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March 19, Chairman Eccles c Canadian financing L. M. Piser 1« At the end of 19^1 demand deposits of the chartered Canadian banks and currency in circulation outside of the Bank of Canada and the chartered banks totaled 1,61+0 million dollars. National income in the United States is about fifteen tir.es that in Canada. In terms of the size of the United States this would be equivalent to 21+.6 billion dollars. Actually the total for the United States was 1+8.5 b i l l i o n dollars or roughly twice that of Canada when both countries are put on a comparable basis. 2. The reserve ratio of Canadian banks at the end of I9I+I w&s 11.2 per cent. The reserve ratio of United States banks was 18.2 per cent. For reporting New York City banks i t was 1+1.7 per cent. 3. Recently the Dominion Government offered 600 million dollars of a 12 year loan at a yield of 3»O7 por cent and a 6 year loan at a yield of 2.25 per cent. Those loans were sold in a campaign which lasted throe weeks. Cash subscriptions totaled 81+2 million dollars, which would bo equivalent to nearly 13 billion dollars for the United States. The number of individual subscribers totaled 1,680,000. I t is understood that subscriptions wore allotted in f u l l . c 1+. The increase in the Canadian debt from the beginning of the war to the end of last year amounted to about two billion dollars. In the same period the chartered banks increased their holdings of Dominion and Provincial secur i t i e s by 329 million dollars or about 16 per cont of the increase in the debt. In the United States the lntcrest-boaring direct and guaranteed debt increased by 16.7 billion dollars in the two years ended December 31 # 19^-1» and commercial banks increasod their holdings by 5*5 billion dollars or 33 P^** cent. 5« The support rendered to the market by the Bank of Canada is conditioned by the characteristics of the Canadian market, which is quite different from the United States Government security market. Trading is small in volume and is generally conduotod at spreads of 1/1; to l/2 point, and each transaction may take several days. Dealers keep the Bank of Canada informed as to offerings on their books. If the securities are pressing on the market or are being offorcd at a pric-j below that of the previous transaction, the Bank of Canada or Government accounts will purchase the securities. From the beginning of the war to December 31, I9I+I» tho Bank of Canada's holdings of securities increased by JLjJU5 million dollars, most of which was to offset a large increase in notes in circulation and the remainder to offset a decline in holdings of gold and foreign exch'ange and to add to the deposits of chartered banks. Tho average yield on intermediate and long Canadian securities has declined slowly from J>,\G P^** cont in January I9I+I to 3»O7 Vor c c r r t January 1 Note - - Most of the information in this memorandum was obtained from Ifir, Kindleborger, Mr. Robinson, and Mr. Longstreet.
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