Mr. DUNNING:

I used deliberately the two terms money and wealth, because I wanted it to be quite clear that I was not referring only to physical money, dollar bills and such, but to the actual transference of wealth which takes place when we take something from all of the community and give it to some of the community. We can call it money or wealth, but definitely a transference of wealth takes place.

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Mr. BLACKMORE:

Would my hon. friend then say that there is a way of getting money in Canada other than by taxing or borrowing?

Mr. DUNNING:

Yes. I hope to follow my hon. friend, and I will tell him then.

Mr. BLACKMORE:

Once he grants that, we are not far apart. One of the great causes of disagreement among people I think, is that they do not always know when they are talking necessarily about the same thing.

Mr. McLEAN (Melfort):

Is it not real wealth that my hon. friend wants to have transferred from those who have it to those who require it, rather than money?

Mr. BLACKMORE:

I think that when I have finished my hon. friend will fully understand all that I am talking about.

Never.

Mr. BLACKMORE:

We hope so. I give him credit for a good deal, and myself some credit too.

The question is, how much money can Canada have? How much money ought Canada to have? Should the amount of money which Canada should have be governed by the will of banks? Just as soon as we ask ourselves that question in all earnestness and set about finding the answer to it we shall be on the way, at least, in my opinion, to find some path out of our difficulties. We as a group contend that the amount of money, genuine good money, which this government can have, does not depend on the will of any banker or on the amount of money which people have been able to make and save in the past. Then you ask: Well, what is money? So the first thing we will consider this afternoon is, what is money?

In order that we may get together on this, and that you may not feel I am giving any private definition of money I am going to read a quotation from a book which is just off the press. It was published in 1937 by John Donaldson, Professor of political economy

I am not sure just where. The name of his book is The Dollar, at page 1 of which he says:

Although there are many meanings' given to the term money, unless otherwise indicated the word will be used here to mean (1) currency in the sense of all regularly recognized circulating media of hand-to-hand exchange (such as coins, national bank notes, federal reserve notes, and federal reserve bank notes), plus (2) credit, in the form of bank deposits.

For the purposes of our discussion let us accept that as the definition of money. Roger W. Babson, in a book published in 1937, called If Inflation Comes, defines money at page

68. He is worried about the coming of inflation, just as the Minister of Finance expressed himself as being afraid of it; and he has good cause just now, I will grant. In setting forth his reasons for his fear of inflation Mr. Babson gives the following as money: "gold coins, silver coins, paper money, cheques, private credit, government credit." I think that is enough from that quotation. I may say that Mr. Babson goes into the question of money and inflation with a great deal of care. He is certainly not a social crediter, but I like to read men who disagree with me completely because I find in them large sources of information.

There are then two kinds of money; currency and credit. To illustrate what our conception is, so that the members can form their own opinion whether they agree with it or not. might I give this simple little illustration. It is almost childish but it helped me to get a conception of the confounding difficulties when I first commenced to study Douglas.

If you go back into the history of money, (according to one story), you will come to a time when there was a man living in a community and keeping cows. Another man not far off was raising grain, and the man raising grain came to the man with the cows and said, "Let me sell you some of my grain." "Well," said the man with the cows, "I would gladly take some grain but I have not got anything to give you for it. I could let you have a cow." "No," says the man with the grain, "I cannot handle a cow just now. She will get in my way, but I certainly would like to sell you this grain." "Very well, then," says the man with the cows, "I will make a little leather tag and on it put a cow's head and my private mark, and you take the tag, go your way, and when you want the cow, come back and give me the tag and I will give you the cow, because the cow stands behind the tag." "Right," says the man with the grain; and he hands over his grain, takes the tag and goes his way. A little while afterwards he goes to a man with shawls. "I would like to get one of those shawls," he says to the owner. "I will give you some grain for a shawl." "No, I cannot handle any grain," says the man with the shawls. "I will tell you what I will do," says the man with the grain. "I will give you a cow for the shawl." "Yes?" said the man with the shawls. Then the grain man takes out the leather tag and says: "Take this little leather tag and give it to Jim Jackson, and he will give you a cow, for a cow stands behind the tag."

The mere fact that the word "pecuniary," which is the word we use with respect to

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money, is .traceable to the word pecus, meaning cattle, indicates that that story may not be altogether far from the truth.

Now the question arises, how many tags could Jim Jackson make and trade for grain or shawls, or milk or cream, or fruit or sheep or anything else he wants to trade them for? Immediately people will say: It will depend on the number of cows he has. Of course it will. Allowing a certain number of cows to absorb the shock, shall we say, so that he will not be completely cleared out of all his cows, if he has thirteen head of cows he can safely issue probably nine or ten tags, which may go circulating all around the community. Every time a tag returns there will be a cow to back it. Now, suppose this man has thirteen cows and he issues ten tags; let us suppose another man has thirteen cows worth of grain and issues ten tags, and another man with thirteen cows' worth of shawls issues ten tags, immediately we see that in this little community there can be thirty leather tags in circulation. What is the backing of them? Is it the banks? Is it gold? Is it silver? Is it capper? No, it is cows and grain and shawls. Originally the money of a community depended exactly on the community's ability to produce goods that people could use. That helped me to get the idea of the backing of the money of the new economics. I believe we have quite lost sight of that backing of money. As soon as you begin to apply that principle to Canada, with all her boundless ability to produce all manner of things, you see that there is the possibility of a great many leather tags. Let me say that that possibly explains the way in which currency could be backed. Those leather tags would be currency.

Now, as to the other kind of money that we use-the credit; let us employ a similar illustration to get the idea of what credit is. Credit in the last analysis is the ability to produce and deliver goods and services, as, when and where required. That is a glib definition which meant nothing to me the first six months or so I studied it, but I got the idea of what it meant by this means. Supposing that, to a community where there is plenty of timber .and fish and good hunting, and coal in the ground, there come four men to settle. One is a good hunter, one a good fisherman, one a good woodman, one a good builder. The hunter goes out and has considerable success; he gets a good deer every day. He goes to the woodman and says, "If you will cut me twenty-five logs to-day I will get you a good deer." The woodman knowing that the hunter can be relied upon, goes off and cuts the twenty-five

logs. The hunter goes out and gets the deer, delivers it and gets his logs. The confidence which the woodman had that the hunter could get the deer gave an establishment of credit. If this little community went on and gradually developed, one man coming in with the ability to saw lumber, another with the ability to tan hides and make coats, little by little the public credit of the community would grow because its ability to deliver goods and services as, when and where required, would increase. The man who is the woodman will give an I.O.U. to the hunter; the hunter may give the I.O.U. to the tanner. We will suppose that they begin to use for I.O.U.'s figures in a book just as we use them now, just as our bank credit is operated. A man comes in who makes it his specialty to write up these I.O.U.'s. He does not need gold; all he needs is the assurance that these people can deliver goods and services as, when and where required, and he can commence to write up credit.

Mr. CLEAVER:

Would the hon. member permit a question?

Mr. BLACKMORE:

Gladly. That is what I am here for.

Mr. CLEAVER:

Before I forget about these cow tags, are you suggesting that they can be handed or given to anyone without being earned, without being paid for?

Mr. BLACKMORE:

Not just yet. We will come to that after a while.

Mr. CLEAVER:

I am sorry to have interrupted the hon. member. I just wanted that information.

Mr. BLACKMORE:

As you have asked it,, let me say that if a community gets into war and one person is wounded so that he is thereafter incapable of going out and raising cows or grain, and the men who can raise cows and grain and shawls can produce far more than they can possibly use, it is conceivable that some of the tags could be given to this wounded man without doing them any harm at all. But when one of the tags comes to the man with cows he can turn it over and buy grain with it, and the grain man can turn it over and buy shawls or coal or any other article the community produces.

Mr. CLEAVER:

Are you suggesting that anyone may acquire one of these tags without having given value for it himself or through his friends or someone else?

Mr. BLACKMORE:

That is a very fair question, but as we go along we shall get to the point that, as the community develops,

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it will be evident that the all-important thing for the man who produces cows is that he shall be able to sell them. That is the allimportant question which obtrudes itself upon all western stock producers to-day. Their great anxiety is not whether they can raise cows but whether they can sell them. They are interested in any means which can be employed whereby they will be enabled to sell their stock. Even the people who do not produce would probably confer upon them a distinct advantage-

Mr. CLEAVER:

I take it that-

Order.

Mr. BLACKMORE:

May I have the question? Very well. I am glad to answer questions; we might just as well take them up as they arise, because that is what I am here for. I delight greatly in questions.

First of all, then, we have decided on a definition of what is money; what is currency (tags); what is credit-figures-in-a-book. If hon. members do not agree with my definition- good. If they do, we are together thus far. The next question we shall take up is, where does money come from? Is the money which the bank, for example, lends to you if your credit is good, money which somebody put into that bank, or is it money which the banker creates at the moment and lends you? If the answer to the latter question is yes, a tremendous possibility opens up. Where does money come from? The contention of the whole social credit movement is that the banker creates that money as he lends it to you. There is a real clash there, some bankers maintaining it is not so, and increasingly many bankers and great authorities contending and declaring that it is so-and the latter are not all social erediters, by any means. We say that bankers lend credit and not currency. Some evidence that that is true is to be found in a quotation which I shall read. May I say that when I first heard this four or five years ago I considered it was the most idiotic thing I had ever heard of, and not until I was completely convinced that bankers do create the money they lend was I ready to listen to the social credit proposals.

Here is a quotation from a source which I think all hon. members must respect. It comes from the London Economist of August 15, 1936.

The most obvious and significant fact which emerges is that no single major country has overcome the great depression without undertaking a policy of monetary expansion of one kind or another.

Which indicates that money is the root of the difficulty.

It is, of course, open to anyone to maintain that recovery would have come without positive expansionist policies if only the countries concerned had waited long enough. In fact, however, it never did. Holland and Switzerland are waiting still.

Hon. members can find this letter in 'volume 124, July to September, 1936, page 292. The article goes on to say that the monetary expansion is accomplished, not out of savings, but by the creation of fresh credit. That agrees exactly with our contention. There are many other quotations that could be cited. I am going to direct the attention of the house to the London Chamber of Commerce report of July, 1932. I quote:

It is upon the base of currency (money without physical existence) that the structure of bank or credit money is built. This credit money is many times greater in quantity than the currency, and having no physical existence, it is conveyed from account to account by cheque. At the present time the banks are working to a ratio of ten per cent cash of their total deposits-i.e., they are lending ten credit pounds for every one pound cash holding.

That is, they are lending ten credit pounds for every one pound of cash held. I would submit that statement to any man in Canada and ask him to explain how on earth that is true unless the banks, holding one pound of money, can create and lend ten credit pounds out of nothing. As I say, there are plenty of quotations that I could give; I have them in great number. But these are enough.

Where does the money come from? If all the money that this government could borrow in Canada were obtained in Canada, if it had to come out of past savings of the Canadian people, out of life insurance and trust companies and the like, then, of course, we should be prepared to pay interest, on that money and consider ourselves in debt for it. We should have to pay it back and have our descendants for generations pay interest on it. Ultimately, if they could liquidate it, they would. But if the money originally was created out of nothing why should we have to pay interest on it? Why should we be in debt and bleed the country white to pay it back? That is manifestly a revolting prospect.

The next question is, what gives money value? The Minister of Finance has said, very wisely and quite correctly, confidence. Surely it is confidence. And what makes confidence? Is it not first of all the certainty that the person to whom you present money will deliver to you goods and services as when and where required? Does anything else matter at all? Undoubtedly the conclusion must be drawn that if in a country you have plenty of goods and services so that people are able to deliver these goods and services as, when and where required, then to the

1122 COMMONS

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extent to which you have goods and services you can have money. That is a social credit contention put in another way.

The thing that attaches confidence to money is government backing. This Dominion of Canada has created millions upon millions of dollar bills. Did they cause inflation? Surely not. Were they good money? Surely they were. Did they always have gold behind them? Surely not. Just consider for a few minutes Sir Thomas White's excellent pamphlet, How Canada Financed the War. Many of these principles are set out clearly. Consider the way in which Britain financed the ' war. Britain went into debt to the extent of seven billion pounds. One of these billions she borrowed from the United States and two of them she borrowed from her people, raising it by loans and taxation. But the other four billion pounds were not in England before she went into the war. Where did they come from? If they were created by banking institutions in England, why in the name of common sense should the English people and their children to the last generation be loaded with a burden of debt which they must pay back, paying interest to an extent that ruins the country, just as we are doing now? The money was created out of nothing by the banking institutions of Great Britain, and ten per cent of it was created by the British government itself in treasury bills. And after a pound of treasury bills was created and handed to the bank the banker could immediately make ten pounds of his own credit money and lend it back to the government. Such a situation must surely present itself to any thinking man as an incongruity, a monstrosity, an absurdity. The thing that gives money value is the power of the people behind the government that creates that money-the power of those people to deliver goods and services as, when and where required. It is not gold. This principle must be laid down; if the hon. members challenge it we must clear the matter up. If the people's productivity backs and makes possible the money, then the money certainly ought to be theirs.

There is in the minds of people generally throughout Canada and the British world, and in the United States as well, great confusion as to the backing of money. Practically everyone has the idea that there must be gold behind the money. Thirty or forty years ago it was generally thought that money was better if it was made of gold. We never see gold to-day; we never even ask for it, nor do we trouble ourselves about it. Is it gold that gives value to our money? Let me hasten to say, I fully grant that you must

have gold to back your exchange. But that is another matter that must be considered in its place; if we go into it on this occasion we shall not cover the other aspect of the question. Apart from exchange, however, is there any reason at all why the question whether there is gold in Canada or not should affect the value of Canada's money?

Mr. ROGERS:

Does the hon. member

agree that the value of money has some relation to the price level?