Getting around the obstacles
The modern practice of governments spending money in times of recession was a shocking idea to most politicians of the 1930s. This practice reflects the theories of economist John Maynard Keynes: If a slump occurs, spending falls and a recession follows. Therefore, to get out of a slump, spend. This is just what American President Franklin Delano Roosevelt did in his economic solution package of 1933. Called the “New Deal,” it created jobs and got money moving again. He also suspended the gold standard. The Federal Reserve Bank’s consistent rate hikes still hindered the money flow, and the New Deal wasn’t able to turn things around completely, but light began to shine at the end of the tunnel.
In Canada, Prime Minister Richard Bedford Bennett proposed a similar scheme in time for the 1935 election. It included welfare, minimum wage and large public spending. However, provincial governments saw the proposal as a threat to their authority, and most of the plan was defeated in the courts. But one of the surviving recommendations was for a central bank to regulate the economy. And, in 1935, the Bank of Canada was born.
