Sir THOMAS WHITE:

If my hon. friend will pardon an interruption, I should like to

point out that he is entirely wrong on the so-called trading account. In the year 1918 the Government not only did not lose money but made money. The stabilization did not cost the Dominion Government one cent.

Sir THOMAS WHITE:

Represented in bonds which were taken in-cancelled.

Sir THOMAS WHITE:

It does not compare with the circulation of either the British Government or the Bank of England. My hon. friend should look up the facts when he speaks upon this question.

Sir THOMAS WHITE:

Well, I accept my hon. friend's correction. That, undoubtedly, was the impression he gave. He did say that the lowering of our credit-I think I am quoting his precise words-is due to

faulty action of the Finance Department. Why is not the lowering of the British exchange to a greater degree dub to faulty action of the free trade Government of England? Now, let me say this for my hon. friend's comfort-

Sir THOMAS WHITE:

Now my hon.

friend (Mr. Clark) also touched upon the tariff. I am not sure whether it was he, or the- hon. member for Marquette (Mr-Crerar) who referred to the fact which has been put forward on more than one occasion to the farmers of this country, that on account of our policy the farmers have moved from Canada. I ask the hon. gentleman where are the farmers who would have been in Canada but for our policy? -I ask the hon. gentleman did those who left the farms of Canada to go to the United States engage in agriculture, and if so how many of them? You will find the cities over there full of Canadians who went seeking industrial, commercial and financial opportunities, where they have done exceptionally well; but it seems to me it would be a wise policy on the part of this country to bring about such a development of the industries and the commerce and finances of Canada, as to keep those men at home

in the work in which they desire to engage. Because men have varied talents. How many men in this country are farmers? A large percentage, it is true. But farmers' sons have various talents. One is a skilled mechanic, another will make a soldier, another a professional man, and so on. How are you going to prevent the farmers of this country from giving their sons that opportunity if they so desire? All that is involved in this question.

Now my hon. friend says: Oh, but your domestic loans. He shakes his head over our domestic loans and says there is plenty of money in the country. So there is. But does the hon. gentleman think that the loan which was floated last Fall could have been floated in 1914? Will he look at the bank credits of Canada now and compare them with the situation before the war, and will he tell me we could have floated a Victory Loan in 1914? No, we could not; the money was not in the country. What was the result of the floating of our Victory Loans, broadly speaking? Every loan a success.' But for that our banks would have had to take the securities as they did in New York. That is one of the difficul

ties down there at the present time. Those banks had to take too many of the securities because the interest rate was too low. Three thousand million dollars the financial institutions in New York took that they did not want. It is the function of a bank not to buy securities but to loan on securities. We finished the war with a perfectly clean financial situation. None of the banks owned bonds that they did not desire to own and the amount owned was very small. It was a perfectly healthy situation because our loans had been distributed all over Canada among probably two or three millions of people. They are the bond holders of Canada; they have got that stake as well as other stakes in the community. What about our securities, and from a market standpoint? -No country in the world-including Great Britain that my hon. friend so properly holds up as an example-where the Victory Loan securities stood at par, or above, at the end of the w'ar except Canada-not one. In the United States, 90-92. How did the bond owners -feel all over the country? I would like to have all the bond holders of Canada here that took Victory Loans but you could not gather them in Ottawa, the place is too small- one million and a half and two millions of them. Yet my hon. friend gets up and contends we should have put the loans out at such a figure they would be down to 90

now, instead of par where my tax-free bonds are. That is not good politics even. The public in this country that have bought Government bonds like to see those bonds stand up in the market. Because they need money from time to time they want to realize, and they do not want to realize at a loss. Take the insurance companies that represent the interest not only of stockholders but policy holders. Supposing in the United States they wrote down their securities to the market value? In this country they can show them the market value and there is no loss to policy holders of insurance .companies who took tens of millions of dollars of our securities. At the close of the war Canada was in a position to say: The public of this country subscribed enough money to send 500,000 soldiers overseas and to fight thousands of miles from their base; to provide the necessary credits for the purchase of our agricultural and other products; and at the end of the war our banks had no securities, had made loans upon securities to only a limited amount, and our securities stood above par on our stock exchange. I will rest my reputation upon that statement before this House and before posterity.

Why, Mr. Speaker, we appealed to the public to save. By a publicity campaign, by direct personal appeal, by every proper method we asked our people, rich and poor, to save their money and give it to the Government in return for our securities; we took possession of the securities marketed in Canada and would not allow issues to be made except for essential purposes; we shut luxuries out of Canada by Order in Council; through our bond houses and our banks we discouraged the purchase of Anglo-French and other securities in New York in order that all the money of Canada might be available for the purposes of our loan; and we appealed through our Victory Loan organization- the greatest organization ever put together by any country during the war -from the Atlantic to the Pacific for subscriptions to our loan. No Minister of Finance ever had such an instrument as that Victory Loan organization, which, with the patriotism of our people, made those great loans a success.

Now, my hon. friend from Bed Deer (Mr. Clark) says, " You made the bonds tax-free." Unhappily for him he has taken a particularly unfortunate time to put that argument forward. It would have seemed more weighty last year than this. Last Fall we put out a taxable loan, whereas before our loans had been tax-free. The respon-

sibility for that is upon the Government, and the credit, if any, for it, is due to the Government. In July of last year, before leaving office, I called together the leading members of the Victory Loan organization and the best bond experts in Canada and asked them to determine, among other things, whether we should put out a taxable or a tax-free loan, telling them that if it could be done, I would prefer the taxable issue. The situation had cleared a great deal since the war, our securities were all selling on a better basis, and we came to the conclusion that we should try the taxable issue. There was some dissent on the part of a few of the ablest bond experts. They said, " You will get the loan out, but we are a little doubtful as. to whether you can hold it out, because it is a little out of scale with the price of securities to-day, and those which we expect will prevail." My successor, Sir Henry Drayton, who threw himself with great energy and enthusiasm and ability into the campaign, was able, I am glad to say, to make a great success of that Victory Loan. To-day the securities of the taxable loan are 96 and 97; the securities of the tax-free loan are at or slightly above par. In, other words, the advantage of the tax-free privilege is a real market factor, which brings about a constant buying power in the country, which in turn tends to keep your market right.

Now, I say further to the hon. member for Red Deer that on his assumption-in which I do not agree, and I will state the reason later-that on his assumption if we had put out all the loans-$2,000,000,000 of securities-on a taxable basis, instead as we did most of them on a tax-free basis, all the Victory Loan securities to-day would be at 90 or lower, for there is no market situation to sustain them. What has happened the last few months is this, and it throws a little light on the question of exchange-which I am coming to a little later-spoken of by the hon. member for Red Deer in terms rather derogatory to myself: 'Our exchange has gone down compared with the United States'; but Great Britain's exchange is lower. Unless my hon. friend the Minister of Finance (Sir Henry Drayton) had taken the steps which he recently took, Great Britain would sell back to us or would offer in our markets the securities of our municipalities,-of our provinces, the securities guaranteed by the Dominion and by the provinces that we sold to her years ago and which have been years overseas-she would have sold and continued to sell those here until our exchange

dropped to the level of sterling exchange; that is what would have happened.

I told my hon. friend what would have happened on his theory that we put out 5J% taxable bonds during the war. Now 1 will tell him that we could not have done it even if we desired to -do so. There are two essentials, Mr. Speaker, which a Finance Minister must consider when he is putting out a loan, and he makes a great mistake if he overlooks either. In the first place, he must get his money-the offering must be a success; and, in the second place, he must consider the market situation after the loan, especially "if he is going back for another loan. You have got to look a little further than the end of your nose in public finance where you are offering large loans which, to a certain extent, are taken on the inspiration of patriotism. I might at the start have put out a 5i% Victory Loan taxable, and the public would have taken, not as much as I got, but a very substantial amount,-although I know we could not have got anything like the amount we did get because those skilled in investments could have bought scores of securities of the highest quality in New York to yield as high as 7, 8 and 9%, among others the Anglo-French loan backed by the credit of Great Britain and France.

Supposing I had put the first loan out taxable at 5i%, the trouble is it would not stay out, it would keep coming back, and if I desired to stabilize the market I should have had to pay out tens of millions of dollars to keep that loan up, so that when I went back to the public my loans would get the reception which our subsequent loans were accorded, because my loans were as a matter of fact stabilized. I say to my hon. friend from Red Deer, and that there is not a financial man in this country of high standing who will contradict me, that if we had put out taxable loans during the war we would have finished the war on a 6J instead of a 5J% basis. What would have been the result? My successor would have his interest charges increased in respect to the debt of from $10,000,000 to $15,000,000, and he would not have got one fraction of that amount back from the comparatively few people in the country who derive a substantial advantage from purchasing the tax-free bonds. My hon. friend might say, " Well, I would rather that the Dominion Government should have to pay $10,000,000 or $15,000,000 more annually rather than A, B and C, wealthy men, should be able to buy tax-free bonds and not pay the full amount of taxation called for by the 13

legislation of this Parliament." Well, I would not. You have got to look at this thing as a whole. Any Finance Minister looks at his balance sheet, he wants to get his best result there; and that is what we got.

It is often put forward that a man with an income of say, $11,000 derived from $200,000 of tax-free bonds, does not pay any income tax. Neither does he. But what could he do? He could do what men are doing to-day, buy municipal and provincial and Dominion guaranteed 6J and 7% securities, and pay his tax and still have more than $11,000 income. I admit that when the income derived is above $25,000, $30,000 or $40,000 a year there is a considerable advantage to those who buy tax-free bonds. But that advantage is negligible as compared. with the saving of from $10,000,000 to $15,000,000 a year ' which I contend has been effected in the balance sheet of this Dominion by rqason of our having floated loans at 5| instead of 6i per cent.

My hon. friend says that the lowering-of the credit of Canada is due to faulty administration .of finances. Now, that is a very sweeping statement. Is the lowering of the pound sterling due to faulty action of the British Treasury? What is the world situation in exchange to-day, brought about by the war? The Italian lira, corresponding with the French franc, at 6 cents; the French franc at eight cents; the German mark at one cent; the pound sterling was as low as 3.30 as compared with $4,861, the par of exchange. One third of the pound sterling wiped off-the pound sterling, to which before the war all the currencies of the world touched their hats. Is the British Treasury to blame because its exchange is at a discount with that of the United States? My hon. friend failed to observe that the British pound is at a discount with the Canadian dollar. The Canadian dollar is down 15 per cent; the pound sterling is down 30 per cent. My hon. friend says that it is the free t-adc policy of England that has brought about the exchange situation- which confronts her to-day.