| The thesis assesses three propositions. First, that Canadian financial development was significant through the period. Second, that this financial development was consequential for the non-financial economy. Third, that financial forces deepened and lengthened the slump of the 1930s.; Evidence is presented indicating that the stock of primary securities increased in absolute terms and relative to national income. Significant advance was made towards developing a domestic financial system. Security trading and institutional intermediation progressed.; Canadian business practice registered the impact of these changes and financial development facilitated an increase in the absolute size of financial flows. However, no general increase in the rate of capital formation relative to the level of output occurred. Most firms unwound leverage during the 1920's and application to the capital market was concentrated in pulp and paper and hydro power projects.; The impact of indebtedness in depressing spending after 1930 by shifting funds to rentiers cannot have been great. No clear evidence was found that indebtedness was the chief influence on the level and pattern of business investment.; Although the nominal money stock fell and led the fall in output, real balances were maintained. The chief destabilizing financial influence was a shift in liquidity preference. The value of private financial assets was driven down to low levels, the physical capital stock was liquidated and substantial disintermediation occurred. |
