Mr. MACKENZIE (Vancouver):

$171,000,000; the Prime Minister said $174,000,000.

Mr. BENNETT:

No. Gold held against notes at $20.67 per ounce, which is the statutory value at present provided, $69,537,952, making the present percentage of gold to notes, as I have just indicated, 40^y per cent. The amendment which I am now offering to the house provides for a maximum increase of the present outstanding issue of $52,871,003. The total possible issue, therefore, under the amendment that I submit, would be $223,981,952. That is on the basis, of course, of the present advances under the Bank Act, which I have already indicated amount to something over $38,000,000. The present gold holdings, as I have just indicated, at $20.67 per ounce, would give us 31 per cent of coverage in gold, even with the increased issue that I have indicated. But if we value the present gold holdings at the present market rate of $35 per ounce, we should have the value of our gold at $117,746,895; and the revalued gold would thus be 52i per cent of the entire issue provided for by this legislation.

I think it is unnecessary to say to this house that that is a very, very large reserve to have against the issue of paper, of dominion notes. Now, the calculation on the basis of the revalued gold is intended merely to indicate to the house the substantial gold reserves that are held at the present moment and will be held against the increased issue to which I have referred.

I now further indicate to the house the possibilities which the Bank of Canada will have when the transfer of the note issue takes place and after revaluation is effected.

In the United States, as is known, they have revalued their gold so that at the moment the reserve of gold held in that country under the new valuation is between IS,000,000,000 and $9,000,000,000. When our revaluation is effected here as I have indicated, if we exercise the power that I am seeking by the legislation submitted to the house, of issuing

$120,000,000, we shall still have 52J per cent of gold coverage on all the paper thus issued.

In the second place, I desire to point out in these calculations no reference has been made to the gold of the chartered banks which is to be transferred to the Bank of Canada. Next, I desire to indicate that the Dominion Notes Act so amended is only to operate until .the Bank of Canada Act is in force and the bank is established, at which time, of course, as is well known by hon. members who have been following the legislation, the dominion note issue will be taken over by the new bank under legal requirements as to gold reserve less stringent than those which the present amendment proposes. I need hardly remind the house which has been engaged in passing the legislation, that under the provisions of the statute the bank will be called upon to hold 25 per cent in gold of all the notes that are issued as well as 25 per cent of the deposits which may be made with it under the circumstances provided for in .the bill itself, that is by the chartered banks or by the nation itself as the case might be. I mention this because while some hon. members are of the opinion that I err on the conservative side in connection with this legislation, this is to fill the gap between the time when the new bank begins to function and the rising of this house; that is, we must make provision for the situation that develops between now and the time the new bank comes in, and we have dealt with the matter as indicated by this legislation. I think it may be said that the effect of the amendment will be to provide an element of elasticity in the note issue, which element of course is to be one of the outstanding features of the central bank and one which we believe will be of the utmost value to the dominion.

The next point I desire to make in regard to the amendment has to do with the necessity of making some provision for our credit situation during this transitionary period. Hon. members are all aware that the dominion notes provide the greater part of the base on which our commercial credit structure is reared. One of the banks the other day in the committee said that they had holdings, I think, of $40,000,000 worth of dominion notes. The reserves of the banks are largely held in dominion notes and in fact the statute requires that 40 per cent of the reserves shall be so held. The result is of course that the base of our credit structure is in dominion notes. That has been so and under the new legislation the notes issued

Finance Act

by the new bank will constitute that base. In the past when the banks have needed to strengthen their position they have, in order to meet any situation that they thought required treatment or consideration, merely secured advances under the provisions of the Finance Act. That act of course will be repealed and in fact this afternoon I am submitting an amendment providing for its repeal when the new bank begins to function. It will therefore be apparent that the banks in that transitionary period may feel some hesitancy in utilizing the Finance Act, knowing it will cease to operate when the new bank begins to function. To meet that situation it is desirable to provide for greater elasticity in our credit structure and also to enable the banks by that means to meet any growing demands that may come from industry if there is an improvement in economic conditions. I think it may be said that the provisions of the proposed measure will afford that ample foundation, which business may demand for our commercial credit structure during the transitionary period. When business was at a low ebb the requirements were very much limited; as business increases the demand for credit and currency becomes greater and in order that there may be no question as to the sufficiency of the provisions of our legislation during this transitionary period to meet the situation, I have offered the amendment in question.

But I propose also to deal with another phase of the matter that this measure will assist, namely, the program of public works to which I shall presently refer. Before doing that, however, I desire to point out that the amendment submitted to-day in the new bill contemplates the purchase of silver by the Minister of Finance in accordance with the London agreement to the extent of 1,671,802 fine ounces for the year 1934 and the payment therefor by the issue of dominion notes. Of course it will be within the memory of members that the purchases during the succeeding years, 1935, 1936 and 1937 are to be made by the new bank and not by the Minister of Finance; Then, as I have just indicated, the bill that I now ask leave to introduce provides for the repeal of this statute when the proclamation is issued bringing into force the statute that creates the Bank of Canada. A similar bill with respect to the Finance Act will also be offered to the house this afternoon.

In addition to that the Public Works bill that I will announce to-day is one of the means by which the provisions of the act as amended may be utilized. Wffiile each, of

course, must be considered independently of the other, the fact is that the two measures are mutually supplementary and are part of a policy primarily concerned with the restoration of sound business conditions in the dominion. With these all too lengthy explanations of the provisions of the bill that is proposed to be offered to the house I now move for leave to introduce Bill No. 110, to amend the Dominion Notes Act.

Motion agreed to and bill read the first time.

Mr. A. M. CARMICHAEL (Kindersley):

Yesterday when we were in committee of the whole on this bill the Prime Minister who was sponsoring the measure indicated that on the third reading he might be prepared to state whether there was any possibility of extending the legislation to help a province like Saskatchewan. I would like to remind him again, as the sponsor of the bill and the leader of the house, that the situation under discussion is one that merits consideration. Just recently I had correspondence with a farmer in my own district who purchased land during the era of high prices at $40 per acre. He has been unable to make any payment. Recently he was offered the land at $10 per acre if he could raise the money to pay it in cash. He got in touch with our provincial farm loan board and was advised that they were unable to advance any money. That is one case, which might be multiplied hundreds of times, in which farmers who are in financial difficulty, if they could get some money could readjust their finances so that they would have some heart to carry on. I realize that our province is operating under its own scheme.

I recall when the federal farm loan scheme was put through the political complexion of our federal government was the same as that of our provincial government. Yet our provincial government saw fit to carry on under their own scheme. At the present time however they have not the money to carry on, and they are unable to raise the money at as low a rate as this federal government is able to raise it. The thought I had in mind was that if the money which is raised for this

scheme could be used to help out our provincial scheme I am sure it would be a great boon to a great many struggling agriculturists in the province of Saskatchewan, and I shovdd like again to ask the Prime Minister if there is any method whereby he thinks such a measure might be made helpful to that province?

Mr. BENNETT:

While I have no right to reply, I believe with the permission of the house I have the right to answer a question. I can say only this, that the same conditions obtain in the province of Ontario as in the province of Saskatchewan. Neither province has accepted the provisions of the Farm Loan Act. And the only method, so far as we can at the present time discern by which the benefits of the compromise statute might be made available in Saskatchewan would be by loans made to the province for that particular purpose. That phase of the matter has engaged our attention, and no definite conclusion has been arrived at.

Motion agreed to and bill read the third time and passed.

Mr. BENNETT:

I should like now to proceed with order No. 8, an act respecting shipping. I have to leave the chamber for a short time, but presently I shall move the committee up, and take up the resolution at any time which suits the convenience of the right hon. gentleman.