"Let me emphasize that the government of Canada has no power or control whatsoever over money supply. While the Bank of Canada has no power or control whatsoever over money supply, it is the chartered banks that decide - through their day-to-day actions how that supply of money is allocated. In the allocation of these resources neither the government nor the Bank of Canada has any authority to direct how the chartered banks shall act."
So spoke Finance Minister Fleming in a speech delivered to the Empire Club in Toronto on October 8 of this year.
Mr. Fileming was trying to get the government out from under the heavy barrage of criticism which of late has been directed against it for the so-called, "tight money", situation which has existed in the country now for some time. The Finance Minister says that the government can't do anything about "tight money"; that this policy of restricting credit is something decided upon by the policy of the private or chartered banks.
"In 1959, there has been no intervention by either the Government or the Bank of Canada. In May and in August the chartered banks, acting on their own initiative, imposed restrictions on their lending operations."
However the Minister did state that the Bank of Canada could and did exercise control over the banks' lending policies. The statement of right is contained in the quotation beginning this article. The Minister also remarked in his address that, "in 1956, when it (the Bank of Canada) considered that some credit restraint was necessary, the Bank of Canada intervened. As the result of its intervention term loans by the banks were curtailed, the liquid requirements of the banks were increased and the banks found it necessary to restrict credit immediately and severely..."
According to Mr. Fleming, then, the government cannot, under the powers accorded the Bank of Canada and the chartered banks, interfere in the monetary policies set either by the Bank or the chartered banks. If they wish to follow a policy of restricting credit there is nothing the government can do. The people, business and, yes, the government also, will just have to grin and bear it.
However complacent the Finance Minister might feel about the way the financial affairs of the country are going, large sections of the national community are feeling anything but satisfied. In fact there is a growing restlessness, a discontent with the way the monetary policy is being handled.
Premier Flemming of New Brunswick in an address he delivered some time after the meeting of the Atlantic Province premiers, said:
"A little more than three years ago — on September 25th, 1956, I addressed the annual meeting of the Maritime Provinces Board of Trade, in the city of Moncton, and, on that occasion voiced my objection and criticism of the (then) "tight money policy" which had been initiated from Ottawa and was even then causing a severe contraction in business in the Atlantic area. Now, tight money is back with us again and I wish to assure you that the recent conference of Atlantic Premiers was not indifferent to it, since probably the most important decision taken... was that relating to monetary policy. We decided to obtain the services of a distinguished expert and have him examine the effects of national monetary policy on the economy of the Atlantic provinces and to recommend methods by which it could be made more flexible so as to meet the particular needs of our four provinces."
This decision of the premiers of the four Atlantic provinces, is in itself, a denunciation of the complete lack of efficacity of the present monetary policy. Premier Fleming stated also:
"I hope that this problem will be studied in the broadest possible way".
In other words, the entire policy governing our money system is vitiated.
The Minister of Finance of the province of Quebec, the Hon. John S. Bourque, also spoke out, though somewhat timidly and with nothing of the same vigour of the Atlantic premiers. He said: "I accordingly wonder whether, without endangering the value of our currency, the Bank of Canada could not slacken its reins in the coming months by making it easier for the chartered banks to advance the funds required for legitimate and contractual requirements of governments and business". in other words, Mr. Bourque wants the Bank of Canada to ease off on credit restrictions.
Probably the most influential voice raised against the policy of credit restriction, or, "tight money", was that of Premier Leslie Frost of Ontario. Since we do not have the exact text of the Premier at hand we would like to quote from an editorial of the conservative Toronto Globe and-Mail, commenting on the premier's criticism:
"He (Mr. Frost) was entirely correct in warning that Ottawa's present tight money, dear-money policies make it increasingly difficult, increasingly expensive for the provinces and municipalities to raise the funds they must have if they are to develop and to provide the services needed for industrial expansion. He was entirely correct in singling out the Bank of Canada as the main culprit. Said the Premier: "One of the jobs of the Bank of Canada is to assure that credit will be available to the provinces and the municipalities — in other words, to ensure that their ability to raise money is kept unimpaired..."
And now let's hear the evidence of the Municipalities. The president of the Canadian Federation of Mayors, and Municipalities, Mayor Robert M. Simpson of Arnprior, Ontario, said in Toronto on October 22:
"Municipal governments across Canada are caught in the tightest money squeeze they have ever experienced. The present situation is even worse than the tight-money years immediately following World War I.
Any municipality that can borrow at 6½ percent today is lucky. Some cannot borrow at all and others are virtually ruled out of the money market because of exorbitant interest costs".
What is the purpose of all the quotations which we have set down here at length? Simply to make quite clear that there exists in Canada today a shortage of credit. The people of Canada simply do not have enough money (or credit) to carry on the normal production of goods and services and to expand the facilities whereby such services and goods may be increased in order to meet increasing needs. The leaders of our provincial governments and likewise the municipal governments are raising their voices strongly against the policy of restricting credit. The federal government itself says that it has no control over the monetary policy of the banks. The banks retort that they cannot extend credit because of the policy of the Bank of Canada.
Clearly, then, the answer to this problem lies in the Bank of Canada. This institution was set up by the federal government and charged with helping the country. It is not doing so. If not, then it is because there is something wrong with its make up or, the Bank itself is not being administered properly by those entrusted with that job.
Since the federal government itself instituted the Bank of Canada there is no reason why it cannot change its constitution if there is something amiss with it. This is only logical. If the Bank is not being administered properly then let the Federal government dismiss those civil servants (and this includes the Governor who, in fact, is nothing more than a glorified civil servant) and replace them with men who are capable of bending the Bank to the will of the people. That neither step has been taken is highly indicative of the fact that the monetary and financial policy of this and is not being laid down either by the directors of the Bank of Canada or by the peoples' Ministers in the government. As the Fundy Fisherman, a New Brunswick newspaper, so clearily and sharply puts it:
"The tight money and high interest people are attempting to persuade the people that black is white. People are quick to sense and recognize the evil effects of monopoly in any other field. And despite the dense smog of propaganda on behalf of the usurer, they recognize that the same temptations as before will be used by monopolists of credit and finance as apply in the case of any other monopoly. The time is past due when the fiscal, and monetary policies should be developed to serve the requirements of the economy rather than as under tight money and high interest rates, the requirements of the economy being tailored to serve the interests and profit of finance"... (Italics ours - Ed.).
This is precisely what the Union of Electors has been pointing out for years: that the financial and monetary policy of this country, and of all other countries for that matter, have been designed and bent to serve the interests of the financial dictatorship under which we live.
Social Credit demands that the monetary and financial system be put back in the hands of the people and be operated by a national monetary organization directly under the surveillance of the government. It demands that this situation finance all new production, — provincial, municipal and for whatever other public and private enterprise, — by the issuance of credits free of interest. It demands that the salary and wage, which are rapidly disappearing due to automation and the tremendous progress which is the fruit of the labor of all, be supplemented or replaced by the periodic dividend issued to all, free of any link with employment.
And Social Credit says that until this is done there can never be any real solution to the "tight money" problems, or the "inflation" problems which today are harrassing the people and their leaders. Drive out the financial dictators, institute the monetary and financial reforms and a good beginning will have been made towards a new civilization free from the haunting spectre of want and insecurity.