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  • Standing Committee On Banking and Commerce May 9 1939 MINUTES CANADA PG 461 500

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    Yakim Bélair
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    HOUSE OF COMMONS STANDING COMMITTEE ON BANKING AND COMMERCE MINUTES OF PROCEEDINGS AND EVIDENCE RESPECTING BANK OF Mr. Graham Ford Towers, Governor of the BANK OF canada. In the course of his examination bv Mr. Iaqucs, Mr. TOI'rs SIlf,!;gest that he be allowed to answer some. Of his questions by incorporating in tho

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    9684794 Standing Committee on Banking and Commerce May 9 1939 MINUTES CANADA Pg 461 500

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    HOUSE OF COMMONS STANDING COMMITTEE ON BANKING AND COMMERCE MINUTES OF PROCEEDINGS AND EVIDENCE RESPECTING BANK OF Mr. Graham Ford Towers, Governor of the BANK OF canada. In the course of his examination bv Mr. Iaqucs, Mr. TOI'rs SIlf,!;gest that he be allowed to answer some. Of his questions by incorporating in tho

    Copyright:

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    Markieren Sie unangemessene Inhalte
    89 Ansichten43 Seiten

    Standing Committee On Banking and Commerce May 9 1939 MINUTES CANADA PG 461 500

    Hochgeladen von

    Yakim Bélair
    HOUSE OF COMMONS STANDING COMMITTEE ON BANKING AND COMMERCE MINUTES OF PROCEEDINGS AND EVIDENCE RESPECTING BANK OF Mr. Graham Ford Towers, Governor of the BANK OF canada. In the course of his examination bv Mr. Iaqucs, Mr. TOI'rs SIlf,!;gest that he be allowed to answer some. Of his questions by incorporating in tho

    Copyright:

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    von 43
    SESSION 1939 HOUSE OF COMMONS STANDING COMMITTEE BANKING AND COMMERCE MINUTES OF PROCEEDINGS AND EVIDENCE Respecting the | BANK OF cotADa, WITNESS: ‘Mr. Grattm Ford Towers, Governor of the Bank of Canada MINUTES OF PROCEEDINGS ersnay, Magy 9, Ui The Staneling Committee on Banking aad Commere aiet at 1 eeloek sam, the Chinn, Mr Moore, presiding Members present: Movers. Baker, Clark (vork-Sunbuny), Cleaver, Col I, Denelinaty, Donnelly, Dubtc, Fontaine, Hill, Howard, Saqnes, Kinley Kirk, Taunderyou Ledue, Mayhew, Moore, Stevens, ‘Taylor (Nanalmo), Tueker, In attenlance: Mr, Gralan Ford T Examination of Mr, Towers wos eontinued the Bank of Canad, Tn the course of his examination by Mr, Jaques, Mx. Towers anggested that he be allowed to answer some of Mr, Jagues! questions by incorporating in the roeord an extract from the Report af the Royal Commission appointed fo enquire into the Monetary. and Banking Systems of Australia, dealing, with ie Deaghis Soeial Credit theory 0 motion of Mr. Howanl, Ondered—That the said Report be printed as an appendix to this day's On motion of Mr. Cleaver Ondeved,-—"That the following correction be mae im the printed record, ‘On page 361, fourth line from the bottom, delete the word before the worl “revenue producing public works.” At 145 pum, the Committee adjourned until morrow, Wednesday, 10th ‘May, ab IT oelock sn, R, ARSENAUL’ Clerk of the Com MINUTES OF EVIDENCE Movs oF Cossions, Roos 277, May 9, 1999, ‘The Standing Committee on Banking and Commerce met-at 11 sm. ‘The Chainnian, Mr WW, 1 Mote, presided he Chtaamstays Onder; Mr, Jaques has the In attendanee: Me, Guatiaxt Foun Towens, Governor of tho Bank of Cand Mr, daacrs: Mr, Chairman, the reporters complained that they could not hear very well Yeetenfny, aul I partieslarly do not want thal to hapen, Mr. Townes: Excuse me, Me. davies, Perhaps bofore we eomuienee 1 slow say theve were, varios qlestions whieh were raieed at the Tsst meeting ot the eames. We have not had an opportunity to get answers (0 thes fauestions prepare, but we wil have them ready for the nest meeting of the ‘Mr. Curavea: While you are speaking of questions, [should like to correct aw ervur in tve question that T asked on page SOL of the committee's minutes en Thursday, May. de Would you please strike out the word now” before fenwe-prontueings public works."" My question was in regard 10. rev By Mr, Jaques Q, Now, Mr, Towers, I think we agreed yesterday that all wumey whieh the people have’ to spend ie devived fron bank loans, agit eistributed. thro production by way of wages, salarice aml dividends? —A. T would put it tas ‘vay, that the medium cf exchange is sapped partly by the central institution, haypely the Banke of Canada, partly by the government m te form of subsidiary Coin and partly by the banking syeten QT helieve tho figures are that $5 or 96 per cent is Dank eredit?—A. 1 thought." percentage was little Tess than that ‘2: Aeoughly?-—A. The_amount. represented by bank deposits in Canada, $2,300,000,000, is very nied larger than either of the ather 'Wo sections of the Inealiain of exchange which T have mentioned. By the Chairman Q. Would you eall that bank credit? —A. I would call i¢ bank deposits Py Mr, Jaques: Q. 1 ain not evticizing at lA. No G1 am merely saying that the vast majority of the money whieh the people have to use ie derived from hank evedit?—A. Ts derived from. the Operations of the banks in_purelsing investments ond in making @. Laans to producers?—A. oans to all people Q. Well, practically itp through produetion. Tam not ert I merely want to —A. Yer @. Only the prineipal stand that, Mr-dnques., You mean: (QT Lat a proiticer aad T bo QT receive $100—A, Yes itributed?—A, T am nut qnite sure that T under w $100 A. Ye STANDING COMMITTEE Ive tu pay back $100 pls $6 oF $7 oF 88 interest, represented by AL The hater figure belng higher than is next ehnnged; say 6 iis amy question “of figure terse —A. That pre eent ar whntever the vate might be i an interest oh soa ay 10 he Hanky si hil the ane st to fenver its operating expenses to py intenst ta depueitors aul so forth Q. Tn quite willing to eal a service Fyn Tikes but wire does rome frotu?—-A. It canes frum the ae fe barrier seh we il ese Hs heen able tse the mune which he horreseat for proactive or dither purposes whiel suit his needs, anda a result of which he ha heen abl 9 make More sill be tines shen he does not make profit asd thie nay involve had debts. If he hae made profit he wll le antag to Him nan tie deposit aceon of aller wpe sient t rest clare forthe hank. “The hank then spends these. inte the way: that rentione for operating tsp fenent 46 tlepositors, apd 50. Tot ing the anoint ao paid i the seneral low of the cireulating. metitn . Yoo: bnt just the same nu private ilivcal ean create muaney al here ne the interest which he has to ay in addition to what he bortoas—anud when Vsay he, Taian all hgtrowers ean nw anotler bank. ALNo, Tthink you are neat nt i af the inelinn f exehange pecwren different prope. When ne yerson ayes in ho anothier the Mew af rireulation continues, s0that yon havea eonetant eireulay movement th mestium of exehinige, otherwive knotsn te velocity You; bub nohody ean ereate mney att animes does tn reed; then if the people of Canada Borrow $14,000 «$100,000 000,000 $100, it sacs hot matter whieh, all i $100 for eonvenienee, they get S100. ‘That is all they sc But they have te. pay’ back StOH. Where conve from, less vues from another haan and thevetore a ti " ne pit it this ays Iet ns aetaally the eave, tha the ana hares af the Hiominion are inthe neighboartwad of $130000,000, ani for the a simyplivity, although it does not change the major argument in anyway, Ts the $130,000.000 pertains entirely to debt heli in Canada, ‘The simon govern ment taxes the people. We ean apply the ineaine tax. far exinpe, conveniently to the eaee beeause it is about the same ae the debt eharge. Tt ealleeis $140.000,000 in income tax sich pyoaple pay inte the government from. the enor accounts in te banks: so that te deposits of the publie in the banks 20 ox $140.000,000- aid the deposits nf the dominion eosertment nthe bene a tin S14000.000. “Then th ise tHal$10/000.000 to nay to the ite nt then i= thatthe. denninion nent ep 1 anes go sane $140,000 000 sind tle deputy a poublie in th 9 up $140.000.000. "Ip ether words, there has been fanent from many thoxshnvds of inlividual accounts ina the Rover nint-and trom the government aeconnt back to mary thins of people eh movement, otliee things being ena. ‘in total of Ink lepoits Yes, but if only $100 is distributed and $106 has to Ie paid back, the that $6 nme cane from———A. That sul he tre if the $6 sehiel was pa bark disappeared somewhere; if it disappeated int sume other world then there uli! ea ennetant rain arising from all interest payments, But in fact na Q. Well, 1 submit that i¢ does mot isa at survives a8 a debt — A. No: ibis instantly rettimed to eller people Hon, Mr, Srevexs: Mr. Jaques, T wonder if you would let-me interject a thought here? Tdo that because T think Mr. Janice som point that sught to tre ame very lear night be is “forth €2 bat shove does aver eh we Wil ifs Ben able uske fpf and recomlug to ii the way iat T ands forth, ulsting median, romney and theres ironts—-an when her an Ho exchange her the Ml wuvenent a Us then i Yor $100, it iloes That is all they fet ine put it this " ot the ny way, T nese ple, conveniently ange Tt collects ninent fromthe iin the banks 0 iin the banks 70,000,000 to it he dept ere th sane of pene ranks deposits pail ek, then @ whieh wns pai ‘world then there But in fart into the fla of BANKING aND comsrence 463 Mr, Towns: Ms. Stevens, ann L wish i could, Hon. Me, Servs: F's an illisteation list night in a pamphlet issued by the Bunk of Montreal where they are notifying the peopte that they. will ake sina Toans. ‘They ive «number of illustrations. Perkapy this will help on Mr. Jaques. ‘Chey record the ease of & woman in Alherta wo went to the bane anid borrowed $50, for hie she fut alan per cent interes figure she pays hack, ‘We will sny-for the xake af argument it Wns $2. She Dorrowed $50 te hiya eu. "She pad the $50 hack pls $2 interest in sa many months, ten months or something ike that. She paid back selling the wl ff the cow. Nin, doce that not seen ta fit le eat Me. Jaguis: No, Mr. Stove Me. Deacuissax: Would it be joment the money was snore Yala so they transferred it to her? tion there of Gime? That at that fhe woman than it was to the an Mr. dagues: I am not speaking of the desirability Mr. Cunaven: New productive: wealth, Mr. Jagurs: T havo asked where interest comes fron and people have said to me, well it You grow seheat and it eames ott of the crap. Mr Chairman, {lave stooked a lot of wheat in my tine but [have never foun dollar bill in the stook yet, ‘The money tw buy that wheat has th be eecated and is eveated as a-debt, and T yyaintain, atl L think it is hevonl atgaient, that ince all money for practi! purpases is created! by the banks a wouuad te Abt, then if the poaple have te pay brake more thay they. borrow, tt exer money enn only came fron country has to inceease, atleast hy the amos af interest ei Mon, SMe. Sryurxs: Mark Sea, Me; Chair Tally ace that thsi a point that should be very earetully acid very fully, shall Tsay, dealt with Mr. Towns: Yew Hon, Mr. Srevexs: Mr. Jaques will aioe with his analysis; I see his point. E know a seat many people holds. Perhaps if you put it in a more extreme way it anight help. We will ay that the tofal interest charges of « year are $260,000 000, beranse if You get Into larger figures you Ket pethajw « better view of the teneney. am if at some argue, that interest charge ts burden om the country whieh te not dente with fae prineipal is dealt with, then obviodsly in a eertain mumber of Years You Would accumulate point where you have an annihilation of resources and value to meet it With what Mr, Towers is trying to explain, name at in the fan rinejpal new value comes ‘hich takes cave of tht iy more’ than takes eare of the interest smd aly to the uuntry. I interject that hecatee Tn belive the poi Shou ined of Mr, Teexen: Tf T may be permitted to interrupt, may 1 say that T beliew at this is the point that T believe Mr. Saques is wetting at, lis point is that the purchasing power uf the country comes info exislenee by bank!loane.) You simply stirt tron seratel svt say th power, ‘That is all the purchasing put out,” Bue a vear ater the pes 0 to repay th 100,000,000 9, pay’ the principal back and then sine pas el they hay to find money 40 Da $4,000,000 nf interest. Now, tint $10,000,000 vas all that was put 1 rt wliere ea they Td $104,000,000 to pay ik nek? What he is getting at as I understand if, i if you ise anly money’ in that way and. require £0 pays it hack with interest, then at some time Yeu have to esue the purchasing power to pay the interest which means that vou have got t nally further and Further into debt $10,000,000 af preasing, has b 404 STANDING COMMITTEE The Camry: Gentlene explain what Mr, dauques is deivi that Mr, daques, who is-a very competent scholar on social credit be'allowesl to explain’ his awn theory Mr, Jagres: Me. Chairman, Tala not wish to Tabour the point at, this woment, but it is of fimekinental importanee, Presumably, of ed whirl are extomteed tor the people and whieh result in production re ineresase in i whiek, therefore, yor may sty eartesponds to ¢ whiek fs paid But the point is this: that however great or however industrious the poopie of Canaekt are, sd whatever they may produee, there is one thing whieh they deat produce, and that is money. Asa matter of fact, our whole ease is bute! on shortage. the ebronie shortage af money: die toa number of This is one of them, though itis one-of the minor ones, Tt scems to rast arsiment that allioneh we have ineretsed wealthy, real wealth, tunvier our system increasing debts, The Crovmstys: Onder, gentlemen, Mr. ‘Towsus: Iv T could explsin it so that it could be understood, as remarked by Mr, Stevens. it wottkl be extremely helpful, Te should be one of the simplest of all things to explain, yew Tam not rashiy confident about my ability: to put it in terms whieh will be readily understandable, However, if it were the ease iat the payment of interest on loans somehow required @ constantly ineressing total of money heeause of the suggestion that interest could fonly cone from nese money. WoL It not alse be the ease that any service eharge shold bo join the same way? Ty other words, Freight is a service charge, Must the money to provide freight also come from new sources of supply? T ean mention, naturally, many « vice charges, Would not. the sume thing apply to thom? Teva only say: main, that what you have in mind, Mr. dagques, neglects completely the fact that this is a transfer fro the producer io one of the people who perform servines for him. He forgoes a part of his cero in-omer 10 pay that servies charge. But instead 4 giving a Tittle wheat ty the raikway-—Fam taking wheat farmers for purposes of example—instend of giving 1 little wheat to the railway and @ little t0-bis doctor and dentist and sone to his bank for interest, he dacs the thing in terms of money; but in making these money parments nothing is withdrawn from the sum total of the money in the ewintry, Sonic is transferred from one person to another, First of all, the sim is transferred to him fram other people when he sells his total trop. ‘Then he transfers some of that hack again to other people, to the railway, to the bank and so forth, so that there is a constant interchange between people, Int in that process no amount of interest payment disappears into thin air, or involves, 40-10 speak, a constant drain on the money supply By Me. dca Q. No. it does not debts of all ‘a broad appear, but you will admit thet countries ate inen A. AL countries Q. Well, the civilized ones tion in Englind from 1981 until fairly recent tines, there was not, as 1 reeall it ny particular increase in ie English publie debt. (Thon, if it i= not in the public debt, itis in the private debts—A. ‘That is another mat ‘Q. It is one or the other.—A, If that private ilebt is represented by promue- ny harm in that? An alternative to that, of course; 1 system where 1,000 oF 5,000 individuals decide that they vvon't eamstne all ‘hat is, they would not spend them all on consumption gooxls, "They tight elub together for the building of a factory, some contributing @ few planks and boards, and others some bricks, and others ms] tsing at an amazing rate A. If you take the situa Me 1 Ford The Wis wis Lim and whi stat kno dees bala whe ih that at this eas I in an Instr ar whole rmbt of wrath, too, as one of hott my ver, if ib mired could ve charge charge, supply? in mind, producer tof his le wheat nstend! of ntist- and + but in Al of the First his total rail n people, thin air, ts of all 1 broad he situa recall it, AS. That produe- they. mall on nd others BANKING AND COMMERCE 65 various wheels for the machinery, Whov a 1 those 5,000 people wail have a elaine on ah mehinery, Presimably they would have fn the relative: importanee whieh exeh one of those itense bore in the factory ae x awhole, Md if the factory was operating profitably they would. share the proceeds of the fawiory’s activities intl proportion, Via as you ean anderstatl, to. build fnetory in that way. getting a piece of stone fran ote oxtail plank from sor an then tevin, to sbeare tp Won linavity difficult procenss in that form, Hie ame in the form of a monetary Peaple bys some bons: they bays sane preferred or eon hg determines the distribution of earnings bt it is just the came a if each one Tete contributed amy tent ere aed a iten there Haw the thing that happened not been phrased itt ters af money, 1 think that you woubd have agreed that thee various people who had eonteibated tloeir planks sand stone und pieees af machinery till kal their rea wealth, Tf Ie was a factory aan IF was operating sucessfully, they had real wealth, just as an individual would have it ina well-built howse whieh he fond useful And perhaps you would Inve said in that ease that the debi of the enuntey Trad not gone ap beestise there was no monetary transaction between the factory and the people, You might Inve said these individuals have a ektim on th factory’ for a stone ar a piece of machinery, but iL is at partnership sgreenten it is not a debt. We da not mind that, Now, just because for the sake of convenience the thing is phrased in terms of money terme, Edo nat see tha it it nt} Q. Well, L have quite a lot to get through, "The point is this, Chom, that covving to an arbitrary’ system of finance or buokkeepinye, if vou Tike, the money Which is taken from the country docs not represent the real facts of the enuntry Nothing is more obvions to-day than a country such asonr own whieh is immensely wealthy in a real sense and immensely hart up inv a financial sense ‘Thevtwo contradict, and we say’ that it is heeause money oes not reflect faets, It is an arbitrary ystom nnd dacs not reflect the Facts, Hossever, 1 do not wise to labour that as T have not the time just now ‘The Cramatsy: Take your time, Mr. Jacqtes, You have time iek or a plank oe piece af By Mr. Jaques. 4 Q. There is a question, MecTawaremthat F think is important. You are famitlar, of course, far-midre than Tam, with company statements, balane sheets A. Y Q, They always include the pliysieal assets af the company. Your own, Timagine, would put in the bank. "They would piat down the buildings and plant andl the balance sheet of a factory sould contain the physieal assets; and it would not be considered somnd nat to dasa, Nase, in the national balance sheet whieh we call the budget there is simply the financial statement. ‘There is no statement of the physieal assets or the wealth af the country, s0 that we never Know from one year to another whethe or decreasing: we niever know, Mr, Dunn balance one day or the other, but we have nothing t0 « whether the eountry has inereased in wealth sn the it has decreased, and we have na way of knovvin re maute of the national income, ate they not? Q. We think that there shoud be a national statement of the physieal alth of the country sa that we could relate the tve—A. T think that the itl income is the only important factor (Q. The result is this: ave say it ought to be a great deal higher than it is and it would be if those facts were taken into eonsideration—A, Tao not think that setting down ona piece of paper an estimate of the vahnation of Canada would affert the national income one way or the ather wealthy of Canna is in 1 will make w statement giving 0 napire that vith to know fivelve months or whether \, OF course, estimates STANDING COMMUTER Aq: te wot tis ano pa he sans Aor thats | Well, fe di ae Know’ ee Mil ku Meet Fae eats tne wae of Ue conten do ets Fe ASC ane am extn woal leet wu Ae tebviely might be taken bee to i netion ain timers he LNA itw atu engrler a ithe conienee? A. No, L do tion N vk we ait ee cat, Newent eatin he velocity of bee neta et eounee es ameter nin ArT Hmportance. 1 hae nt Me. Danni ne amet te ae that i ma tae aun Betis the vetority of i cireaation he 3 Finpartant, dust exactly tes a A ey eth vetavity: af eeeuation Ty Tacs the activity 3 shes te TAL ye eden im anon este medium of ot meee reretare more Fequent translers, Welt Giegeiduals, For example nt et te fe i Cana i 192D wee Nery . oft Se knony, the volume of Bt velowity Tas very. igh, both fram Mon, Mr. Steves: Represented! abot Mew Teswens: Pave forgotten the fi Mec tates af prntarit wd De Tee ‘arity alee from the it ie ain TIA Se NS i Alone with Magranion af nue oF Nel Han the aanstnt whieh is now men fants, Ht ieeften the case Aa a ITE valine af ier ul a lee amon of anene BIM e Theeautse re joedine: in the absolite enon viral By Mr, Landeryor (He ita fate that there anit the a larger volnmge of bank deposit moving oe von tite Hat tarzer aunt, Terense eles ies 22 ‘iat Ut a, there are $200,000 of depois Yes eta "thee sete mat =D Te 3 bat, there to vite ater partion of te cota deporte CF ansterring soos ant We coe at have bee an ceca in Yeloehy br = wot that the re there Is torlay Feri awe been a Hicesie fy the armonnt OF MONS =\ (rhe Cuaumras Ni Laspenvor 0 (Phe Crnsarstas, Te same resntt bust not the se Uns te to enmntinne withou Tivol suggest you allows Mr daa by Me. Jaq (The gene standing of the velocity, of eieuation is something ree thet a man gove into a etore, we Wl SAY At buys $50 worth of zoos, an ike tee oteaty ix reat he stone wecree oe8 NE) another store with the Me Te BaD worth gb oi then that stor e eeper oe tate Dilys $50 worth: of goons ad s0 0m So that rr sey tage bay 8500 worth Of pat tthe par ia; cevtainke Ty Mes Dans idea of the en et On eto ie altars hem le to illustrate it ty etary teres if T may, ome wets T hae, veel nee Pac’ and Mike, x eee etimen, fan few eotlars whieh | ta eatedd in at keg. of beer. Whest i ee Arior the eer they hae 10 eents Ve ar ey thought they sould go th " thes ido ad retail the Deer. On the way, Wn the ee t being & » Ae peers “Pat, arin had the ten cents, said (0 ved this an mange Ne Ek tbe tke AL No, Halo AL thw velovity of metanee. LE have re ikve amount of ants dust extelly feats The activity ne mein oF 1 Bar example iy 1D wae very high, both from from the twas alone with we asnich 1s nose fee in vane of iethat i beeanse (absolute amount i en reed ere gn bt there even ows and renee in veloetY eye not at the Sto continue without vulation ix something 0 worth of zoos, and nother store with the anit ten tal storo pao on. 80 that Dunning’s itea of the id like to illustrate, Pav and Mike, {keg of beer. When night they would go tt the races, it being HANKING AND COMMERCE “or Mike, * Sell n of beer” So Pat pays the 10 cents over to Mike am ets the glass af Then Mike sis. Pan thirsty, toos sell me at glass of eer” And he pays the 10 cents hnek to Pat. As Tsay. they were. frishinen aad it was very hot there Was a very great velocity of eitealte tion, aint i anit. Nowe, the 10 cents lead the effeet of consuming the ries But her are they: coun ce replace the beer? They: have merely drunk up the eapital Mr. Drsetistas; Borrow money from the inh: Mr. daacrs: Nog their evcdit would be Mr. Desetaay: How woul the social ereditors solve thet) Me, dares: Tam dealing with the velocity: of cireutation. Hon, Mr Srevexs: What is your answer to that very complex: problem? Mr. Jaques: ‘T fof money. inand out of the banks Tinight wo into a store aint buy $10 worth af gous from the storekeeper If the storekeeper is selling goowls ona 10 per cent profit, per eent of the $10 oes not belong to hin, or, 17 iC loes, is represents his eapital, In ane ease he owes it to the wholesaler, and if the $0 ie his own inoney he hits te se that Correplenish his stock. He ean spete the profit, but that is al Phe Cuamstax: Mrs daques, inay TE break my: own rute? Mr, dagvrs: Yes ‘The Chamatan: Lwould make this suggestion: That che beer was owned by Pat and Mike, the tive of hem being im partnership, and. Pat sleank up his share of the eapital and Mike drank up his share of he’ eapital, and that is all there was to it Mr. Townns: 1 think they only paid the 10 cents backwards and forwards to exeh other for fun Mr, dager: ‘That is exactly: what happens, It ie a perfectly oo proper illustration, Me, Chmavnats Thore is a difference in ownership, Hon, Mr, Stevess: Mr. Jaques, supposing that when Mike paid over the 10 cents the frst time, Pat, being the custodian of the partnership assets, Haul taken the 10 cents he received fron Mike sand gone and bonght for 8 cents another pintaf beer, the nartsership would be 2 cents ahead; is hat not right? Mr. Jaaves: Taed what aight be thowght a eamieal story, but that is alsointely trite. ‘Take periods of boom ia inubistry or in the country when the so-ralted velocity of ireulation is geval, how long do they last? They fame fo aren. Why? Because the money is used to emneime goods and not to retire debt, thal is 6 ye Cuaarax: Mr. dques, lets presume that Pat and Mike were saloon ewpers, that they were in the business of selling heer, but thal instead of having enstoners they drank up the keg af heer? & Mir dneves: That is exaetly what these people de Let tie put in this way: Supposing [have x dollar and that is all the money there ie in this room. Nese, we eae sant to bugea hat and we eaeh have a htt Nove, (will buy mg neighbour's hat awd J get the hat and give him the datkar He takes iat dollar and buys his nigh nt. If the velocity of eireula- ' nt enough, that daflar will buy every ht in this room, but it will any he manaiaeturing costs of one hat and it only tiquidates the debt on one hak pay Mr, Towens: Mr. Jaques, in those eirramstane Deen bolt T think oni one new bat has STANDING COMMITTEE Bey Mr. dag QONo there won not be one new hat because they are all okd hat A. Welly in that ease T think the peaple have just swapped hats: no-one hits (Qe That is exactly true, Mr Towers, and that is exaetly what Teappens with this sreatled velocity of eureulation: they swap goods but they do-not Pay the whi whieh was ereated to prodace thse goods, E dhink that is self Evnlent A. Supeys Peat sunee The Camas: Go on, Mr. Jaques Mr Trewrn: [thinks Mr, Chairman, Mr. Jaques. should pat on the record all of Uuese stories a0 that they aay be available 100s, By Me. darpues (Q. The aneument is perfectly: sod, ‘The iden that $1 ean liquidate $100 worth of debt heraatse it changes hails cae hamedeed times is a fallaey. SE will Tiquivdate SL worth of debt gavd that is all. Hon, Mr, Sravess: Bat rat SE may serve twenty: different services Mr. dens} Tell only: liquidate $1 worth of debt to the institution where it originated and where eventullly: it must return, Mr, Cheaven: Do you snggest that a dollar ean only he used once and is then valueless? Mr. Juris: No. ‘The pwint is this: That all money is issued in respeet of prodietion, said Uhe money goes out in the format wages, salaries and dividends Tin the production of these goods Mr. Chewven: Ie not money simply ised, sien, ae a convenient token to 1 in the exchange of sows? My. dagees: Yes, but Lam simply felling you how money fumetions, The people win teecive these wages, salivies and dividends take the wages, salaries and dividents to the storekeepers and buy what they need. As soon as that money teaelies the retail counter it is an its way back tothe place from whenee it started, Mr, Criswvint Oh, no. Mr. gees: Then they sre not paying dheir debt. Hon. My, Stavexs: 10 goes to the wholesaler and from the whok-saler to the manufacturer, and 80 on Mr, Jaaces: No, it ges to the retailer and then to the wholesalers they take the profit out and dhe balance goes to the manufacturer Mr, Craven: And the wholesaler uses it to pay Bis wages, Mr Jaares: ‘The wholesaler sends it (o the manu/veturer and the manu- faeturer has to pay his loan from the bank. Mr. Chmaven: And his wages and his taxes Me. Saoves: He has paid hie wages when he has distributed the money Phat it how money gete in circulation, Tt comes buck to the ananufaeturer Mr, Cuxavia: Ye Phe Camas: Tam azest that Mr, daqties be allossed to pro- coed with his inves Mr, Towens: T think if T may interject something there, that under the citeumetanees you mention, one would expect to find over a period of years, that hank loans were eonstantly going down and the valume of medi of exchange war being retuced, or eke that they would be constantly going, up fand the medium of exehange being increased for the yrarpse whieh you mention, In fact, do you not think that what happens in the ordinary course of even this their ment alwwa Dut exp: the bon pro inte aK tol cout <0 tha et wh spe are apt iri re} arf sta N old hats, vhat_happens they a net tha is self | put_on the liidlate $100 Iiaey. $1 will titution ashore Jin respeet of sand dividensts + whokewler to at the mnanite allowed te pro- that under the period of Years, ‘of median of jantly going. up ch yout mention. BANKING AND COMMERCE 469 this: That as people who have borrowed money for prtuetion purpares sell thelr goods and repay the oar sameone else is at that partionlar anement bor= rovving fresh money? to go ahead with the process of proauetion? Mr. dagres: Oh, yes, Eagree with th Me. Towsts: [think that one of the matin troubles in the thevries you wention ix that it is founded upon an isstayption that total Iemk: elt always on the way down, Mr, Jaguns: T would say the Mr. Towns: 1 did give th Inut, in faet, wwe know t . , ow mative, either on the way down ae ap, ab that is mob the ese . By Mr. Jaques. Q. Wo auereed yest expand their loans butt That is a faet, is it not se, Ye. Q. Now, why? Team speak from Dorrow money is simply that T do . Words, Teannot finda market beeause there is me chane prottuee for enough money to pay back the loan f iy which disturbs you, then, isi fo, wot altogether. The banks must be paid, of course-—A. No, but. if yout saw an opportunity’ for profitable enterprise, and there are still 44 good many people in the eauniry, fortu who do, you would be willing to'borrost money and sent would not have any Tears in regard to getting enough out of the profit to be able to pay the interest charge (Q. Yer, quite, s0 long as there is expanding debt and expanding production, so°long as they are advancing together we ean carry on. But after a time as Tsay, owing to the fact that industry cannot distribute enough money 0 that the people ean buy what they produce, after a time debts mount up, credit gets top-heavy and then-the banks have to eall their loans and we et into Shat it called a depression—A. May Peay there, Mr, Jaques, that we were Speaking about the Trish commission the other day’ and Thelieve it was yor who Trew the analogy about brewers and distillers sitting on a commission to appraise the virtue of temperance Q. Yeu. There is also the Australian commission whose report on social credit is pethaps eve. more actailed from some points of view than that of the Trish commission, Te-does seem to me that a considered answer to the careful report mavte by these two commissions is # much better form of upsetting their figment tan a suggestion that thes were prejudiced. Tf they were prejudiced fand made a scrong report, surely that could be contradicted. Surely the reports Stand_on their own feet, irrespective of who made them Q.T might remind You, Mr. Towers, that the greatest astronomer that ever lived refused to believe that the eaxth went round the sun. ‘The man who first suggested it and stick with it was put to the torture beenuse he upset orthodox opinion, Mr, Tx Danks were doing their level best ti borrawers to borrow their iiler esisting conditions thi is kangely 1 would not what 1 us the profit.A, Te is not the fon: That is being don. every day By Mr. Jaques: Q And in no subject under the sun is there so much prejudice as there is concerning money. For instance, T said yesterday that the hostility to, the Statement that banks ereate money is a fact, which T know yout will not deny for a moment. and yet we have the general manager of the Bank of Montreal, avhen he was before this very committee, swearing that they did not do that, 40 STANDING COMMITTEE init they loot their dlepwitons® money, oA. fe it unt possible, thomas tht it wth bes st eel ile to pitt dover it bktek an white a contradiction of the Mente af these 160 eouissione? Would dat wot define the argument more Vfialy:thnan hats, becit puosilae hitherto? (tia experienee, Mr. Towers, and by this time it is pretty. wide Lint ie inpossiite sii a aman Ins dew: on money, nothing short of, what Tsay he Cerameaas: An earthquake Mr dagrea: of conversion will alter those ideas, Ye ean point out That they ev nat coat Mir. Cunaver: Haw wohl it he if we had some facts? Mr, dagurs: T have given yout some faets y Mr. daqpues Q. You jive sail ere was no point in the government ereating: money and Sauing it debi free, heease if they horrovwed the money from the public Mar wieht could be an asset?—A. T noticed that in some of the press reports HAL ‘Neferunees autturally, iealt with very briefly, Has eused some surpri Of cone, von will remeinber that T pointed out that what is someone else's Hebi is nevessarily. someone else's asset Qi ite A, That is a very siniple conception; ie. that taking the people of Canada as a whole they owed themselves this money. did not Pear Shak trementous aecunnilation of public debt. eauld not he a very peeetome matter, indeed and very dangerous thing, Tt ean be, because Hrean aistort. the economy; Ht ean make for a very bad distribution and for All Kinds of jatts in the machinery, so to xpeak, QT was going to suggest that if debi is an avset then there is no point in nlatting the budget?—A. T do not think that follows. T did not say that a Hebt was an asset of the deblor, Tt is his lability. But surety it must be an ect af cenncone else beeatiee it is owed to someone, T would like to took bebind That debt and see what the debtor has to show for the money whieh he has jurrowed and spent. TE that debtor is in effect. a factory’ or, enterprise which Tar to show for the money spent a going eoncem, why, the debtor is all vight inl the ereditar is owed money by a debtor who has a good asset Q. 1 agree. with that entirely, and that is the reason 1 am susgesting that Cans, whieh jn a national sense is a debtor, should have a statement of what is Haut Canada physieally, which we do not get in our budget. Tf we had a vetautent of the pliveieal assets of Canada we should be able to sce whether our Tatvonal debt is sound or whether it is not. As i¢ is, all we get are the figures Mir, Dracnistax; Would you mind telling me just for my own information why you are not satisfied with the national ineame as as: estimate of the see eae have snguestioned assets in the form of fish in the Great Slave Lal bai they ure not available? ‘The natio: al income is something which is available to meet obligations. Why is thn not satisfactory? ‘Mr. Jacatns: Beeatise we think that the national ineome could be great deal bigger than it is. We say when we look Tord any more. We have got to ext down.” By Mr. Jaques Q. Mr. Towers, you are familiar with the May report which I believe was issued in Great Britain by the royal comm! faded by Sir George May believe, jn 1930 or thereahout?—A. Some time like that Ghat represents the considered opinion of the ablest men, I presume, orthelog mein Whom the government were able to get to advise them, and their 2 that it mv a the ent more ty will, af, what yoint out he publie reports ‘surprise aking the [lid not eeause nan for o point in ay that a st he an wk behind ch he hive rise whiel: © all right sting that of shat is ve had a ether our pformation the assets, ave Lakes, = available and should We cannot pelieve was rge May, 1 presine and their BANKING AND COMAEERC an fadviee was to cut down an the expenses of all kinds. The dole waes ett, the allo fanec Tor pensions was eut and everything else was ent down, Ye will remember thal the result of that Was to bring the country almost to a revolution. New we fare told by the same ceonoiniets, T suppose, that the opposite of that policy, the (tremendous expansion of money on armaments, is, s0 Zr from ruining. the 1 great benefit and is even reflected in Canada. ‘The same lot of men navocated absolutely apposite policies —A. Whe says that 1 is of great benelit to the country? QT thought that was said Here, that the result of the armament ptiey wa: to Tower the unemployment figutes and fo

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