Mr. Gerald Grattan McGeer
"Gerry," lawyer, politician, mayor of Vancouver 1935-36, 1947 (b at Winnipeg 6 Jan 1888; d at Vancouver 11 Aug 1947). He first distinguished himself as counsel for BC on freight-rate hearings in the 1920s which brought enduring financial benefits to BC. Elected mayor of Vancouver in 1934 by a landslide, his 2-year term was marked by tragedy and triumph: the riots of the unemployed, the On-To-Ottawa-Trek, the serious waterfront strike, the desperate plight of Vancouver citizens; conversely the highly successful Golden Jubilee Celebrations of 1936 and, culminating his mayoralty, construction of the superb city hall. He gave Vancouver a sense of destiny.
Twice elected to Parliament, and appointed senator in 1945, he chafed at federal politics and, after being re-elected mayor in 1947, died in office. An early proponent of monetary reform, mixing Keynesian economics with Social Credit theories of Major Douglas, he, with his powerful oratory, became a national figure.
Mr. Towers was appointed Governor of the Bank of Canada on 8 September 1934 and served three 7-year terms, retiring on 31 December 1954. Born in Montreal in 1897, Mr. Towers graduated from McGill University in 1919 and had a distinguished career with the Royal Bank of Canada at Montreal before becoming Governor of the newly established Bank of Canada in 1934. During World War II, Governor Towers was Chairman of the Foreign Exchange Control Board (from 1939 until controls ended in 1951) and Chairman of the National War Finance Committee (1943-45). After the war, Governor Towers served as President of the Industrial Development Bank (1944-54) and was also Alternate Governor for Canada at the International Monetary Fund (1946-54). Mr. Towers died on 4 December 1975.
Session, Friday, May 5, 1939 – House of Commons, Room 277
Standing Committee on Banking and Commerce
Minutes of Proceedings and Evidence
Gerald Grattan McGeer examines Mr. Graham Ford Towers – Governor of the Bank of Canada
Mr. McGeer; All right, let me put this proposition to you. On your own evidence it is now established that the money of Canada is a creature of the laws of Canada?
Mr. Towers; Yes
Mr. McGeer; That parliament does, by enacting laws, provide the means of creating, issuing and, in a measure, controlling and regulation the circulation of Canadian money. That is correct?
Mr. Towers; The amount; hardly the circulation.
Mr. McGeer; The amount. All right. Will you tell me why a government with power to create money should give that power away to a private monopoly and then borrow that which parliament can create itself back at interest to the point of national bankruptcy, because, if we cannot finance the things that are necessary it means that this nation cannot meet its current obligations. But we will eliminate the question of bankruptcy and leave the question: Why should a government with power to create money borrow that money at interest?
Mr. Towers; Presumably it does so because it wants to give the people a medium of exchange with which they will be satisfied. Now, speaking of borrowing that money, we realize of course that the amount which is paid provides part of the operation costs of the banks and some interest on deposits. Now if parliament wants to change the form of operating the banking system, then certainly that is within the power of parliament. Secondly, if parliament decided that it would proceed with such and such and expenditure by means of legislating for an increase in the note issue-two hundred, five hundred, a billion dollars-there are no limitations on parliament; it could do so. I would not be here to say that parliament must not do this. That would be foolish. Parliament can do as it sees fit. I can express opinions for what they may be worth on the results of any given method of financing.
Mr. McGeer; I put the question to you: If I as an individual had the power to create money, do you think that I would ever give that power away and they borrow back that money which I could create at interest, without being completely lacking in any understanding of sound business principles?
Mr. Towers; If you thought it was more profitable and more effective to do so, I daresay you would.
Mr. McGeer; Can you conceive of anyway by which I, as an individual with the power to create money, would give it away and then borrow it back at interest which would be more profitable to me?
Mr. Towers; Of course, what an individual might do is different from what a government might do, because the government acts in what it conceives to be the national interest.
Mr. McGeer; If I did that, I would find myself loaded up with unpayable debts.
Mr. Towers; Is your sole vocation, under this assumption, one of creating money?
Mr. McGeer; Yes, and carrying on my normal activity.
I just want to interject here before I type the last entry of significance. After all the testimony a sitting member on the Standing Committee on Banking and Commerce asks the question; “It does not create money, does it?”
To anyone privy to the fact that commercial banks can and do create money this is a demonstration of how foreign the concept is to most people. As John Kenneth Galbraith said; “The process by which banks create money is so simple that the mind is repelled”.
Mr. Clark; Might I interrupt Mr. McGeer? Mr. McGeer states, I believe, that money is created by the banks by a system of bookkeeping. Is not the function of bookkeeping to record transactions? It does not create money, does it?
Mr. McGeer responds by referring to previous testimony by Mr. Towers. One can almost sense a resignation of sorts in the response (Have you been listening?).
Since that exchange so long ago those pertinent questions posed by Gerald McGeer remain unanswered, and since then there have been no serious inquiries into our banking system!