Mr. REID:

Still, I maintain that the

amendment which I have offered is to value

silver at the market price, to the advantage of the government. I claim that under the Bank of Canada Act there is no provision whereby the bank is compelled to value the silver at the then current price.

Mr. BENNETT:

But there is.

The CHAIRMAN:

Shall the amendment carry?

Mr. BENNETT:

No, it is already covered by the statute.

Amendment negatived on division.

Mr. REID:

I have an amendment to offer; I suppose it will meet the same fate as the other I submitted. I see that the attitude of the government is not in favour of any silver policy. I move that the words "and silver" be inserted after the word "gold" in lines 19 and 21. The section will then read:

(1) Any profit resulting from the valuation of the gold and silver in accordance with the provisions of section 3 of this act, being the difference between the value of such gold and silver held' by the bank on the date of the coming into force of this act as computed on the basis established by the currency act and its value at current market price, shall be credited by the bank to a special account in the name of the minister:

Surely the Prime Minister cannot take any exception to this, because I am really providing some further value for the government, for silver as well as for gold.

Mr. BENNETT:

We have already covered it by the Bank of Canada Act. In the reserve which the bank showed in its statement of June 5, silver bullion appeared at $1,230,279.09, and the statute says 'that it is to value that silver bullion at the current market price of the fine silver content thereof. That is subsection 2, clause (a), section 26. That is exclusive of subsidiary coin consisting of twenty-five cent- pieces and other pieces of money that the Bank of Canada has.

Mr. REID:

Subsection (a) reads:

silver bullion received from the minister under the * next preceding section or purchased under the authority of subsection (4) hereof, valued at the market price of the fine silver content thereof;

There will be very little silver received from the minister if the government does not go out and buy it.

Exchange Fund

Mr. BENNETT:

But there was a substantial sum of bullion-I do not carry the figures in my head'-some of which cost $1.50 an ounce.

Amendment negatived on division.

Mr. YOUNG:

Will the Prime Minister now explain how this fund is expected to work?

Mr. BENNETT:

The fund is under the direction of the Minister of Finance. The reason it is under his direction is that under the Bank Act it was to go into the consolidated fund. Now it is to be maintained for a special purpose. It is still under his administrative control, for reasons that are obvious. Ultimately it should find its way to the purpose for which it was appropriated, as indicated by the hon. member for North Waterloo (Mr. Euler). The fund is set up for the purpose of endeavouring to control the external value of the Canadian monetary unit or of checking undue fluctuations in its exchange value, and the minister may directly or through such agencies as he may designate cause any balances in the special account to be invested'-a limitation as to the form of investment-in:

(a) gold;

(b) foreign exchange as defined in section 26. subsection two (b) of the Bank of Canada Act;

That means countries on the gold standard; and Great Britain as well:

(c) balances with any bank in London or New York designated by the Minister of Finance!

(2) gold or other investments purchased under the provisions of the preceding subsection may be resold on instructions from the minister.

(3) This section shall not come into force until a date to be fixed by proclamation of the governor in council,

Under these circumstances I do not think any explanation is required as to how it is to operate. The limitation as to the form in which it is to be invested is made by the section itself. The amendment offered by the hon. member for Macleod was that the following words be added to the proposed resolution: "subject also to the establishment of parity of the Canadian dollar with the British pound." So that if he had had that done as he then asked, and for which the hon. member for Weyburn voted, the conditions would not have been exactly to the benefit of Canada during the intervening period.

Mr. YOUNG:

I do not think I ever advocated anything of that nature. But coming back to the operation of this fund, I understand that Great Britain has maintained an enormous fund for this purpose, and so has the United States and other countries. So far as I can learn, the operation of these funds is shrouded in mystery; no one knows what has been done. That is why I asked the government what they proposed to do in the matter. Apparently if they know they are not prepared to tell. How is the sum arrived at? This $64,000,000 is the profit on a certain transaction.

Mr. MACKENZIE (Vancouver):

Read

section 10; there is the answer.

Mr. YOUNG:

Mr. BENNETT:

I should be only too delighted to agree with my hon. friend about anything. But I point out that this section does not come into force except by proclamation, and if all his provisos are true he may have the responsibility of carrying out the operation.

Mr. YOUNG:

The hon. member for Macleod was to have it a few minutes ago.

Mr. BENNETT:

Well, the honours may be divided. Undoubtedly what he says has a great deal of force. It is a small sum. But Mr. Chamberlain in Great Britain said the other day that he had not used any such sum as he was authorized to use; he had used it only "to iron out the wrinkles," I think were

Exchange Fund

his words, in connection with exchange transactions. This, as I tried to point out-I said it very poorly at the threshold of my observations-is to endeavour to place Canada in a position in which at a time of great difficulty we might have some fund that would be available for that purpose on proclamation. That is all. I cannot tell anything further as to the circumstances under which it might become necessary to use it. It is true its operations are shrouded in some secrecy; that was necessary in Great Britain, in the United States and in other countries. The very foundation of its use is that there should be no public knowledge, because its value would then become problematical. You know the circumstances under which the Bank of England was compelled to go off the gold standard. People sold securities in London and then went around with their cheques and got Bank of England notes and presented the notes and demanded gold for them. Of course there came a time when there was no more gold. That was the combination worked on that particular occasion. This is a fund to take care of extraordinary conditions to the extent that we may be able, and it will be done only if the governor in council is of the opinion that circumstances warrant its being done.

Mr. YOUNG:

If, as Mr. Chamberlain said, the fund in Great Britain has been used only to iron out the wrinkles, I believe other prominent men over there have stated that they were not able to use the fund to fix the pound at any given level, but only to make the ups and downs less violent. I do not see how this fund is going to overcome our difficulties. According to that theory we cannot fix our dollar at any given value.

Mr. SPENCER:

I take it for granted that this bill will give the government power to increase that fund to any extent that may be desired if it is in the interests of the country to do so?