enactment, are apparently prepared to stand silently by and see the House of Commons part to the governor in council with all of its enactments, and allow the governor in council, under the guise of legislating for peace, order and good government, to pass, notwithstanding any statute of this parliament, whatever orders in council he may please when parliament is not in session. After all to legislate is the function of parliament; legislation is not the function of the executive. The constitution gives certain powers to the executive for administrative purposes, to the judiciary for judicial purposes, and other powers to parliament for legislative purposes. Legislation is the function of parliament, it is not the function of the executive, and when the executive seeks to take from parliament the power of legislation it is taking away practically the whole basis on which parliament itself rests.
There is a third objection to this legislation from the point of view of its ignoring the established practices and methods of procedure of parliament. It gives to the provinces grants in aid out of the public treasury in a manner which precludes any proper supervision of federal expenditures.
We have had this legislation, or enactments substantially the same, for considerably over two years now, and while our objection to it at the outset was based principally upon what it would mean in the way of extravagance and waste of public money, we were overruled in our objection on the score that it was likely to be but for one year, and that the end would later on justify the means that had been taken. The country has had opportunity to see whether the end does justify the means. I think the people are now discovering that the free hand given the administration, combined with its method of dealing with the unemployment problem has been a very expensive one. The people are beginning to realize what it is going to cost them in the price of sugar, in income tax, and other taxes. It is all very well for the nation to become aroused over the additional taxes put on, over increases in expenditure and over the fact that we are not balancing the budget. But here is where the increases are taking place. They are occurring primarily because of the method which the government has adopted in dealing with the unemployment problem.

Relief Act, 1933-Mr. Mackenzie King
Anyone who listened to the minister as he was explaining how money had been spent under the act must have felt that the whole business was very slip-shod and haphazard indeed, and that so far as the minister and the government were concerned there was no real control at all over expenditures. What happened? We questioned the minister time and again as to how such and such expenditures came to be made-how it was, for example, that the navy league in Toronto got a contribution from the federal treasury to help it out. The minister's answer was that the Ontario government had decided to give the navy league a particular power. In another instance the explanation was that some municipality had decided upon a certain method of spending public money, the province had to help the municipality, and the dominion was committed by its system of dealing with these matters to help the province. And so it has proceeded from the start.
The ministry recognize no responsibility in the matter of expenditures beyond seeing that the money gets out of the federal into the provincial treasury. Now that is a thoroughly bad principle. It is bad in two ways. In the first place, it induces the municipalities and the provinces to engage in expenditures which they would never think of incurring except on the strength of a percentage grant from the federal treasury; and in the second place it is bad because it does not enable the federal government to follow up the expenditures of its own moneys, the moneys of the people, to see whether these expenditures have been made in the most economical manner possible.
I believe, from what we have heard in the last day or two, that many of the provinces and municipalities have pretty well reached the limit of their capacity to carry on their own business. Indeed, we have been told that part of this money which we are voting is used to meet current expenses of at least one of the provinces. The government is loaning money on the one hand to the province and on the other advancing the province the wherewithal to pay back to the federal treasury the interest on its own loans. That is the sort of thing that is being done under this legislation. So long as that practice keeps up it simply means that in Canada we are heading towards bankruptcy.
The Minister of Finance may come and plead with the house that on ordinary expenditures he has pared things to the bone; but this expenditure is as much a charge upon the treasury as any other, and it is running wild with the taxes of the people of Canada to have money spent in the fashion it is. At the very beginning we on this side of the 53719-218
house urged as strongly as possible that a conference should be held between the dominion and the provinces, looking to some financial readjustment; we insisted that there ought to be an arrangement whereby the provinces woud secure what they were entitled to in the way of federal subsidies, and that a stop should be put to grants in aid in addition to subsidies. Grants in aid I believe were never intended by the fathers of confederation; I do not think they contemplated that such grants in aid should be made in addition to the regular subsidies.
It is perhaps not too late yet, and this is the only opportunity that may be available to urge this upon the ministry, to effect the necessary readjustment. I do say that while further borrowing is going on on the part of the provinces and municipalities the government ought to see that some arrangement is made whereby these moneys which we are voting to the provinces for relief purposes will not be made the means of enabling the provinces to continue carrying on a number of services which they are really unable to carry on 'by -means of their own taxation. I venture to say that one of the effects of the money paid out of the federal treasury for relief purposes has been to cause the provinces and the municipalities in different parts of Canada to carry on a number of services which they would have abandoned long ago had we not been supplementing their treasuries in the way we have done; and if the federal government goes on supplementing provincial treasuries ad libitum in all parts of the dominion, then I say we can never hope -to get out of the morass into which we are sinking financially as a consequence of such expenditures.
If parliament will designate the uses to w'hich this money is to be put, and will exercise its own supervision over federal expenditures, I believe this House of Commons will be prepared to do its share to as large an extent as could possibly be desired in the endeavour to solve the unemployment problem. But the practice of having one authority raise the revenue and another authority spend the money thus raised is absolutely wrong. It is not a sound principle, and so long as it continues it will spell disaster to the financial operations of this country. The only body that has the right to expend moneys is the body that raises what is required by taxation, and vice versa.
May I say to the minister and to the government that in my view, another strong objection to the measure is that it gives no evidence of any comprehensive, coordinated, constructive policy on the part of the administration in

3444	COMMONS
Relief Act, 1933-Mr. Mackenzie King
dealing with this great problem of unemployment. It should have afforded the basis for a truly national people's movement which would have linked up the activities of individuals or organizations, municipalities and provinces in one great national endeavour to provide work and sustenance for all. After all, unemployment is the greatest problem before the people of Canada at the present time. The ministry to-day is simply washing its hands of any direct obligation in the matter apart from contributing money out of the federal public treasury for other public bodies to spend. That has been the mistake from the beginning. The government at the outset should have had its own policy and, in so far as federal moneys were being spent, they should have been spent under the direction of a commission which would have accounted for every cent to the ministry, and through the ministry, to parliament.
I intended, when speaking about the extent of controlling expenditures, to observe that an anomalous feature of this act is that the only limit that is stipulated anywhere with regard to any amount is that which is fixed in one of the clauses of the bill as to what is to be paid out in direct relief. What irony there is in the fact that in a relief measure which covers expenditures for almost everything the only thing limited in amount is the money that is to be spent in actual direct relief. As regards everything alse-and the ministry is practically free to use a blank cheque for any purpose-there is no limit whatever.
Another objection that comes to my mind is this. While this measure purports to be an act to aid in the relief of unemployment, it is in reality for two other purposes as well, purposes that are anything but justified in the light of existing circumstances. One of these purposes is to enable the ministry to carry out some of its policies in other directions, policies which are apart altogether from relief. For example, the ministry has a certain policy under the Canada-United Kingdom trade agreement. We were told that agreement would promote trade between the United Kingdom and ourselves. As a matter of fact, that agreement has not promoted trade to the extent which the ministry expected or hoped it would. What are they now preparing to do? They are going to use part of these unemployment moneys to subsidize the export of commodities from Canada to Creat Britain; when the Minister of Finance comes down with his financial statement a year hence we will not be told that the cost of subsidizing this export trade is part of the ordinary expenditures of Canada, expenditures chargeable to the promotion of
LMr. Mackenzie King.]
trade; we will be told that it is part of the expenditure on unemployment relief. That is wrong. More than that the minister knows, as I know, that included already in amounts that have been named, for unemployment relief, so-called, there are charges that ought to have been made against the mounted police vote, representing money required for the purpose of increasing the mounted police force; there have been expenditures for railway ties amounting to over a million and a quarter dollars which should have been charged to the railway account. There has been legislation respecting amendments of the Bank Act and the Insurance Act and matters of the kind which should never have been dealt with under relief, but rather under the appropriate enactments, and discussed in parliament in relation to that legislation. So I say the act commits us to a number of objects which we should not be asked to be committed to at all in any measure relating to the relief of the unemployed.
The other great objection, Mr. Speaker, is that under the guise of dealing with a condition of distress, and! largely because of existing fear that out of this distress some critical situation may arise, we are being asked to establish a dictatorship in this country. This power given to the governor in council to do anything at all in the name of peace, order and good government, with an open treasury at hand, would enable the governor in council if it was so desired, as I mentioned in a previous discussion, to bring an army here to overawe parliament. That could have been done legally under this measure but for the adoption of the amendment which was passed a moment ago, even though .parliament was in session at the time, no matter how parliament might protest under its own laws. They may wish a Mussolini in Italy, a Stalin in Russia or a Hitler in Germany, but we do not need a dictator in- Canada; we do not need anyone exercising that sort of arbitrary autocratic authority in this country, nor do we wish Canada to be placed in the same category as those other countries in dealing with any domestic situation. I cannot repeat too often, Mr. Speaker, that the pride and security of British peoples with respect to all such matters lie in their parliamentary institutions, and this parliament is the body to which the people of Canada must and have a right to look to have taxation controlled, and for peace, order and good government in the true sense of the words. The less we get away from relying upon the will of parliament as a whole, rather than upon the individual will of a few men, no matter how

Relief Act, 1933-Mr. Woodsworth
well intentioned, how earnest or how anxious they may be, and the more we rely upon the common will, the better it is going to be for everyone concerned.
It is little short of a tragedy, Mr. Speaker, when we consider that this parliament has been meeting now for almost three years, and that during all that time we have had this great unemployment problem before us as the most urgent of all problems and that there has been hardly any general discussion of that problem in this House of Commons. I refer particularly to hon. members on the government side of the house. How many members on the government side have given this House of Commons and the country the benefit of their knowledge of conditions in the communities from which they come? How many suggestions have we heard from across the way which would help meet the situation or assist in bringing about a constructive, comprehensive, coordinated policy? For the most part hon. gentlemen opposite have been wholly silent; they have left everything to the ministry, which has obtained from this parliament these absolute powers to do as it pleases. Now we are beginning to discover the cost; we are beginning to find that the moneys we have been spending are running up into colossal figures. I think the minister told us that in two years and two months which had elapsed at the time the estimate was made they have spent or loaned to provincial governments, with very little chance of being repaid, something like $115,000,000. I suppose if we keep on for another two years another $115,000,000 or more will have been spent in the same way. What does SI 15,000,000 represent? It represents more than the total expenditure of Canada in any one year prior to the war. We cannot go on spending $115,000,000 every two years under these blank cheques and this blanket authority and not expect the financial condition of this country soon to reach a point where the whole credit of the nation will be threatened, if indeed that point has not been reached already.
For the reasons I have mentioned, Mr. Speaker, including the fact that apparently the government has no policy except the dole to the extent of $20,000,000, no constructive way of dealing with this all-important situation, we on this side of the house must strongly oppose the third reading of this bill.


James Shaver Woodsworth: Mr. Speaker, some of us are
opposed to. this bill but for reasons altogether different from those expressed by the right hon. leader of the opposition (Mr. Mackenzie 53719-218J
King). The right hon. gentleman feels very strongly that the constitutional aspect of the question is the important point. When the second reading of this measure was under consideration I voted with the leader of the opposition, not because I agreed as to the constitutional side of the question but because I objected to the limitation of $20,000,000 as the amount to be spent for direct relief. It seems to me that the constitutional point may be easily overdone. I recognize that there is a danger of giving the government very great and indeed almost dictatorial powers, but may I submit that to a large extent the government has those powers to-day, though they are not so complete as those to be conferred under the bill now before us.
The right hon. leader of the opposition spoke of parliament having been sitting for three years, and he said it had been almost impossible to get a full discussion of this matter. I submit, Mr. Speaker, that this is what we must expect under our present party system. The government has a clear majority of twenty or thirty; of course the}' can carry through any measure they may desire, and we are reduced to nothing much more than a debating society. I think we must recognize the actual position. We get up and utter our protests; we repeat them again and again, but we all know perfectly well that when all the protests are finished, under the present system the will of the government must prevail. So I do not think there is any use trying to deceive ourselves in the matter. The trouble is that as it is constituted to-day parliament is ineffective, and it seems to me that we must either reorganize our way of doing business in this country or if the business of the country is to be carried on we shall have to put up with some sort of dictatorship. I agree that to a considerable extent we have that dictatorship now, but by this measure we are simply taking another step in that direction.
Let me suggest, Mr. Speaker, that matters were not so very different before this government came into power, particularly with regard to unemployment. Some of us did our best to get the late government to act, but they sat tight and refused to do anything month after month and indeed year after year, though unemployment was gradually growing worse. I would rather give dictatorship to a group who would go ahead and help solve the problems facing the country than simply discuss matters here indefinitely and get nothing done. It is not so much the dictatorship I object to as the fact that the dictatorship is under a group of people having the ideals of the present government. I find that during these days the government is worrying about the

Relief Act, 1933-Mr. Woodsworth
protection of our credit and the financial position of Canada. I am not oblivious to the need that our credit and financial position should be protected, but I think there are other things a great deal more important. If we give great powers to the Dominion government and they proceed to use those powers in order that the banks and insurance companies may write up and keep written up their assets, and in order that loans may be made to the railways, I would say that the result will be disastrous indeed for this country. That is one consideration which makes me hesitate in giving more powers to a government that is so definitely committed to the priority of the financial interests of this country and that has so far so sadly neglected the interests of the great masses of our people.
There is, however, one consolation I have in the government talcing this power of peace, order and good government, and that is that it effectively removes the objection that has been given us for weeks and months past, namely, that the government could do nothing in this matter because of lack of jurisdiction. We have been told again and again that this problem of unemployment was primarily one for the municipalities, secondarily for the provinces, and that only in the last remote contingency should the government of the dominion step in to do anything in regard to the matter. On the government's side constitutional questions were raised that they could not interfere with the jurisdiction of the provinces; that the latter might resent this kind of thing and so forth. I aria glad to think that with these powers being taken over by the dominion government, there is absolutely no further excuse for inaction on their part.


Richard Bedford Bennett: If the hon. gentleman will direct his attention to the statute, he will observe that 'this is within the legislative competence of parliament; there is no destruction of provincial jurisdiction.


James Shaver Woodsworth: Yes, but these are practically war measures, and in time of war almost anything comes within the legislative competence of parliament. These are the residual powers of government. I hope the Prime Minister will not try to evade the responsibilities of the power that he is taking by this legislation.
There is no reason why under this bill the Dominion government cannot give relief directly and on any scale it likes to individuals in any province of Canada. I would, however, point out that as far as we can ascertain, the purpose of securing powers of this kind is not primarily that we may provide for the needs of the unemployed. As the leader of the

opposition has suggested, these powers may be used for repressive measures, for instance, still further to increase the mounted police force or of any other body of that kind. That is what I fear. I suspect the government is intent on repressive measures rather than on definite, constructive relief schemes. I would point out, as I have done before, that apart from the comparatively small provision that is being made for the movement back to the land, construction camps and camps under the jurisdiction of the military, the only plan that at the present time the government has put forward is that of providing doles. Several years ago, the Prime Minister said, and I think quite rightly, that what was needed was not the dole but work. That position has now been abandoned and the government says:	We do not
propose to provide work; we propose merely to provide the dole, direct relief. The only provision that we have at this time is this $20,000,000 to provide for the direct relief of a vast body of people.
Again let me repeat-and I think I shall put this in a way that is correct this time- that in the last year there have been 1,357,000 people receiving relief. As one moves up and down across the country, one cannot but be struck with the very large number of others who are receiving aid through private agencies and many in their own homes, for instance, relatives who are being supported and helped by their families. I should imagine the number who are really affected by unemployment to-day is nearer the 2,000,000 than the 1,300.000 mark. That is an appalling situation and we are proposing to meet it merely by means of the dole, and a very haphazard method, not the regularized one of unemployment insurance, not one by which those who work can directly help those out of work, as under a possible insurance scheme, not a plan that would in any sense give adequate maintenance, but one that gives the least possible assistance with which people can get along.
I do not think I would again have spoken on this subject to-day had I not received this morning a letter from the city of Montreal in which reference is made to a quarrel between the metropolitan area and some outlying suburban district on the question whether one pint of milk should be provided in a given case and whether a child of six or eight years should get or was too old to get the pint of milk that, was allowed. It is disgraceful when we do not know whether we can get sufficient milk to provide for the young children of the country, and yet these are the low standards that generally prevail

Relief Act, 1933-Mr. Woodsworth
in many of our communities. It is very easy for the government to reply that this is entirely a provincial or municipal matter; that they do not set these standards; that they have set no limits to what they will do. In practice those limits are already set because the municipalities are so near bankruptcy that they cannot provide anything more than they are at present doing. Under such circumstances, so long as we maintain anything like the present arrangement of the federal government giving one-third, the provincial government giving one-third and the municipality giving one-third, this means inevitable hardships on our people. If we are going to give the dole at all, we should give it on an adequate scale; we should give relief in such a fashion that our people can maintain something like a healthy and decent standard of living.


Edward James Young: Can we do that?


James Shaver Woodsworth: I am surprised that the hon. member for Weyburn should ask: Can we do it? Does he mean that the babies of this country have to suffer because we cannot finance an adequate relief scheme?


Edward James Young: That is not what I mean.


James Shaver Woodsworth: Does he mean that we have not the finances to do it? We have under this legislation the power to do it. The next question comes: Have we the finances to do it? I think there are certain possibilities even now of remunerative work. If the babies have not milk, why can we not put certain people to work on farms to produce more milk? If the children have not shoes, why can we not run some of these idle factories and provide shoes for the children? If we are having large numbers of people in our population wretchedly housed, why can we not put at least a certain number of mechanics at work to rebuild some of our slum areas? That is quite possible. There are other works that will not directly supply commodities, great public works that might be undertaken which would supply work to the people and at the same time distribute greater purchasing power among the population generally. I do not think the question to-day is primarily one of producing more necessities, it is rather one of distributing more purchasing power. Under our present wage system, the only way in which we can do that is to employ people and give them wages and then they can buy back what they produce. If people were getting steady wages to-day, they would not need to come to the
municipal depots to get milk; they would buy it. If they had decent wages, they would not have to go to charitable institutions for shoes; they would buy them. If they were' getting work, they would build their own homes. The trouble is that the people have not purchasing power. They cannot get money without, working for it. Under these circumstances it seems to me that what should be given is work that will provide men and women in this country with wages. I do not think that any large majority of the people want to continue on charity, although if we keep on in this way very much longer we shall undoubtedly develop a class of people who will be lazy and look to the government for everything. At the present time most of our people want to work for what they get, but under our present arrangements we are not providing the work.
I think the hon. member for Weyburn (Mr. Young) in his question suggested the real answer so far as the government is concerned, that they cannot finance an adequate relief scheme. The budget however would seem to show that every cent in the form of interest that is demanded on the bonds outstanding has to be paid. The Prime Minister would tell us that that is a part of our national obligation. He would tell us that we must keep faith with the investors, and so on. Well, I should like to stand by all our obligations and keep faith with the investors, but, Mr. Speaker, I submit that we should keep faith with the people of this country who migrated here in order to make a living for themselves and their families, and we should keep faith with the sons of the pioneers who sacrificed one or two generations in order that theii children and their grand-children would have a heritage in this Canada of ours. We are not keeping faith with the ordinary people of Canada. We are keeping faith, if you like, with the investors scattered all over the world, as is especially the case with those who hold railway bonds. We must keep faith with them, but what about keeping faith with our own people? There is nothing whatever said about them. We must protect our bondholders. Yes, I would say so, if we can do both, but undoubtedly if we cannot do both the welfare of the men, women and children of this country have priority over that of the bondholders.
Almost every class in the community is taking its loss. The business men have been taking their losses right along for some years now. The wage earners have been taking their loss in lower wages and in unemployment. The civil servants have been taking


Hon. PETER HEENAN (Kenora-Rainy River):: Mr. Speaker, had a commission been
appointed to look after the expenditure of federal moneys for relief purposes, it would have served to bring out what the Prime Minister and the members of the government at the outset stated was their intention, that the moneys voted by the federal government for relief would go towards wages. I recall that at the time I asked the question, whether the money was intended to be for wages or to assist the provinces in purchasing machinery, and the reply I got from the government

Reliej Act, 1933-Mr. Heenan
benches was that the moneys voted by the federal parliament were intended for wages. The other evening I pointed out to the Minister of Labour (Mr. Gordon) that there was also another intention of the federal government, so stated by the Prime Minister and the Minister of Labour himself, and in fact the regulations themselves provide for it, and that was that the moneys should be expended in a non-partisan manner. I pointed out to the Minister of Labour the other day where it was shown in the public accounts for the year 1931 that in the town of Kenora there were two hardware stores, one operated by a Liberal and the other by the president of the Conservative association. They were both good citizens; I have no complaint against either of them. In the Liberal store there was spent during the year the magnificent sum of $125, and in the store owned by the president of the Conservative association the sum of about $30,000.
This afternoon I received the public accounts for Ontario for 1932, and I believe the figures I am about to disclose will open the eyes of the Minister of Labour. I aim not blaming him any more than that I believe he should have evolved some method whereby federal moneys should be spent in the way the federal government stated they would be spent, namely in a non-partisan manner. In the store owned by the Liberal only $373.76 was spent whereas in that owned by the president of the Conservative association $176,652.06 was spent. That is not fair; it is not right. If there is anything which would make me vote against this bill, it is the fact that I know the moneys are being spent by the government of Ontario in a partisan manner. We find the proof of it when we review the amounts spent in the stores of these two gentlemen. The Liberal has been in business for years, and his father was in business before him. He got only $373.76 because he was a Liberal, and it is quite evident that he had something the Conservative store could not supply, or he would not have got that much. On the other hand the store owned by the president of the Conservative association got business to the extent of $176,652.06. I ask the minister if he thinks that is fair, and if he is going to take steps to see that a square deal is given by the provincial legislature.


Mr. GORDON:: For what year are those
figures?


Peter Heenan: These figures are in the
public accounts for 1932, which I just received to-day. I am not suggesting the money was
not spent properly, or that proper value was not given. Other times in this House of Commons I have taken up the case of the ordinary labourers against whom there had been discrimination. I have stopped talking about them because I find that there are now hundreds of men in different parts of the country pleading their cause. I drew their case to the attention of the countiy, and the result is that others have taken the matter up, and consideration is now being given to it by the Ontario legislature.
However, the condition has spread to businessmen. We find that while in one store owned by the Conservative over $176,000 was spent, only $373 was spent in a similar store owned by a Liberal. I do not believe it is right to punish a man because of his political beliefs. The regulations under which the provincial legislature got this money were to the effect that it would be spent without either political or religious discrimination.


Wesley Ashton Gordon: There has never been any complaint.


Peter Heenan: What is the use of complaining? He would not have got the $373 if he had complained. I know there have been complaints, because time and time again the provincial government has been approached. Further, I would not mind if the workmen were getting what the government promised. Let us take, for example, the general work on the trans-Canada highway. We find that there was spent the sum of $10,839,688.74. Out of that amount $3,817,820.73 was spent for wages. The other amount is for the purchase of supplies, and one thing and another. Then, $12,622.56 was spent for police patrolling the highway. We paid the provincial police department a share of that amount of money. Surely the federal government ought not to pay the provincial legislature for policing of provincial highways.
I could go on, but I do not wish to be accused of being too narrow. In connection with the supply of provisions I shall refer to two Conservatives, because I do not believe there is a Liberal supplying provisions. Of the two Conservatives in question, the one who I believe is on the executive committee of the Conservative party supplied $17,565 worth of provisions, whereas the other one, who is not on the executive, supplied only about $2,000 worth.


Wesley Ashton Gordon: I understand camp supplies are arranged by contract.


Peter Heenan: I am only going by the
record shown in the public accounts under the heading "provisions." I am satisfied the
Relief Act, 1933-Mr. Heenan

goods were purchased, and proper value was given, but I am suggesting that there was not a square deal. I know the minister must have his hands full directing the affairs of the Department of Labour, to say nothing of his other duties. Had he had a commission, that body could have seen that the moneys were spent in the proper manner. There might have been some kind of arrangement whereby the provincial governments could supply machinery and camps and the Dominion government pay wages. A division of expenditures could have been arranged so that we would have known what we were paying.
I have before me this book containing the public accounts and I defy any lawyer or auditor in the world, in fact I defy any person except the man who compiled the book, to gain very much information from it. Here we find page after page containing the names of hundreds of men who received payments ranging from SI up to S176,000. The book does not show whether the men in question lived in Kenora or in some other part of the province. That is all the information we have before us, unless the minister could give us more. I do not believe he has it in his department. Even if he had he could not take the time to tell us just where the money went. Had there been a commission the minister would have known by this time how many men were unemployed, and how many were on relief. He could have known the trades those men had followed. For instance, he could have told us how many miners, carpenters and machinists were unemployed. I agree with the hon. member for Temiscouata (Mr. Pouliot) when he says this is the information we ought to have for future reference, because, as stated by the hon. member for Winnipeg North Centre, even when we come to an end of this depression, unless there is a great change another will follow. With our new machinery and our added ability to produce more speedily and in larger quantities, unless our markets are enlarged it will not be many years before we have another period of depression, and my thought is that each succeeding depression will be more severe. So we ought to provide for that; we ought to know how many railway men we have out of work. I could tell you now pretty nearly how many you are going to throw out of work with the bill at present before the house, and those the railway companies with the encouragement of the present government have thrown out. Wo have a maximum of $20,000,000 to take care of those on relief. Where are you going to put all these railwaymen and their families? They have been working part time now for a number of years; they have 
no money, put by. What are you going to do with them and with all those who are on relief at the present time-1,357,000? With 820,000,000 you would not give them five cents per head per day.


Wesley Ashton Gordon: That is five cents more than your party would give them.


Peter Heenan: We were giving men work at proper wages; we were not giving them doles. If the province had followed our lead and put on public works at proper wages the country would not be in the position it is in to-day. But you established this dole, and you see where it is leading. Having this information you would have known how many of various callings were out of work, would have been in a position to make provision for the future, would have known how these men could be fitted into occupations that we might be able to find for them.
As far as the provision relating to peace, order and good government is concerned, and having regard to the statement the Prime Minister made when he first introduced it, that its purpose was to take care of those who sought to disrupt our peace and harmony, and were not law-abiding citizens, I claim that provision has no business to be connected with an unempolyment relief measure. I consider it is an insult to the labour men of this country, who have shown the greatest of patience. I agree with our leader that there is time yet to appoint a commission; I think the government could get real value from it. We have had commissions on railways and commissions on radio and we are going to have a commission on finance; we have had commissions on the tariff, on the civil service, on almost everything in the world except the most important thing before us to-day, and that is the unemployment problem. I appeal once more to the government to appoint a commission so that we shall at least have some information on which to base our policy in the future. I appeal to the minister-I want the Finance minister to listen to me; the Minister of Labour cannot-he is occupied in talking to someone else. When the government first asked for $20,000,000 the Prime Minister said it was for the purpose of giving wages, and that it would operate in a non-partisan manner. I suppose we could bring up all sorts of cases from Nova Scotia, Quebec, British Columbia or somewhere else, but I am dealing only with the province I know and am here representing, and I say that when the president of a Conservative association in the hardware business in a little town like

Relief Act, 1933-Mr. Brown
Kenora can get $176,000 of business while a Liberal in a similar store gets only $373, it is not a square deal; it is not what this parliament intended. I oppose the third reading of the bill.


Mr. J. L. BROWN (Lisgar):: Before this
bill is read the third time I wish again to bring to the attention of the government a matter of which I have already spoken on a number of occasions, and I take this last opportunity to discuss it again. Perhaps .the minister in. charge of the bill will remember that when it was in the resolution stage, just before the Speaker left the chair, I mentioned the matter of potatoes. To some it may seem a small thing, but it is very important to the people affected, and although I have already stated the situation two _ or three times, it seems necessary to repeat it.
Last fall I received communications from my people requesting the privilege of bringing in potatoes free of duty from North Dakota. The first report was that they could get them for ten cents a bushel; indeed I think one telegram said six cents. To my request the Minister of National Revenue (Mr. Ryck-man) replied by a question; he asked me if I thought ten cents a bushel was fair market value. I received further communications; this time my people could get these potatoes for nothing. Again I approached the Minister of National Revenue, but he told me there were better ways of dealing with the situation than by creating sectional tariffs. When I mentioned the matter on the last occasion I wanted to know what better way the government had in view to provide for the wants of these people than that of allowing them to get the potatoes in free. I received no answer on that occasion. I had decided that it would be necessary to let the matter drop, but since I last spoke of it in the house I have received another communication, which I propose to read. My first impulse was to read this letter to the house immediately on receiving it. I felt however that courtesy demanded that I again approach the minister. I did so and have waited until this moment to receive an answer, but so far none has been forthcoming.
The following is the letter I received:
Morden, Man.,
March 17, 1933.
Mr. J. L. Brown, M.P.,
House of Commons,
Ottawa.
Dear Mr. Brown,-
As I am the reeve of the municipality of Stanley now I am everlastingly asked why we cannot get potatoes from across the line as they are so cheap there. As I know, you have
tried your best last fall to get the duty removed and failed, but now comes the time when people want a few bushels for seed and we wonder if it would be any good to try again. Dr. Wiebe-
Doctor Wiebe is the local member in the Manitoba house.
Doctor Wiebe said he would try and get a resolution through the provincial house regarding this. People have gone through the winter without any potatoes, or nearly so. We got a fine lot of vegetables donated by a society of Birtle last fall and we distributed them as fairly as we could. The largest family with fourteen at the table did not get any more than three small bags of potatoes and this is all they had all winter.
Hoping that you will try again and that you may succeed, I am,
Yours very truly,
J. H. Martens.
As I said, my first impulse was to bring the matter up when we were in the committee stage on this bill. However, I delayed, and I wrote this letter on March 22nd to the Minister of National Revenue:
Dear Sir,-
I am enclosing a copy of a letter from the reeve of a Manitoba municipality. In view of the communication that has passed between us in regard to this matter, there is no need for me to enter into further details. My first impulse on receiving this letter was to immediately read it in the house, and, if my sole desire were to make political capital out of the situation, I assure you this would afford me a good opportunity, as there is nothing that this government has done or failed to do, that has aroused greater resentment among the people of Manitoba than has this particular . matter.
I shall be glad to hear from you at the earliest possible moment that you have decided to grant the request of these people with reference to the tariff on potatoes. If you cannot do this, then I want to know what is the better way that you suggested in a former communication.
Having refused to allow these people to supply their own needs in a way that would have cost the government nothing, I feel that their case demands special treatment and that some provision should be made for supplying them with the seed for the coming year. I do not know what the price of potatoes will be in Dakota this spring but naturally they cannot expect to get them as cheap as they could have last fall.
I bring this matter again to the attention of the minister directly in charge of this bill and I urge on him that he do something to implement the promise-perhaps it was not a promise, so I will say suggestion-that there was a better way of dealing with this question than by granting sectional tariffs. It would not have been an unheard of proceeding had the request of these people been granted. On two different occasions the government of Canada allowed seed to come in
Relief Act, 1933-Mr. Reid

from Dakota to serve a community only a little further west than the community referred to in this communication. On one occasion I brought the matter to the attention of the Liberal government and action was taken in less than two weeks. I had occasion to bring the matter to the attention of the present government and it took them about six months, when finally the request of the people to be allowed to import hay and straw free of duty was granted.
Now this is a serious matter to these people. I think the government has already received a resolution that was passed in the Manitoba legislature dealing with the same matter, and I may add that when it was being considered last fall the Manitoba government undertook to see that the privilege, if granted, would not be abused; that is to say, they undertook to see that no person should be allowed to make it a commercial transaction but that the people would supply only their own needs.
I again ask the minister in charge of this relief measure this question: What better way has the government in view to meet the situation than by creating a sectional tariff, according to the statement of the Minister of National Revenue? I call this to the hon. gentleman's attention now. I would have deferred making further reference to it, and giving the Minister of National Revenue a chance possibly to reply to my last communication. However, having waited some days, and no reply having been received, I deem it necessary, since the bill is about to get its third reading, to bring the matter once more to the attention of the government.


Thomas Reid: I have one suggestion to offer to the Minister of Labour. When the bill was being discussed in the house he intimated that it was the intention of the government to try to provide useful work for the thousands of single unemployed men in ithe camps in British Columbia. In that connection I have a suggestion which I think has merit. As the hon. gentleman well knows, our forests are being gradually depleted. In New Westminster we have a plant which is used for the extraction of seeds from coniferous trees such as spruce, firs and balsam. These seeds are shipped to practically every country in the world but we in Canada are not using any of them. We have also dominion national paries as well as the provincial parks, and I would suggest to the minister that when he is looking around for useful work for the thousands of single homeless men who have been fed and looked after during the past winter, the question of reforestation be given

serious consideration. I do not think we should wait until all our forests are depleted. Why should Canada provide seed for every other country while we in this country do not take care of our own forests, looking to the future? I offer this suggestion to the minister in all seriousness. I submit that it is meritorious and should be carried out, in view of the fact that we have seed and we have land which originally grew forests and which is ready for another crop.


Mr. ANGUS MacINNIS (Vancouver South):: 
John Livingstone Brown: Has the minister any statement to make in reply to my question?


Pierre Édouard Blondin: The minister, on the third reading, has no right of reply.


Mr. McPHEE:: I was paired with the hon. member for Regina (Mr. Turnbull). Had I voted I would have voted against the motion.


Mr. RYERSON:: I was paired with the hon. member for Norfolk-Elgin (Mr. Taylor). Had I voted I would have voted for the motion.


Mr. GARLAND (Carleton):: I was paired with the hon. member for Russell (Mr. Goulet). Had I voted I would have voted for the motion.


Mr. DONNELLY:: I was paired with the hon. member for Cape Breton North-Vietoria (Mr. Johnstone). Had I voted I would have voted against the motion.


Mr. MITCHELL:: I was paired with the hon. member ,for Parry Sound (Mr. Arthurs). Had I voted I would have voted against the motion.


Mr. MULLINS:: I was paired with the hon. member for St. Boniface (Mr. Howden). Had I voted I would have voted for the motion.


Mr. FACTOR:: I was paired with the hon. member for Halton (Mr. Anderson). Had I voted I would have voted against the motion.


Ian Alistair Mackenzie: I was
paired with the hon. member for Saskatoon (Mr. Macmillan). Had I voted I would have voted against the motion.
Mr. ST-PERE: I was paired with the hon. member for South Hastings (Mr. Tummon). Had I voted I would have voted against the motion.


Mr. MERCIER (St. Henri):: I was paired with the hon. member for West Hamilton (Mr. Bell). Had I voted I would have voted against the motion.


Mr. MacLAREN:: I was paired with the hon. member for Rimouski (Sir Eugene Fiset). Had I voted I would have voted for the motion.


Mr. GOLDING:: I was paired with the hon. member for West- Lambton (Mr. Sproule). Had I voted I would have voted against the motion.


Mr. SPENCE:: I was paired with the hon. member for Northumberland, Ont. (Mr. Fraser). Had I voted I would have voted for the motion.


Mr. MURPHY:: I was paired with the hon. member for West Edmonton (Mr. Stewart). Had I voted I would voted for the motion.


Mr. BLACK (Halifax):: I was paired with the hon. member for Chicoutimi (Mr. Dubuc). Had I voted I would have voted for the motion.


Mr. MacLEAN:: I was paired with the hon. member for Royal (Mr. Jones). Had I voted I would have voted against the motion.


Mr. SMOKE:: I was paired with the hon.
member for South Oxford (Mr. Cayley). Had I voted I would have voted for the motion.


Mr. HARRIS:: I was paired with the hon. member for Cartier (Mr. Jacobs). Had I voted I would have voted for the motion.
Mr.	FOLTRNIER (Translation):	I	was
paired with the hon. member for Halifax (Mr. Quinn). Had I voted I would have voted against the motion.


Mr. THAUVETTE (Translation):: I was paired with the hon. member for Matane (Mr. Larue). Had I voted I would have voted against the motion.
Mr.	RAYMOND	(Translation):	I	was
paired with the hon. member for St. Antoine (Mr. Bell). Had I voted I would have voted against the motion.


Mr. DUPRE (Translation):: I w-as paired with the hon. member for Joliette (Mr. Fer-land). Had I voted I would have voted for the motion.
Mr.	ROBERGE	(Translation):	I	was
paired with the hon. member for Kingston (Mr. Ross). Had I voted I would have voted against the motion.


Jean-François Pouliot: I was paired with the hon. member for North York (Mr. Lennox). Had I voted I would have voted against the motion.


Mr. PARENT (Translation):: I was paired with the hon. member for East Essex (Mr. Morand). Had I voted I would have voted against the motion.
Motion agreed to and bill read the third time and passed.

Income War Tax Act



INCOME WAR TAX ACT

[Stage Direction]
The house resumed from Tuesday, January 31, consideration in committee of Bill No. 11, to amend the Income War Tax Act-Mr. Rhodes-Mr. Cowan (Port Arthur) in the chair.
On section 10-Application of sections.
The CHAIRMAN (Mr. Cowan, Port Arthur):: I am told that all the sections
have been, passed with the exception of section 10. Shall section 10 carry?


[Stage Direction]
Section agreed to.
Edgar Nelson Rhodes: I have one amendment
to propose which I think will not be questioned. I wish to add section 11, to correct an error in the French version. My hon. friend the Minister of National Revenue will move the amendment. This is to make the French version conform to the English version, which was amended in 1926. That amendment was not inserted in the French version in the revised statutes of 1927, and this is merely to correct that error.


Mr. RYCKMAN:: I move that the bill
be amended by adding at the end thereof the following section:
11. Section 79 of the French version of the said act is amended by inserting the words "au moins" after the words "d'une amends de vingt-cinq piastres," in the said section.


William Lyon Mackenzie King: Just for the
sake of information I should like to ask the minister if there is not some general rule or law which covers the translation of statutes that would1 render this amendment unnecessary?


Edgar Nelson Rhodes: There is some such rule
but apparently this was a pure omission in the codification of the law in 1927. This is merely to make the law conform to the actual bill that was passed.


William Lyon Mackenzie King: It does seem
to me that somewhere there is a statute that governs. If a bill passes this house in one language to all intents and purposes it is passed in both. Surely it is not necessary to bring in an amendment to the French translation of an English bill which has passed the house.


Richard Bedford Bennett: The right hon. gentleman has overlooked the fact that this was a revised statute. When the revision was made some words were omitted and there is no provision by which they can be added unless an amendment is made to put them into the French version. The same thing happened in one or two other measures, only the words
ivere left out in the English version. Perhaps the right hon. gentleman will recall that we had to amend the English version of one of the revised statutes because in the revision words were left in that should have been deleted and in one case words were added that should not have been there.


William Lyon Mackenzie King: The revised
statutes?


Richard Bedford Bennett: Yes. In an ordinary
statute, as the right hon. gentleman says, the matter would have been covered by the ordinary rule.


[Stage Direction]
Amendment agreed to.
Bill reported, read the third time and passed.

[Stage Direction]
The house in committee of supply, Mr. Cowan (Port Arthur-Thunder Bay) in the chair.
Immigration and Colonization-salaries and contingencies, $228,042.
William Lyon Mackenzie King: This is under civil government, is it?


Wesley Ashton Gordon: Yes.


William Lyon Mackenzie King: The minister, ever since this session opened, has been inveighing pretty strongly against immigration, but he does not seem to have reduced his staff to any extent. How does he reconcile his view that we ought to end immigration with the fact he is still maintaining such a staff?


Wesley Ashton Gordon: If the right hon. gentleman will look at the figures for 1929-30, 193031, 1931-32, and 1932-33 and note the comparison, he will see that there , has been a very large reduction in expenditures, but the reduction this year is not so large because I find that the inspectional service along the international boundary is unquestionably a much more difficult task at the present time than it has been for many years past. For some reason-and perhaps this may be an indication of the fact that Canada is not as bad a place as we paint it in this chamber-many people aire seeking admittance. Of course at any time undesirables should be excluded, but at this time even people who under normal conditions might be desirable, have to be inspected with a good deal of care in order that our labour market may not suffer by the admission of persons who will enter
3456	COMMONS
Supply-Immigration-Civil Government
industry and other activities, thus rendering the position of our own workmen more difficult. That is the main reason why very little decrease is shown in civil government thi3 year.


Mr. SPEAKMAN:: I should like to ask rather a general question: When the Minister of Finance introduced his budget, he indicated that there would be a further cut in all the estimates averaging about ten per cent in each department. These estimates of course, do not indicate that cut. Are we to understand that each of these estimates will be cut by ten per cent, or are we voting the full amount without that deduction, the government, while having that full amount voted, in the budget pledging themselves to spend only ninety per cent of the money voted?


Wesley Ashton Gordon: The decrease that is indicated in item 18 is by reason of a reduction in salaries and of not filling positions that have become vacant.


Alfred Speakman: That is not my question.


Wesley Ashton Gordon: There is a ten per cent
deduction from the vote as indicated, the details of which are found on page 74.


Henry Elvins Spencer: With regard to the Canadian doctors who were sent to Great Britain and Europe when immigration was coming to this country in good volume, has it been found possible, now that immigration has been reduced considerably, to cut down that staff of doctors?


Wesley Ashton Gordon: Yes, the staff has been reduced very materially. Right now we have about six doctors, while prior to, say, three years ago, we had something like fifteen or sixteen.


Henry Elvins Spencer: Where are they stationed?


Wesley Ashton Gordon: Three are stationed in
Great Britain and three on the continent, one at Paris, one at Antwerp, and one I think at Rotterdam.


Alfred Speakman: I do not think the minister quite caught the gist of my question; I may not have put it clearly. It was this: When the budget was presented, the Minister of Finance made the statement that in addition to the reduction in expenditures as shown in the estimates as they now appear, a ten per cent flat deduction would be made in the interests of economy. That deduction does not, of course, appear in the estimates because they were prepared and presented to the house before the Minister of Finance made his statement. Are these estimates to be considered 
as being voted less ten per cent, or are we voting the original amount and does the government then in effect pledge itself to expend only ninety per cent of the money now voted, in order to comply with the statement of the Minister of Finance that an additional cut would be made in the estimates of ten per cent in the interests of economy?


Wesley Ashton Gordon: With respect to at
least the item at present under discussion the decrease as shown, plus the ten per cent statutory deduction, is all that the government has in contemplation unless during the course of the year some further reductions can be made. This vote, as I have indicated, covers salaries for officers on the boundary and in Europe, and there will be no further ten per per cent cut.


Alfred Speakman: The further ten per
cent reduction as intimated by the Minister of Finance will not apply to the salary votes but only to the other votes?


Wesley Ashton Gordon: That is the way I understand it.


Alfred Speakman: I was wondering just
where it did apply.


James Malcolm: It is hard to determine
exactly what the salaries are under the Department of Immigration and Colonization, as they are spread over so many votes; for instance, under vote IS, the details of which are shown on page 74, and then under vote 63 we have immigration, salaries and contingencies, SI,417,000. Can the minister tell us what salaries would be included under vote 63 in addition to those detailed on page 74?


Wesley Ashton Gordon: The item we are now discussing is for salaries at Ottawa generally speaking


James Malcolm: The permanent staff?


Wesley Ashton Gordon: Generally speaking, and
the others are outside of Ottawa, in Europe and on the boundary.


James Malcolm: Under item 18, according to the details set out on page 74, the total staff cost 8228,380, from which is deducted the statutory ten per cent, leaving a balance of 8205,542. I undertood the minister to say a moment ago that the promised economy of the Minister of Finance in his budget speech of a few days ago will not have any effect on this vote. Might I ask the minister, in view of the desire of the Minister of Finance to effect economies, why he needs to retain at this time, when he is not encouraging immigration, a director of publicity at 84,320, and

Supply-Immigration-Civil Government
an assistant director of publicity at 83,000? What publicity are we engaging in to secure immigration at the moment, when it has been intimated we are trying to discourage it?


Wesley Ashton Gordon: The publicity branch, when I took charge of the department, was quite a large one. Now it consists of the officers as indicated, a director of publicity, with an assistant and, I think, one or two stenographers. Their work consists of answering communications from the United States, because it will be recalled that up until two years ago we had some sixteen officers, if I remember correctly, in various parts of the United States, and we had many forms of advertising in Great Britain and on the continent, showing the opportunities and attractiveness of Canada to people who might come to this country and colonize. That staff was entirely done away with following the policy inaugurated in the fall of 1930. The designation of the position, director of publicity, is hardly a correct one, but it was the designation given by the Civil Service Commission when the office was created, and it has been retained. The activities of these four officers are in assisting the attempt that we are making to do some colonizing at home, a matter which has been discussed very often in this house, and I can assure the committee that these men are working and earning their money. It is, comparatively speaking, a very small staff.


Ian Alistair Mackenzie: In regard to the ten per cent deduction of $22,838, as shown on page 74 of the details, I presume that that cut applies to certain ex-service men on the staff. Will the proposed pensions deductions referred to in the budget the other day apply to these men, plus the ten per cent reduction referred to in the item, amounting to $22,838?


Wesley Ashton Gordon: I prefer to let the Minister of Finance answer the question, but if my information is helpful I would suggest that it would apply.


Ian Alistair Mackenzie: So that we may have the ten per cent reduction applying to all, and the special pension reduction under the terms of the budget?


Wesley Ashton Gordon: I should think so, yes.


Mr. LUCAS:: Have we any immigration officials in the United States at the present time?


Wesley Ashton Gordon: No.


Jean-François Pouliot: As the Department of Immigration is a minor department, and as the Department of Labour is one of the
important departments, would it not be more appropriate for the minister to be called the Minister of Labour and acting Minister of Immigration, instead of Minister of Immigration and acting Minister of Labour?


Wesley Ashton Gordon: I do not know that it would make much difference-"A rose by any
other name

"-but the fact is that I have
been appointed Minister of Labour and am acting Minister of Immigration.


William Lyon Mackenzie King: How many immigrants have come into Canada during the last year, and from where?


Wesley Ashton Gordon: I shall have that information in a minute, if the right hon. gentleman would let the matter stand.


William Lyon Mackenzie King: Are there as many immigrants as there are members of the staff?


Wesley Ashton Gordon: In 1931 there were 27,530 immigrants admitted, and in 1932, there were 20,591.


William Lyon Mackenzie King: What countries were they from, chiefly?


Wesley Ashton Gordon: In 1931: British, 7,678; United States, 15,195; all other countries, 4,657. In 1932: British, 3,327; United States, 13,709; all other countries, 3,555.


Richard Bedford Bennett: Canadians coming home.


William Lyon Mackenzie King: Has the minister any way of telling whether any of these immigrants have received relief since coming to Canada, or whether they have been selfsupporting?


Wesley Ashton Gordon: I think I am safe in saying that the great majority of these immigrants are the wives and children of men who have been legally admitted. In each case before the wives and children are admitted investigations are made to see that the heads of the families here are established ready and willing to support the people coming in. I have heard of no case where any immigrant admitted since 1930 has had to accept relief in any way.


Ian Alistair Mackenzie: Of the total sum of over 81,641,000 for the Department of Immigration, what is the estimate of the amount that can be saved by the suggested pension legislation contained in the budget address? Has any estimate been made?


Wesley Ashton Gordon: I presume the hon. member is speaking of the vote contained under civil government?


Ian Alistair Mackenzie: Yes, vote 63 plus the civil government vote.
3458	COMMONS
Supply-Immigration-Civil Government


Wesley Ashton Gordon: I think it will be found
that very little, if any, further reduction can be made. An extensive reorganization of this department took place about eighteen months ago. A great number were retired andi I seriously doubt if any further reductions can be made and the necessary efficiency maintained.


Ian Alistair Mackenzie: I do not think the minister understands my question. Would1 he make an estimate -of the amount of money which would be saved to the treasury out of this $1,641,000 as a result of ex-service men having to forego either pensions or salaries?


Richard Bedford Bennett: Not their pensions.


Ian Alistair Mackenzie: Their
salaries.


Wesley Ashton Gordon: No estimate was made
with respect to that.


Humphrey Mitchell: I should like to ask
whether the government has in mind compliance with the convention of the International Labour office with respect to the exchange of the publication of information and statistics on immigration and emigration?


Wesley Ashton Gordon: I have not sufficient material before me to answer the hon. member, but I believe the question might better be put when Labour estimates are under consideration. It would seem however that this and the preceding government endeavoured to carry out all their obligations and commitments with respect to the matter to which the hon. member has just referred. I shall look into the matter and when the Labour estimates are under review shall be glad to give any information I have.


Humphrey Mitchell: This is definitely an
immigration matter. I have long felt that there should be some statistics on record concerning immigration. I do not believe it should be necessary to put a question on the order paper to learn about the flow backwards and forwards of the various nationalities. That information should be available to hon. members, and possibly could be made up twice yearly, or at some other definite period.


Wesley Ashton Gordon: Each month a statement
covering the information to which the hon. member has referred is issued to the public press by the Department of Immigration, and
annually a very detailed statement is printed, published and laid upon the table of the house in which all the information to which reference has been made is set out in detail.


Alfred Speakman: Has the minister the
number of immigrants who have left the country during the past year, voluntarily and involuntarily? I was wondering how they balanced.


Wesley Ashton Gordon: The only figures available would be with respect to cases which have come under review by the department. I do not think we have any record of those who left voluntarily.


Alfred Speakman: In other years the
minister has had the information,-obtained, I imagine either from the border officials or from officials of the country to the south. From time to time reasonably close estimates have been made of the numbers who had left the country during the year. I was wondering if the Minister has suoh figures at hand, because these questions are asked annually, and usually are answered.


Wesley Ashton Gordon: No record is kept of those who leave the country voluntarily. I am fairly certain that the number is comparatively small.


James Malcolm: Has the minister a record of the number of Canadians returning from the United States during the past year


Wesley Ashton Gordon: A statement of that kind
we get from the American authorities.


James Malcolm: Surely we keep those
figures ourselves?


Wesley Ashton Gordon: I have not the figures
before me at the moment, but I will get them.


James Malcolm: I submit that the figure it is difficult to get is the number of Canadians going across the border outward bound. But we do through our immigration officials have the figures of those coming in.


Wesley Ashton Gordon: Before the estimates are
finally disposed of I will investigate and have a statement made.


[Stage Direction]
Item agreed to.
Progress reported.
At eleven o'clock the house adjourned, without question put, pursuant to standing order
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