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& | control of money and credit > Â¥ to curb chronic inflation § "free economy in action" by keeping . & markets open to underdeveloped countries. the government sector in our economic life. Such a gystem combined with a more com prehensive eoverage by our monetary authorities in the regulation of credit, could 1 think provide an economic cliâ€" mate for highlevel employ ment and economic growth and, at the same time, protect the value of our currency from ‘tnhe”ravages of ‘chronic inflat Surely a more flexible tax sys tem could be devised which would adjust tax rates to coun: ter cyclical disturbances, not only quickly and effectively but without . arbitrarily chang igg the relative importance of "But surely it is not beyond the wit of our fiscal experts in government and elsewhere to devise a system that will minimize the role of the busi ness cycle in determining the size and nature of government sponsored economic activity. FORMIDABLE TAsK "Until fundamental budget changes can be made the Govâ€" ernment must finance its de ficit by selling bonds to the general public, the chartered banks, or the Bank of Canada. The shift from bonds to equit ies, in spite of the relative» at tractiveness of bond yields rules out the general publiq The need for lisuidity inhibits sales to the banks, except for the shorter maturities. Purch ases of securities by the Bank of Canada, whether from the general public, the chartered banks, or in this case the Govâ€" eFnment, finances government debt through an increase in ‘the money supply. Thus at a time when inflationary pres sure lse growing, the indicated policy for the Bank of Canada monetary restraint, may run directly counter to the finan cial needs of the Government. It is this formidable task of steering between Scylla and Charybdis, between failure of monetary policy and failure of fiscal policy which, in the months ahead, will try to the limit the imagination and re sourcefulness of those charged with the problem of governâ€" ment finance. opposite direction. The Central Bank contracts credit in booms and expands in recession. Un regulated consumer credit ex pands in booms, contracts in re cession. Those devendent on bank credit have to bear the full brunt of credit restriction while others enjoy a spending spree. To break up this unholy alliance of injustice and futiâ€" lity I have repeatedly urged that monetary and credit con trol should embrace a widet area of â€" our financial world CONVERTIBILITY Referring to the recent de and President of The Royal Bank of Canada, at the bank‘s Annual Meeting in Montreal on Thursday, January 8th. Re viewing the conditions whichk must be met to ensure continâ€" uing economie growth, high level employment and a stable currency, Mr. Muir said, "Re gardless of the skill and energy of the monetary authorities, an effective monetary policy is impossible so long as consumer deciared James Muir, Chairman greatest single threat to Can The Royal Bank of Canada‘A_. .â€".__ ts ‘«laide West can set an example of }in the same boat, which is to say they can freely dispose of their sterling for dollars or any other currency at the going rate within the support points established by the British auth orities, viz $2.78 to $2.82 U.S "One important outcome is that London can deal freely and directly*t with all curren cies and again get back.. to where she. was before the war as ‘ the ‘nost important foreign exchange market in the world ‘"The great hope is that these latest developments will hasten that all non â€" sterling area holders of pounds are now viz, put Canadian and U.S sterling, soâ€"called, and Tranâ€" sferable sterling in the same bracket. This means franc and the pound sterling. ‘"Devaluation of the French franc was inevitable. Now it remains to be seen how stable the new rate will be. Natur ally this will depend upon how firmly the internal economy of the country can be built up and upon how faithfully the people will accept the new restrictions they must endure to come through successfully. ‘"‘The immediate significance of Britain‘s move towards con: vertibility must not be exag gerated. All she has done is tc make formal what has inform‘ ally been more or less the case the most important devices for ensuring the mobility of invest: ment funds, capital goods, con sumer goods and services among the nations of the world is a freely operating foreign exchange market. In this con: text two recent events of specâ€" Canada‘s brilliant economic showing since the second world war. "Uncertainty bred of fear fear of crippling regulation, can cut off risk investment and destroy all hope in the free world for sustained and healthy economic growth." ductive, higher wages can be paid without inflation. The increase is both an incentive and a deserved reward. If risks are taken to expand production in some direct ion, the opportunity for a correspondingly â€" large â€"re ward is not only prerequis ite, but justified to the ex tent of the riskâ€"taker‘s con tribution to ii«::leral welfare "I would like to join those who are urging the Governâ€" ment in considering the re port of the Borden Commisâ€" sion on Energy not to move hastily to put a public util ity straitâ€"jacket on one of the most important contriâ€" . butors to Canada‘s riskâ€"capiâ€" tal investment: the oil and gas industry â€" a risk in dustry that has been respon sible in large measure for ductive, h paid with increase i and a de risks are should make a thorough study of our complex tax structure with a view to im provement both in the dis tribution of the burdens and in the allocation of the net rewards for productive act labour becomes more productive effort and risk is an important condition for econ o m ic development", said Mr. Muir. "Government, with the aid of tax experts. "I would like now to move RISK «â€" TAKER MERITS REWARD the French for BCmR ts . AMDshadvtcth uie ducs Th . Muir, was whether the " "I think we must raise the ~question whether earmarking more aidâ€"is best for East Asians or the West until much more has been done both in educa tion and in the careful preparâ€" ation of programmes that ach ieve a proper balance between agricultural _ and _ industria) development. "Aid _ to underdeveloped countries", said Mr. Muir, "is useless unless it leads to susâ€" tained, _ and selfâ€"sustaining development; and fundamental social changes in the under developed country are required before the spirit of enterprise is sufficiently strong to achieve what we might call "escape velocity" independent of the temporary _ rocketâ€"thrust _ of economic aid. Without funda mental changes, greatly ex panded aid fanned by overâ€"enâ€" thu;s_iasm, if ml:t emotional eog- pulsion, may have perverse ef fects, not only in the inflation ridden West, but in the under deeloped countries themâ€" selves. throw all shackles overboard and make the pound free and fully convertible for everybody inside, as well as outside the sterling area." the day when take advantage of what Mr. Sedgewick felt to be "opport unities © for further important expansion of trade between Canada and far eastern coun tb s 39 ada in a position to fi}o;l"de onâ€"theâ€"spot assistance to for budner tin. Jt rainds e o ... ) .AE 100005 pletely modernized." The recent appointment of a Far â€" Eastern Representative with headquarters in Hong Kong, said Mr. Sedgewick, had p‘l'acegi The Royal Bank of Canâ€" in Puerto Rico. We have comâ€" pleted major additions to out branches in Bridgetown, Bar bados, Nassau, Bahamas and at a number of other points. Work is underway now on new main office buildings for Kingston Jamaica and Ciudad Trujillo Dominican Republic. Also our Bogota, Colombia main office is' b?ing expanded and comâ€" BUILDING PROGRAMME. "During 1958 we opened 33 new branches in Canada and four outside Canada â€" three of which were in Cuba and one within a few months work would commence on new main offices in Ottawa and Windsor and on an important branch of fice in Edmonton. in the year. Referring to the bank‘s con tinuing programme. of new construction and the improve ment of existing premises, Mr Sedgewick noted that import ant new offices, now undetr construction, would be opened in 1959 at Charlottetown, Mon:â€" treal and Vancouver and that Mortgage loans arranged by the Royal Bank had increased by 22% to nearly $265,000,000 and shareholders now numberâ€" ed 22,156, an increase of a source of much satisftaction tc where the figures are larger by $148 million odd than those of a year ago. As at date of the Balance Sheet, our deposit ors numbered 2,927,121, indeed Royal Bank Assets over $ 4 Binion. FOREIGN AID . can terpart, cerntralized control of the economic system. In other words, if we would have underâ€" developed countries . abroad develop along _ privateâ€"enter. prise lines, we must set them an example of the free econâ€" omy in action." A oc it e oo e en oi L Ee an instrument of growth. This depended, he said, "not mere ly on expanded economic aid but on the example set by the West, and by a good example I mean not merely that we set our own house in ordér but that we keep the economics of the West. open to the goods produced by the underdevelop ed countries. Otherwise we can only expect these countries to adopt a policy of selfâ€"suffiâ€". ::iency with its‘inevitable coun-‘ pri\(ate enterpris_e economy routes. lands of the earth. Since the earliest recorded history the principal trade between the dif. f>rent countries of the world has flowed along the sea "Actually little more than 25% of the worlds surface is land. The sea is the connecting link bet.wegn all the different "Yet if we study any map of the world¢ and the natural, unâ€" changing features of the globe we must come to the realizat ion that only a small part of the surface of this world is lind and that all the rest is vast imporatnce of the sea to our economy, particularly as the St. Lawrence seaway proâ€" Jlects nears completion. "Some times we find it difficut to be lieve that this flourishing civilâ€" ization of ours could be depenâ€" dant for its existance and its future on anything so far from our usual consciousness as the Last week we started a series dealing with the Sea and Canâ€" ada, and we would like to conâ€" 37 King St. N. Wat. or 135 Ottawa S. Kit. THAT‘S HOW YOUR WARDROBE WILL LOOK IF YOU SEND YOUR â€" CLOTHES TOâ€" _ NEWTEX CLEANERS ii is a truth fraught with 1 PBE HAAVOR â€" UUS holiday season. There was a good turnout despite the very cold weather and those on par» ade enjoyed secing the Navy League film ‘Shipmates‘. A great part of this picture was filmed at the Sea Cadet fl in Hamilton â€" and provo many comments from our local lads, in regard to the completeness and spaciousness of the quarters We hope that (Comtinued on Page 5) the sea, inherent in the great maritime tradition which is our inheritance. LOOKING ASTERN â€" Last week parades got off to a good start again after the words to express his thoughts, +> but as our great seaway system carry this trade, ant fleets sailing the highseas of the world." , . The Skipper does not pre fess to be an authority on these matters that is why he has moves over the. sea 2UIITE Te Cauets, â€" eW gP "We live by our trade and a great percentage of that trade f ~ h . g peace and war by those of *f?‘g people who zo down ao the ses ~A in ships, many of them being ..‘ former Sea Cadets. o se redl iveness and in these UOVER STOCKED FOR TERRIFIC REDUCTIONS ON LADIES WEAR BERGSTEIN‘S must sell a hal i effect .~ is and in these dn learned to a i“" es ‘nnde‘-fi..b '." s;;\l YES$ ..