* .' MARcn 4.19s‘.

Inflation. Fallacy FineNon-Partizan Speech EyBennett

(costume from Page u

. ,, m supply the requirements of the rural population. This comple- tmtary activity, by which the agricultural populsti on the one hand “d, an ever-in market with the development of our resourcel. m; an the other hand ever-increasing opportunity tn Purchase the pro- duct! of mill and factory, indicated I think the ideal development of our

musty. it follows that a country so rich in resources as this, with forests minerals and farm lands, with this magnificent heritage o! mom“, with a population so small as m: and s quarter millions of mp1,, necessarily has an increasing quantity of products for exports- Hence 1t i; that, although with the ‘shrinkage of world trade we found a mat diminution in our exports, and sank to sixth place amongst the mum; countries of the world, I am happy to tell you that once more this young country of slightly more than ten millions of people occupies the proud place of fifth among the exporting countries of the world, ex- mgss only by Great Britain, the United States of America, France and That is a remarkable achievement. And it seems to me it

(lei-many- for us to realize and recognize tonight, gathered in this

[niglibhd W011 _ may, city. the sacrifices that the Canadian people have made

‘Magma, through the burdens imposed upon themselves and upon poe-

m-ity, to make possible this achievement. Highways, railways and sea- alike by the Provinces and the Dominion

have rendered ever-increasin! urvlce for the conduct of trade and commerce. Our railways indicate that at one time at least Canadians had an entirely erroneous view even our own importance. for when you contemplate what it means that the dim people was used for the purpose o! teeing against loss as fer as financing was concerned, rival enter ose function it was to complete with one another and. destroy you can understand something of the causes that contri- having a. deficit in railway operation! lust y"? gmountlfig to about seventy million dollars including indispensable capi-

constructed

wgys have been Our highways

that trade may nourish.

v llectlve credit of the Cu

prises wh one mother, g huts to this country

tal expenditure. THE RAILWAY PRQBLEM

Gentlemen. there is no problem the magnitude of which is understood, that touches so closely the life of every Canadian,

railway problem. involved, for in my iudgmsnt it is one of the clouds that overhaul: o! that problem, whatever it may b0. callin! I! ii the highest character, will be painfully brought about. I say liberalism-though with every

But. may I point out. there is I out for the railway problem.

made possible the result which now confronts us. that at least one of, the 870st Canadian National could neven that the three great agricultural

should take stock of our common

~ adequate conclusions.

‘A we have hundreds of millions of

n oug Grelt Ldkd! l-Iid 5t. Lawrence duds of millions of dollars. We in constructinl our highwlya. Montreal, Quebec, Halifax, Saint John;

bade-cast and wast trade-realist"

‘ and west traffic.

We have built these great railway systems, these great canal system-i. these great harbor works and terminal facilities for the promotion of vision and prescicnce of

the Canadian people that they looked so far beyond the narrow confines trade which ranks filth amongst the exporting countries of the world. It is a tribute to our vision. but: on fiueother hand i0 has placed upon us an enormous burden, and the question must sometimes occur to nifliy of you business men whether

or not the toll exacted from Wu i! 110% IP90"? "l" i!" "mm whim acute as the days

part of what is involved in the steadily mounting, but I trust in reasonable time. steadily

trade, and it is a striking commentary on the

of the immediate day, that. in thh very year we have a

have been achieved. That problem will become moro- IO by. with a clearer and fairer appreciation on your

lessening railway deficits. ¢l cautious CBIDI‘! svsrsss

But we have done something more than that. In the years past we

‘we built up a vast financial and credit system. It was not until 1871, as some of you may r

law providing for the Canada in i058 provision was made for the l-Cilulufts in dollars and cents instead of in pounds. We have developed a system of publ

power of dispsssionate criticism, to determine the

Provision we have made meets Finance-How have we met it? We issue of paper money, which, as some of you w misc to pay on demand the amount indicated on

u! Canada there shall. to the extent of fifty million dollars. be deposited in 95 per cent. in gold. And thereafter, 801d.

Gentlemen, the mare issue are concerned and as I will hereafter develop, found importance. But when it comes to the issue of

it ia ail-important what is behind the paper that we call money,

The provision of our law that requires 25 per cent. up to "ill thereafter dollar for dollar in gold as coverage for the P5991‘ mimi- lwrhaps somewhat higher than modern experience and practice would

die-ate as being necessary. I am

“my. regardless of what the amount will"; M. will!

Brice. Iwiiiuotgointoadisonsaiouoftbattqnilhi.

tions that arise in every country that is‘ so , Runnable crop such as grain, the aecuri “rune-amena- ledaraiTreeaury.

"ii wmee mum to onouinfrl would seem “Yflurba u readied regarding um matter. we mast ha"

“W; iitbtef

through

so little as the I will not dwell upon it tonight, but I trust that every young Canadian will make himself familiar with it and understand what is greatest and dflrkesfl

the future of this young Dominion. The solution does for qualities 01 that de- conildonce that we will find the solution. ‘they sometimes to blame the 'f‘hat should not. be done, except in so far

as those who promoted the enterprises through our national Parliament But it will be recalled

competin systems now merged in the have come into being but for the 100i provinces gave their guarantees to its securities-to the securities not only of one but o! two systems. So we responsibilities, east and west. with respect to the situation that now confronts us. I recommend it to ybui‘ hearty consideration and closest study. that you muyvarrivc at prover

dollars invested in our railways. Waterways system we have hun- havs contributed many millions mere in all the terminal facilities at Vancouver. wharvea and harbors built by the taxpayers of this country to afford faculties for the transaction of that on tbs northern half of this Continent if we are to maintain our identity as a people it is absolutely essential that we should have and maintain common arteries of ell!

scall, ‘that we passed a uniform value of the dollar, although in Old keeping of the public shillings and pence- ic finance that, while it is open to

Wine uiticism, is in the main I thinbsatisfactory. At least it commarxis

the admiration of people abroad, who are well able, by reason of their extent to which the

the demands made upon it. Public have met it by providing for the ill have noted, is a ilro- its face. We have pro- vided for the issue of that under a metal coverage. In other wordfi. We

have provided that when paper money has been issued by the Dominion 28 per cent. of the issue up 9°

the public Treasury 811500-000 °l for every dollar issue, a dollar in

o; pgpgg money, so far es we ourselves is not a matte of pro- paper money for

"is rum» of liquidating and discharging international onus-sum. Ma

told by those wail able to indie. by

snkers and expert economists both hero and in Great Britain and in the United States, that a ac per cent. gold coverage m- the issue of raver be sufficient to

mat Wei‘! damaiid um. urea-ism and practice have taught as liirly 9° but content nuraeii

to expand trade we have

"Me the provision which r have indicated in our currency lanai-tie"-

{gpgaiy dependent lipflfl I ties of this country filly,“ ""0 and the banks may there obtain ism tender o. pijcuiiau to p1 of the Dominion, to enable them to fin- "i" and cam on the operations of export use. of burial and will»! “mummies. m the main that’ provision has been found satisfactory-

Whetbsrornctitadeeadeeiytaanmpisseszqqntnibankitisnct to me that before Ill]

the oluaeat

was CHARLOTTETOWNCUARDIAN

determine what h best for Ill. rather than what has been beef for other peoplei iu the world. (Applause).

CANADIAN BANKING SYSTEM

We". ii-imliil to the field of quasi-public and private finance, we have our great Willa. incorporated by the Parliament of c = , regu- lated under the provisions of the Federal statute known as the Bank Act. Under our Constitution banks and banking are dealt with solely by the Federal power, and in dealing with this subject regard must cyer be had to the fact that the banks are chartered for a period of ten years.- M the end of each 10-year period they seek renewals of their charters, lo that r-Ililmeni. representing the people, may be able in the light of Practice "if! fllilflriflwe i0 impose upon them such regulatory provisions as will ensure on the one hand that their deposits are being made avail- able ior loans to the public on fair and reasonable terms, while on the 0th!!!‘ ill-iii!‘ “ill- ihfl “Wiley o! depositors is safe-guarded in every roas- ohsbie way. Gentlemen, it is a matter of some pride to those charged Wli-hvfliiiliillbillty in these matters to know that the banks, during this period of stress and strain, have discharged with great satisfaction not only to their own customers but to this Dominion and all its citizens, the great responsibility that rests upon them. Sometimes there are com- Dlli-ni-B 001ml. the banks-why there are even complaints against the present Governmentl-but I want you gentlemen, whether or not ‘you are associated with financial institutions, please to remember this: tlIe capital o! banks is relatively small. Practically the whole of it will be found any day. with the reserve and surplus profits, in the till and in buildings and other assets that arc not available for lending to the public. The business of banking in this country is to receive deposits and lend them to those who can afford to borrow. Tonight I will, put this to some 01 you within sound of my voice, either in this room or elsewherel I ask you whether or not you believe your banker at any time in declining to make a. loan has done more than you would do with your own money in like circumstances. That is the test. For remember, the business of bank- ing in Canada is the business of safely investing in loans the deposits of the many. What would happen if you had bankers s0 disregarding their 011118061008 and responsibilities as to lend for three or ‘six lnonths, or for thirty days if you will, to customers who when the time has expired are unable to pay. Then you would have the frozen credits, then as a depos- itor your cheque would go to the bank and be dishonored. Then the doors of the bank would close, as happened nearly 4.000 banks in the United States during the last 18 months.

Lientlemen, the business of ‘ hiring Is the preservationbf an equil- ibrium between time loans and time deposits, between demand loan; 3nd flmlnd deposits. and if a banker is so recreant to his trust and his res- ponsibilities to his depositors, as well as to his bank and the public as w lend money thoughtlessly or recklessly, if that is done on a sufficiently large scale, then it follows that when the moment comes that the de- positor demands as Js his right his money back it. cannot be obtained because it is tied up in a loan that is not and cannot be paid,

I say these things tonight because I am speaking to an audience not all o! whom are trained financial men, as are many in this room, But I desire to make it abundantly clear that the people of this country should understand clearly that- a ‘ ' banks ls no friend clther qr theirs or of the community. The need of caution in making loans is of the highest importance, because if the depositors are to be paid on de~ mand there must be no careless loaning of their money. (Applause). And I repeat, it is a matter of pride and satisfaction that wherever the name oi this country is known-and it is known in every part of the globe-our banking system a regarded as being sound.

I do not say there are not many improvements that may be made. that can be made, that will be made. But I do say that Canadians in this time of stress and strain and universal depression should rejoice in the fact that no depositor in a. Canadian bank has had to take his cheque back because it could not be honored, that no banks have closed their doors, and that in the smallest and most remote part of this Dominion there is usually a brunch of a great chartered bank that offers facilities to those living in these small places comparable with those afforded to you in this great City of-Toronto. (Applause).

Now, gentlemen, the banks also issue paper money. The banks also enjoy a franchise, thc franchise of issuing their bills, their paper money. against their accumulated resources, and if the need should come, against the securities of the Dominion of Canada itself. Now this becomes im- portant in the light oi what I am presently to say. In i920 the Dominion had issued paper money up to $305,800,000 during the year, and the banks $220,800,000, making a total of $534,600,000. In the year 1920 that amount of paper money was outstanding, to serve the activities of the Canadian people, enable us to export our commodities in order to buy goods and to carry on this great business of trade and commerce. Last year the con- traction in trade had become s0 great by reason of universal conditions, not worse in Canada than elsewhere, that the Dominion issued only $165,870,000 of paper monies as its average, while the banks had an aver- age issue oi $l32.i66,000, or a total of $298,036,000 of paper money out- standing. Yeu see, as trade contracts paper money contracts automati- cally, having regard to the provisions of our Finance and L cy Acts which I mentioned a moment ago.

So if we keep in mind those two things, our provision for Public finance, and our provisions through the regulation of our private efforts. through our banks and otherwise, you have what we call our credit struc- ture. Young men, you who are on the threshold of business life and arc facing and studying new conditions, I hope you realize that in these two combin d you have an almost ideal credit structure. Much remains yct to be done, but for a country so young, with a population s0 sparse and inhabiting an area. so great, there ls not in the long story of history a finer record of achievement with respect to the establishment of a credit and financial structure than is found in the combinat‘ of our public and private. arrangements to which in part f have just referred. lApplause).

There are difficulties of course. Normally conditions go on from day to day, from month to month. from year to year, in a regular course, and

"Dim us in this country obligations and rt-‘sponsibiiliies that we have rarely had to fa-co. Gentlemen. your Government is not entitled alone to the, credit for facing. them with courage, as you said, Mr. Chairman, but the iiiie courage of the Canadian PBODlc. their resourcefulness, their faith, their absolute confidence in their ultimate destiny made it. p08- sible for your Government to carry on under such conditions, and thus far to weather this terrible gale. And with your help, your sympathy and your assistance we shall continue to do so.

MARKETING PROBLEMS

Gentlemen, the great difficulties that confronted us, and confront us still, may be spoken of briefly as four in number. First, the difficulty in continuing to find markets abroad i9): our surplus products. Too fre- quently wc Canadians have been willing to produce without regard to distvibuztan. Take as examples newsprint and wheat. The consuming powcr of those who buy must be the determining factor where you produce for export. Here we have been producing thousands and thous- ands of additional tons 0i’ one and bushels of the other, regardless of the fact. that there is no one who can use the one or cat the other.

The sluinkoge of markets arose out of the fact that the conditions to which I have alluded obtained in every part of the world, and every country was trying to sustain its own life by its own efforts, because ii had not the wherewithal to go abroad and buy. That is the reason why the price paid for wheat in some European countries is twice or three times as much as it can be bought for in Canada. Rather than go abroad and buy, upsetting their balance of trade, they found it desirable. by bonus and subsidy, to stimulate production within themselves of their rcquirvinenis for‘ the maintenance of their lives. I have not time tonight to dull further with that question; suiIlce it to say that the development of tliut sentiment, amongst all the nations of the world, whether it be old nations such as France or Germany, or newer countries, it mattered not. I everywhere you had the development of that spirit, and arising from it, whether through the raising of tariffs or otherwise, it was made just that much more difficult to sell Canadian products in the markets of ' those countries. Sometimes it amounted to prohibition.

Then a second difficulty was in connection with our trade balance. i I am not going to discuss with learned men silbh as many ofyoli are, the question of our trade balance. But I point out this, as the Right Hon. Ramsay MacDonald said, addressing e. British audience some months ngo, the State is just like a private individual, if it keeps on buying more than it can pay for your after your it is perfectly certain that in the end it will be insolvent. And if a new countriy‘ or an old country keeps on buying more than it can sell, whether by visible or invisible exports it matters not, if it does this long enough it becomes insolvent. Therefore, if pos- sible a favorable trade balance must be created. Every nation, including Canada, realized that and lessened imports in order that, it might remain solvent; that. its financial integrity might. be maintained, and. its credit structure endure. We have done what we could to maintain the solvency of this country as far as our trade balances are concerned. (Applause).

Gentlemen, I am not one of those who do not realize that it has brought inconvenience to many. You who have been engaged in the im- port business, I know how inconvenient it has been for you. Dc you think for a moment that a Government does these things for more sport? That we did not believe it. necessary. A favorable balance of over one hundred million for the year ended March, 1929, was converted into an nlanost equally large balance against us by March, 1930. This indicates something that he who runs might resdsnd understand. In the fall oi 1930, we imposed additional tariffs and additional restrictions, for the purpose of remedying that condition, and the result has been that at the end of last month this country had for the preceding twelvewnonths a favorable trade balance amounting to upward of fifty millions of dollars. (Applause).

The third difficulty we cxpiwiellccd, one which I merely mention, was the failure to realize that increased production, instead of being helpful. might become harmful. In other words, over-production, with no market, might result ultimately in reduction of the price of products to an extent meaning disaster to the producer. The present wheat situation is an il- lustration. There was at the beginning of this crop year a. sufficient sur- plus of wheat in the world from the year before to supply the entire rc- ‘qulrements of the importing countries. That indicates the danger ct over-production. The other day those who are charged with preparing the agenda for the World Economic Conference said with respect to limi- tation of production that "Such an arrangement is of special importance in the case oi’ wheat, the cultivation of which represents the livelihood of a large proportion of mankind, and a bctinr level of prices could per- haps be maintained by regulation of production."

So you have u realization by the world as large of a condition which was one of our difficulties in Canada.

CURRENCY DEPRECIATION

Another difficulty, of considerable importance to us all, was the de- preclation of currencies. When the pound sterling fell from $4.86 to $3310 ($3.30 in New York) and the currencies of all other European countries and of Japan fell to the level now obtaining, it created additional diffi- culties for the Canadian people. I will not stop to speak of the methods by which we endeavored to grapple with these difficulties, except that I would like to say a word with respect to the quwtion that arises out of the depreciated currencies. Sometimes I find suggestions from those who have given little study to the problem to the effect that all that is necessary for us to do in Canada is to embark upon a. policy of inflation. What does inflation mean? Nine out o1’ ten that I ask have no answer. except they say, you will have two dollars where you had only one before,

Gentlemen, may I point this out to you; geographically, we are part of thaNorth American continent‘. Who by taking thought can add a cublt to his stature? Who by taking thought can change Canada from being a part of North America to being a part of Europe? Gentlemen, I invite you to remember that fundamental fact/that the Dominion of Canada geographically is part of the North American Continent. And it