Hon. DOUGLAS ABBOTT (Minister of Finance):
A short time ago the hon. member for Rosetown-Biggar (Mr. Coldwell) asked the following question:
In view of suggestions made in the house for the devaluation of the Canadian dollar or an increase in the price of gold, and Canada's need of American exchange, what action does the government propose to take regarding the storing of large amounts of gold bullion by the Mclntyre-Porcupine Mines Limited, or other mining interests who may be adopting a similar policy?
I have given very careful consideration to the problem raised by this question. There is no law on our statute books which specifically prohibits a gold mining company from withholding, or delaying to ship to the Royal Canadian Mint, a part or all of the gold currently produced by the mine. The only law relating to the subject appears to be subsection 2 of section 28 of the Bank of Canada Act, which was passed by parliament in 1934. Under this subsection, the governor in council is given power to require-
-every chartered bank or every other person to transfer to .the bank-
That is, the Bank of Canada.
-any or all gold coin or bullion held in Canada which is owned by such chartered bank or by such other person.
The subsection goes on to authorize the governor in council to take-
-all measures deemed necessary or expedient to enforce any such transfer and to impose and recover penalties in respect of any neglect or refusal to make any transfer so required.
I believe that the government could take action under this authority, if the situation appeared to warrant it. It might, of course, be urged that what the mines have been shipping to the mint in the past and what some of them are now storing is not gold bullion but, say, gold concentrates or gold in some other unrefined or partially refined form. However, this contention could hardly be successfully supported in most cases, and particularly in cases where the parcel deposited consists of gold which has been refined to a fineness of around eighty per cent.
There is, however, a rather serious difficulty or objection in applying the above provision of the Bank of Canada Act to the type of case which is now in question. This difficulty arises from the very severe penalty which has to be imposed when the provision is put in force. Section 29 of the Bank of Canada Act provides that where gold is transferred to the Bank of Canada under the previous section-
Storage of Gold
-the value of the said gold shall be computed on the basis established by the Currency Act at the date of the relevant transaction.
This means that if the governor in council required a mining company to transfer to the Bank of Canada the gold bullion which it is now storing, the price at which it would be taken over would be $20.67 per fine ounce, rather than the current price of around $35 per ounce.
This would be probably too drastic a penalty to impose in a case of the kind we are considering-too drastic, that is to say, unless the country's need for the gold was immediate and urgent. On the other hand, after serious consideration I have not been able to think of any amendment to these provisions of the Bank of Canada Act which I would be prepared to recommend at this time, because I can see that there may be cases arising in future where it might be appropriate to apply the present provisions of that act. With this in mind, I am not proposing any action on this matter at the present time. I am content to defer action for the time being because any gold that is stored by mining companies will be in a few hands; we will know where it is and approximately what it amounts to. We can therefore take it into account as in some measure a substitute for a part of our official reserves and, finally, if the need should arise, we will be in a position to have it transferred to the Bank of Canada under the legislative authority I have mentioned.
I cannot refrain, however, from expressing the hope that we will not see a continuance or extension under present circumstances of this practice of hoarding gold and thus not allowing the current output of this monetary metal to become an acknowledged part of the country's essential exchange reserves. As hon. members will recall, parliament itself has approved within the past twelve months the Foreign Exchange Control Act, to permit the conservation and control of the use of our foreign exchange resources, and under that act it is necessary for us to maintain restrictions on many types of capital transactions. If this were a world which was not suffering from the consequences of two great wars in one generation, it would probably be possible to permit complete freedom for companies and individuals to speculate in foreign exchange, foreign securities and gold. Unfortunately, it is not that kind of world. We simply cannot afford at present to see widespread speculation in foreign exchange and foreign securities, nor widespread speculation in gold, which is the equivalent of foreign exchange. In so far as we can secure the sensible cooperation of
business men and investors, it is possible to get along with a minimum of restrictions and controls. I trust that public opinion itself will be a potent force in determining what type of action is considered reasonable under given circumstances, and that that public opinion today will serve to a considerable extent to dissuade individuals or groups from attempting to make unproductive and speculative profits by exploiting the international difficulties that various countries face in these times.
On the orders of the day: