¹ See my International Cycles and Canada's Balance of Payments, 1921–33 (Toronto, 1954), 59–61 Google Scholar (henceforth cited as International Cycles).

² By “abroad” is meant the rest of the world having any major degree of importance to Canada's external monetary affairs.

³ The same distinction can be made between Canada's merchandise imports and exports on the basis of their different income elasticities of demand, as I did in my doctoral dissertation, “International Cycles and Canada's Balance of Payments, 1921–33,” submitted to the London School of Economics, University of London, in 07, 1948 (pp. 264–5).Google Scholar

⁴ Excluding the change in inventories. Dominion Bureau of Statistics, National Accounts, Income and Expenditure, 1926–1950 (Ottawa, 1952), 46–7.Google Scholar

⁵ D.B.S., Monthly Review of Business Statistics, 04, 1944, 38.Google Scholar If the change in inventories is excluded from these estimates, the only significant change is that a slight fall occurs in 1924. But new issues abroad rose sharply in that year.

⁶ The improvement of the long-term capital account came mainly from a reversal of the outstanding security account from a debit of $5 million in 1937 to a credit of $29 million in 1938 and a fall in net direct investment abroad by Canadians.

⁷ E.g. in his comparison of the data for 1932 with those for 1937 he says the main changes in the long-term capital account were partly “the result of the boom in both countries” (p. 158) but he makes no mention of the relative strength of the upswings here.

⁸ The relative cyclical hypothesis is applicable not only to the periods 1933–6, 1936–7, and 1937–8 as we have just seen, but also on the whole to the periods 1921–5 and 1925–9 (see my “Mechanism of Adjustment in Canada's Balance of Payments, 1921–9,” Canadian Journal of Economics and Political Science, XVIII, no. 3, 08, 1952, 303–21Google Scholar, and my International Cycles, 22–5, 52–7).

⁹ See “Mechanism,” 303–5, 312–13, and International Cycles, 22–4.

¹⁰ International Cycles, 36–7.

¹¹ There is another way of making the same point. While, in studying cumulative changes in the balance of payments, one might add the absolute amounts of monetary gold and the changes in the banks' net foreign assets to assess their balancing qualities, one would hesitate to sum the absolute amount of the flow of outstanding securities, since it is the change in this flow which does the balancing. For example, in the period 1927–9, when a net debit appeared in the outstanding security account every year, a summation of the absolute amounts of this account would indicate no balancing tendencies. Yet this account did move in a balancing direction since the net debit fell sharply throughout.

Marcus does not add the absolute net balances of the outstanding security account in these years. Yet he does in such years as 1930–2 (p. 74) and 1933–6 (p. 128) when their sum happens to give him the same sign as his gold account (including both monetary and commercial gold exports) and the net changes in the banks' foreign assets.

¹² International Cycles, 36. In his discussion of 1931 Marcus agrees that it was the “ending of the incoming stream that was the disequilibrating factor” (Canada and the International Business Cycle, 82).

¹³ Elliott, G. A., “Canadian Monetary Policy—Drift, Domestic Management and Debts,” Papers and Proceedings of the Sixth Annual Meeting of the Canadian Political Science Association, VI, 05, 1934, 254.Google Scholar

¹⁴ International Cycles, 79. These estimates were constructed in 1946. The banking items included in Marcus' monthly estimates apparently differ only slightly from those included in mine.

¹⁵ The monthly averages of the noon buying-rates for telegraphic transfers in New York. Compiled from the Federal Reserve Bulletin, various issues.

¹⁶ His arithmetical result for the period from January, 1929 to April, 1930 agrees with that yielded by the behaviour of my estimates when the second criterion is used. But when the first criterion is used, stabilizing behaviour is evidenced in 13 of the 15 months!

¹⁷ Viner, Jacob, Canada's Balance of International Indebtedness, 1900–1913 (Cambridge, Mass., 1924), 184.Google Scholar

¹⁸ Ibid., 18.

¹⁹ Cf. the testimony of Jackson Dodds, then General Manager of the Bank of Montreal, to the Royal Commission on Banking and Currency: “While the policy of the commercial banks in Canada could hardly be described as directed primarily towards the maintenance of exchange stability, nevertheless it is a fact that movements of funds by the Canadian banks into and out of Canada have served conspicuously to protect the balance of international payments. … Thus in the period in which the gold reserves of central banks in Europe were being drained to New York … [to] take advantage of the high call loan rates …, the commercial banks of Canada were withdrawing funds from New York.” Final Hearings at Ottawa, 09 14, 1933, 10–11.Google Scholar

²⁰ Bank of Canada, Statistical Summary, 1946 Supplement, 9.Google Scholar Daily average data.

²¹ Knox, F. A., Dominion Monetary Policy, 1929–1934 (Study prepared for the Royal Commission on Dominion-Provincial Relations, Ottawa, 1939), 32.Google Scholar

²² “… so long as bank reserves were deficient, deposits steadily declined and liquidation proceeded apace” ( Noble, S. R., “The Monetary Experience of Canada during the Depression,” Canadian Banker, XLV, no. 3, 04, 1938, 276 Google Scholar). Noble thought reserves were deficient until November, 1932, and that then they only became large enough to arrest the liquidation process.

²³ This rise in “average loan rates” may well have resulted, of course, from a general fall in the credit-worthiness of borrowers without any increase in the rate for any particular type of credit-worthiness. But even if the banks maintained their traditional policy of relatively stable loan rates (cf. Elliott, , “Canadian Monetary Policy,” 257 Google Scholar) and rationed credit, raised the canons of liquidity necessary for collateral, or reclassified downward the credit-worthiness of their customers because of the general business situation, these are the signs after all of a “tight-money” policy–with a consequent increase in the “fringe of unsatisfied borrowers.” Cf. Keynes, J. M., A Treatise on Money (London, 1930), II, 364 f.Google Scholar

²⁴ See International Cycles, 29.

²⁵ It is interesting to note that the banking system was not responsible for the major turning points of the Canadian trade cycle in 1921, 1929, or 1933. See International Cycles, 15 f., 30, 43 f.

²⁶ My conclusion that the “withholding movement” was not serious in 1928 is based partly upon the fact that my seasonally adjusted estimates of total exports to the United Kingdom and of exports of vegetable products to the United Kingdom showed no sharp fall in 1928. The former was $44 million in May, 1928, $48 million in July, and $47 million in November; the latter was $34, $42, and $36 million in the same months. From May to November, 1928, the latter series had higher values than in the corresponding months of 1927.

The total monthly exports of vegetable products adjusted for seasonality were $58 million in May, 1928, $71 million in July, and $59 million in November. From May to November inclusive they exceeded the values for the corresponding months of 1927. The seasonally adjusted exports of vegetable products to “other countries” (countries other than the United Kingdom and the United States) were $19 million in May, $22 million in July, $30 million in September, $27 million in January, 1929, and $25 million in March, 1929. From January to April, 1929, these exports exceeded those for the corresponding months of 1928.

Thus exports of vegetable products to “other countries” were maintained at a high level until around the time of Canada's cyclical peak and those to the United Kingdom did not fall sharply until after November, 1928.

²⁷ Cf., e.g., Dominion Bureau of Statistics, Condensed Preliminary Report on the Trade of Canada, 1929 (Ottawa, 1929), 42.Google Scholar

Perhaps the production data Marcus used are responsible for his feeling that the fall of wood pulp exports was a depressing factor. He says: “Wood pulp production was the first to suffer, in 1927” (p. 11). He must be basing this conclusion on some such series as that appearing in Bank of Canada, Statistical Summary, 1946 Supplement, 74.Google Scholar But, as a footnote there indicates, these data refer to “Pulp production less pulp consumed in paper manufacture” (ibid., 76, my italics). Total pulp production rose continuously from 1924 to 1929. See, e.g., D.B.S., Canada Year Book, 1947, 409.Google Scholar

²⁸ See last paragraph of previous footnote.

²⁹ The data which I have now adjusted for seasonality are those used in my monthly balance-of-payments estimates (International Cycles, App. A), that is, they had already been adjusted in a rough fashion for balance-of-payments purposes. The peak of these deseasonalized estimates was $125 million in July, 1928. They were $121 million in November, 1928, $117 million in both January and March, 1929, and $118 million in April. Then came the decided plunge. The values for the remaining months of 1929 were $106, $110, $104, $99, $89, $95, $81, and $69 million.

³⁰ D.B.S., Monthly Review of Business Statistics, 06, 1929, 12, and June, 1930, 16.Google Scholar