IMAGE EVALUATION TEST TARGET (MT-3) 1.0 SKA 125 itt lii |Z2 !£ Ufi 12.0 u 1.1 ^|U|L6 Fholographic Sdmces Carporatian ^ ^^ ■< ^^U ^.^ v\ '<^ 23 WIST MAIN STMIT WnSTIR,N.Y. I49M (7U)S7a-4S0) 4^ CIHM/ICMH Microfiche Series. CIHM/ICIVIH Collection de microfiches. Canadian Instituta for Historical I^Microraproductions / Institut Canadian da microraproductions historiquas Technical and Bibliographic Notos/Notas tachniquaa at bibliographiquaa The inatituta haa attamptad to obtain tha baat original copy avaiiabia for filming. Faaturas of thia copy which may ba bibliographicaliy uniqua, which may altar any of tha imagaa in tha raproduction, or which may aignificantly changa tha uaual mathod of filming, ara chackad balow. D D D n Colourad covara/ Couvartura da coulaur I I Covara damagad/ Couvartura andommag^a Covara raatorad and/or laminatad/ Couvartura raataurte at/ou pailicuMa Covar titia miaaing/ La titra da couvartura manqua Colourad mapa/ Cartaa gtegraphiquaa an coulaur Colourad inic (i.a. othar than blue or blacic)/ Encra da coulaur (i.a. autra qua blaua ou noira) I I Colourad plataa and/or iiluatrationa/ n Planchaa at/ou iiluatrationa an coulaur Bound with othar material/ RalM avac d'autraa documanta Tight binding may cauaa ahadowa or diatortion along intarior margin/ La r« liura aarrte paut cauaar da I'ombra ou da la diatortion la long da la marga intiriaura Blank laavaa addad during raatoration may appear within the text. Whenever poaaibla, theae have been omitted from filming/ II ae paut que certainea pagea blanchea ajouttea lore d'une reatauration apparaiaaaiit dana la taxte, mala, ioraqua ceia 6 jit poaaibie, caa pagea n'ont pea At* filmtea. Additional commanta:/ Commentairea aupplAmantalraa: L'Inatltut a microfilm* la meilleur exemplaire qu'il lui a At* poaaibie de ae procurer. Lea dAtaila da cat exemplaire qui aont peut-Atre uniquea du point de vue bibliographiqua, qui peuvent modifier une image reproduite, ou qui peuvent exiger une modification dana la mAthoda normale de f ilmage • aont indlquAa ci-doaaoua. Th4 tot D D D D D D D D Coloured pagea/ Pagea He couleur Pagea damaged/ Pagea endommagdaa Pagea reatored and/or laminated/ Pagea reataurAea at/ou pellicultea Pagea discoloured, stained or foxed/ Pagea dAcolorAea, tachatAea ou piqutea Pagea detached/ Pagea dAtachAes Showthrough/ Tranaparence Qualily of print variea/ QualitA inAgala de i'impreaaion Includaa supplementary material/ Comprand du material auppMmentaire Only edition available/ Seule MItion diaponibla Pagea wholly or partially obacured by errata slips, tissuaa, etc., have been ref limed to enaure the beat poaaibie image/ Lea pages totalement ou partiellement obacurciea par un fauillet d'errata, une pelure, etc., ont M film^e^ A nouveau de fa^on A obtenir la mailieure image poaaibie. Th< pot of\ filn Ori bef tha aio otii fin aioi or! Th< ahi Tl^ wh Ma difl enl be( rigl req me Thia item la filmed at the reduction ratio checked below/ Ce document eat filmA au taux da reduction indlquA ci-daaaoua. 10X 14X 18X 22X V 12X 16X aox 28X aox a4x 28X ] 32X ■-««^5^> Th« copy filin«d h«r« hm b««n raproducad thanka to tha ganaroalty of: Library of tha Public Archivas of Canada L'axamplaira film* fut raproduit grAca A la ginAroaltA da: La bibliothAqua das Archivas publiquas du Canada Tha imagaa appaaring hara are tha baat quality poasibia conaidaring tha condition and laglbillty of tha original copy and In kaaping with tha filming contract spacif ications. Original copiaa in printad paptr eovara ara fllmad baglnning with tha front eovar and anding on tha last paga with a printad or llluatratad Impraa- aion, or tha back covar whan appropriata. All othar original copiaa ara flimad baglnning on tha first paga with a printad or llluatratad impraa* sion. and anding on tha laat paga with a printad or iiiustratad impraaalon. Tha last racordad frama on aach microficha ahall contain tha symbol -^(moaning "CON- TINUED"), or tha symbol V (moaning "END"), whichavar applias. Las imagas suivantas ont 4tA raproduitas avac la plus grand soln, compta tanu da ia condition at da la nattatA da l'axamplaira film*, at an conformity avac las conditions du contrat da filmaga. Laa axamplairas originaux dont ia couvartura Bn papiar ast imprimia sont fiimte an commanpant par la pramiar plat at an tarminant soit par ia darnlAra paga qui comporta una amprainta d'imprassion ou d'iilustration, soit par ia sacond plat, aaion ia cas. Tous las autras axamplairas originaux sont fllmis an commandant par ia pramiAra paga qui comporta una amprainta d'imprassion ou d'illustration at an tarminant par ia darnlAra paga qui comporta una talla amprainta. Un daa symbolas suivants apparaftra sur ia darnlAra imaga da chaqua microficha, salon la cas: la symbols -^ signlfia "A SUIVRE", la symbols V signlfia "FIN". Maps, plataa, charta, ate, may ba fllmad at diffarant raductlon ratios. Thosa too larga to ba antiraiy included in ona axposura ara flimad baglnning In tha uppar laft hand cornar, iaft to right and lop to bottom, aa many framas aa raqulrad. Tha following diagrams lllustrata tha mathod: Las cartas, pianchas, tablaaux, ate, pauvant Atra fiimAa A das taux da rAduction diff Arants. Lorsqua la documant ast trap grand pour Atra raproduit an un saui cllchA, ii ast fiimA A partir da I'angia supAriaur gaucha, da gaucha A droita, at da haut an bas, an pranant la nombra d'imagas nAcassalra. Las diagrammas suivants illustrant la mAthoda. 1 2 3 1 2 3 4 5 6 Ul *■- ■ "-'■sf_'^y^ CONSIDERATIONS ON THE USES OF PAPER MONEY. AND THE EFFECTS OF THE BANKING SYSTEM OF CANADA; TOGETHER WITH THE PROJECT OF A LAW TO REGULATE .^■ "W BANKS OF ISSUE. MONTREAL : FRIKTRD 4T THE MORNING CODRIER OFriCE. M 1836. PREFACE. The writer of the following pages has not the vanity to imagine, that he offers to the consideration of the public, any very original thoughts, profound views, or striking illustrations on the subject of which he treats ; but he trusts that even this humble effort of his pen, may incite persons, in the proper quarter, and well qualified for the task, to enter upon it, with reference to an immediate improvement of our Bank- ing system. Such is his apology for publishing at all. He has only further to deprecate any severe cri- ticism, on the literary character of the work. He does not profess to be a practised writer ; and, be- sides, many of the marks of hasty composition, dis- cernible throughout the pamphlet, must be attributed to his anxious desire, to submit it to perusal, at this particular juncture, while the Petitions of the Char- tered Banks are lying before the Provincial Parlia- ment, now in Session. Montreal, January 4, 1836. kv t^ LNTRODUCTION. Few subjects have commanded more attention, espe- cially of late years, than the one of which I am about to treat. It has been discussed by numberless writers, some conspicuous for their intellectual acumen, others for their practical sagacity. It has been the theme of public debate, in almost every country ; and few Gov- ernments have neglected its regulation. It possesses such general interest — it influences so universally the transactions of private parties — and is so interwoven in the condition of a nation, that upon its being cor- rectly understood, and placed on right principles, with the just application of those principles will mainly depend the happiness and prosperity of individuals, and the advancement and power of a nation, as soci- ety is at present constituted. It is not now the time to determine, how far the happiness and virtue of mankind have been secured and improved by an in- crease of fictitious wants, and a devotion of time and energy to the gratification of artificial desires. It would therefore be idle in me to discuss the ques- tion, whether new impulses given to internal trade, or fresh encouragement afforded to foreign intercourse, by encreasing those wants, and stimulating those de- sires, add or detract from the peace of mind, or refine or prejudice the moral character of individuals. We can only, for purposes of utility, view the subject of Currency as it is appHcable to the existing organize ation of civilized society ; and as it promotes that state in which is now supposed to consist the wealth .-if, I-* ;» Bunks beiug suclu us rutlicr to engender suispjcion, and enhance the panic, than to inspire confidence, and afford a prompt and steady support, in times of distress. Besides, the writer does not seem to re- flect, that the use of a paper currency (even of a vi- cious construction) may have been the chief means of such a developement of a country's resources, and addition to its real wealth, as to place it in a situa- tion, quickly to recover from any shock given to its credit.* 1 am persuaded that a mixed currency, of paper and coin, gives to a country a decided advantage over one employing specie only, as an internal medium, as well in times of commercial difficulties, as in the sea- sons of trading prosperity. The latter is liable, by a revulsion in its foreign business, and consequent in- ternal distrust, to have its specie exported or hoarded to such an extent, as to leave the different channels of circulation almost dry, and the manufactures and agriculture of u country without adequate support ; and the country may not possess such an elasticity us to enable it to rise from its depression, until after many years of hard struggle. The return of the exported coin must depend on the return of internal confidence, and the renewed exertions of the growers of produce, and the manu- facturers of goods, to effect a balance of the foreign trade, in favor of the country. The return of con- fidence, on the part of the domestic holders of the coin, will be tardy ; and when they are again induced to give credit, it will be upon exorbitant terms, each lender acting solely from views of direct personal in- terest, and without any reference to the welfare of the trading conununity, except so fur as the safety of his money is immediately concerned. How different is the situation of a country, using a mixed currency. When any of the specie portion of the currency is withdrawn, the Banks (1 allude to Banks of issue properly constituted, as shall be here- after stated,) immediately enlarge their issues, and not only sav(% with early assistance, those, who ) • Vi(fr n(tto Jit the end. I t f 1 ■4 10 though embarrassed, are yet solvent, but prevent the utter destruction of others, who are thereby enabled to make a liberal compromise with their creditors, and to put their talents and industry speedily again into activity. That the Banks can, and will do this, is clear .t A prudently conducted public establishment does not issue more than the real legitimate wants of its customers, or the productive industry of the coun- try, can safely and profitably absorb. It does not, therefore, encourage the spirit of overtrading, when- ever a state of high prices may induce speculators to come into the market ; and when the re-action takes place, it is in a situation, from the previous cautious management of its resources, to extend further assis- tance, to such as may require extraordinary support, and who are persons the Bank may safely protect from ruin. This conduct induces a quick return of confidence, and prevents any great stoppage of the business of the country, which would aflfect materially our foreign relations. The funds of the Bank, being the property of numerous individuals, many of them more or less connected with trade, it is the interest of such parties to check, as much as in each of them lies, the spreading of any panic, which might preju- dice the stability, or operations of the Bank, so as not only to secure their investments of Bank Stock, but also to obtain aid from the Bank, at a moment when it is so imperatively required by them, in their respective private affairs. It is evident, therefore, that when Banks (as all issuing Banks should be) are based on the capital, the credit, and the enterprise of a large and widely spread proprietary, they, in times of national difficulties, draw the sympathy and con- fidence of the public towards them. Thus, they and the public eventually act and re-act in each other's favour. But the selfish fears and interests of the limi- ted number of the holders of specie, lead them to act precipitately and harshly against the great body of the community. Scotland never could have made the rapid internal t Vide note at tho end. 11 improvement, or extended her foreign intercourses so widely, without the aid of her paper currency. When a large field of commercial operations was opened to her, by her union with England, she at once entered the foreign trade, upon almost equal terms with the sister kingdom, though a much poorer country in in- ternal resources. Without a surplus of the products of internal industry, how, it may be asked, was she enabled to contend with her richer and more power-" ful neighbor? The solution of the apparent mys- tery is easy ; she took the greater part of her specie out of the home circulation, and applied it to foreign ; trade, which gave her a great advantage at the very ; outset in that commerce. But while looking with eager regard abroad, she was not unmindful of pro- viding some substitute, that would answer all the do- mestic purposes, which her exported coin had done. We now behold, in the almost unc^xampled prosperity of that small kingdom, in its progressive and steady career in commercial enterprise, and internal improve- ment, under many serious disadvantages, an indisput- able evidence in favor of the vivifying principle of the substitute found in a paper circulation. As the paper has hitherto, during several ages, stood against the cabals of its enemies, and risen firmer after temporary depression, we may fairly prognosticate its future soundness and utility. I may be accused of having occupied the time of my readers very unprofitably, with self-evident and long admitted truths. I could not, however, well avoid going over much of what has, perhaps, become a beaten track, in order to lead those, who may pe- ruse these pages, to some opinions of my own re- garding paper money, which I am not aware are generally shared in by others ; especially in reference to the circulation of notes of a loW denomination. To the arguments and facts, with which I shall en- deavour to illustrate and support this part of my subject, I have to beg a patient attention. Public notice has lately been directed to our small note circulation, and it has been thought by some, B n - 1 : .■ I ■ u 'I H 12 that if the recent example afforded by England, of the rejection of this part of the paper issues of the Banks, were acted upon here, the currency would be put on a much sounder footing, without, at the same time, curtailing the means of the Banks to continue their usual accommodation to the public. An objection made, by the author of the " Wealth of Nations," to the small note circulation of Scot- land, in his day, was, the facility it afforded to per- sons of slender capital, and of desperate enterprise, to throw out, principally among the lower classes of the people, a greater quantity of paper than they could have succeeded in doing, had no Bank notes been legal, except above such a sum, as would con- fine their use among dealers, and not consumers, and thereby promote their quicker return on the issuers. This is, however, an evil easily avoided. The Legis- lature has merely to prohibit any Company, or Bank, from issuing its own notes, unless it consists of a cer- tain number of partners, and has a prescribed amount of capital paid in. Again, in reference to the lower classes, — the small note circulation has been condenmed, on the ground, that, in cases of Bank failures, much of the loss of that part of the paper falls on the poor and the ignorant. Admitting the correctness of this as- sertion, it will, I think, appear, from a little consider- ation, that this evil has been much exaggerated. The real wealth of the laborer is his industry, and it provides, from day to day, for his daily wants. Though I do not mean to object to the hard work- ing man having a dollar or two of surplus money in his pocket, which might add something to his limited comforts, yet I must be permitted to observe, that the dollar in his pocket, after his day's labor has provided for his wants, is, in his situation, a super- fluity, on losing which, the value of his real stock of wealth, his labor, is not in the least diminished, nor does any other party suffer any positive evil. Be- sides, Savings' Banks enable the laboring population to place their little surplus money in safe keeping. 13 It ought, likewise, to be borne in mind, that the addi- tion made to the capital of the country, more parti- ticularly intended for the support of labor, has been the means of pr^ iding the lower classes with more employment, anc : agher wages, than could have been done without such addition — so that any loss to them, by the failure of a Bank, has been more than compensated to them, by previous steady employ- ment. But the greatest injury, from Bank failures, falls upon the working classes where their employers lose part of their capital, which is either in deposit with the Bank, or in its large notes, in readiness to effect a purchase of materials for their business. To the extent of such loss, the masters are deprived of the command of labor, and are obliged to dismiss a number of those, to whom they had previously given employment. Justice, therefore, to our more humble brethren, does not seem necessarily secured by the withdrawal of the small note circulation — certainly the most active, and the most saving part of our pa- per currency. It is that portion, which admits of the application to other purposes, of a large amount of specie, which would otherwise be required for the petty transactions of the country. It circulates more widely, and is more immediately employed in sup- porting domestic industry, than the paper of higher value; and as Banks have found this the steadiest part of their paper issues, they have always been eager to avail themselves of every opportunity to ac- commodate such customers, as intend to take the loans out in small bills, for the payment of labor. The larger bills are chiefly used tor remittances, or kept on hand by dealers, in the momentary expecta- tion of making large purchases. Where the Bank paper is sound, and of uniform value, the inland Ex- changes are certainly made at a very low rate, (much lower than with specie,) through the medium of largo bills. But the value of such bills, for extensive pur- chases, is not so apparent, since a draft on the depo- sit account of a buyer in good credit would never be refused. I I I 14 Much of the opposition to small notes has arisen from the idea, that the forced and temporary redun- dancies of Bank issues consist in that portion of the paper currency. But this is an opinion wholly un- tenable. I shall submit a table, from which the con- trary will appear. It cannot, I should think, but strike every person, who will be at the trouble to re- flect on the matter, that when over-trading takes place, it is chiefly owing to a number of speculators coming into the market ; and as these parties are neither the producers, or collectors of produce, nor the manufacturers of goods, they do not require, for their temporary purposes, a description of cur- rency suitable to the employment of labor, or the payment of numberless petty transactions. They use large bills to take into the market with them, to buy today what they mean to hand over, to a similar party, on the morrow ; thus enhancing the price of the article against the fair dealer, and ultimately the consumer, without any advantage to the original pro- ducer. Parties might as well throw the dice, as thus '^ play at commerce,'''* The following table, taken from the Returns made by the Bank of Montreal to the Legislature of Lower Canada, will strikingly il- lustrate my position, that the small note circulation is the steadiest, and most operative part of the paper currency, and adapts itself to the real demands of do- mestic industry. Table exhibiting the circulation of the Bank of Montreal on the 1st of every Month during one Year : — Date. In Notes under $0. In Notes of ^5 and upwards. Total Circula- tion. 1834 — December 1835 — January February March April May {|185,089 174,525 171,025 171,713 174,818 175,802 199,414 196,231 197,325 193,798 189,668 196,343 $608,605 545,150 491,345 468,115 498,120 465,940 638,200 795,380 851,205 831,715 841,870 823,735 $ 703,694 719,675 662 870 6?9,828 672,938 641,742 837,614 991,611 1,048,530 1,025,513 1,031,538 1,020,07S June July August September — October November... . J i f 15 The hiijhest mnoutit of circulation uiuler $5 oa 1st Juno was $199,411 And the* lowi it amoinit of circulation under $b on 1st Feb. was 171,025 Boinpf a fluctuation of about l-7th, or jj 28,38'J Whereas the liighcKt amount of circulation of $5 and upwards on Ist Auguijl was 851,20>) And the lowest amount of circulation of ^5 u.id upwiirds on Ist May was 465,910 Being n fluctuation of over 2.5ths, or §)38G,265 A statement of the circulation of the other Banks would show a similar position. There is another argument, in favor of the small note system, which ought to have great weight. I refer to the facility it affords for the establishment of branches of large corporate bodies. I shall hereafter shew, why such branches are generally preferable to small independent Companies, and can often be locat- ed, in distant and poor parts of the country, where the latter could not succeed. In places far removed from the sphere of action of any Bank, and no local capital, any peculiar advantages possessed by those places, are very tardily developed. Not only are some of the most certain means of increasing the national wealth neglected, but the benefits of a paper currency being confined to the more favored districts, the riches of the country soon get into partial heaps, and create a pernicious monied oligarchy. If branches, how- ever, be distributed in remote parts, where industry could be made productive, then will the country, like a well irrigated farm, be seen to flourish from one end of it to the other, and not resemble a desert with a few oases in it. In Scotland, all the larger Banks have numerous agencies, or branches, throughout the country ; and it was given in evidence, before the Imperial Parliament, that the expenses of supporting many of these establishments, exceeded their returns from the ordinary transactions of deposits and loans, — the loss being made up and a profit left, from the circulation of the notes of the parent institution. It must be evident that in such vicinities, the demand must be almost wholly confined to a currency of a fractional value : and here mav be seen the immediate 10 connection between the profit of a Bank, and tlie general promotion of national prosperity, from the use of small notes. On the discussion that preceded the withdrawal of notes under £5, in England, it was strongly objected to them, that the forgeries were for the most part on such notes. However, it appears, from the returns then made to Parliament, that, with few exceptions, the prosecutions were for forgeries of the notes of the Bank of England^ and this preponderance was attributable, more to the wretched manner in which the genuine plates were executed, than to the wider circulation of their notes. The Provincial Banks were not only more attentive to the engraving of their bills, but " hunted out the criminals with more eager- ness than the Bank of England, as the injury to the credit of their notes, by a successful imitation, was more sensibly felt by the fonner." In Scotland, the total loss sustained by the Banks and the public, from forgeries, from 1815 to 1820, did not exceed £500 in all. Whereas Dr. Colquhoun states, that the public loss from base coin, and sweating and clipping the genuine metal, in London alone, in six months, has frequently exceeded the amount of all forged sums under £2, throughput Great Britain, for the fifteen years previously to his report. In this country forgeries have generally been confined to the five and the ten dollar notes. Indeed, it cannot be supposed that the notes of lower denomination would hold out tempta- tions enough to a forger to exercise his skill and labor, at the risk of his life ; unless it might be, that the miserable execution of some particular bill, of a low denomination, offered the greatest facility to imitate ^nd circulate a false impression of it. The objec- tions that have been urged against the small note cir- culation, on the ground of forgeries, appear, in re- ality, to have little support, and would better apply to that class of notes, which, with a pretty general cir- culation, are of an amount to be a temptation to the forgers and utterers, for their labor and risk. Some parties seem to think, that the more the 17 small notes increase in a country, the less sound is its currency. Scotland has rapidly advanced in wealth, and internal improvements, and extended its foreign intercourse, yet the relative proportion of small notes over the large has been gradually on the increase ; and in 1826, out of a paper circulation amounting to £3,309,182— no less than £2,079,000, nearly two- thirds of the whole, was in notes under £5. It is said, that paper money, particularly that of a lower denomination, augments the money price of goods. But this is not the case, since the paper money, added to the currency, is only equal to the amount of specie that would otherwise circulate, under similar circum- stances ; for any redundancy would immediately re- turn to the Banks. Adam Smith says, that from 1600 to 1775, provisions v/ere never cheaper than in 1759, though, owing to the circulation of notes of five shillings and ten shillings (repealed before 1775), there was more money in the country. At the present day, prices are not higher in Scotland, than in England. Moreover, the great outcry about small notes being the cause of so much overtrading, and so many Bank failures, is negatived by the fact that in 1792, while there were no bills in England under £10 value, two- thirds of the Bankers failed. And it is well known, that the country was almost saved in the latter end of 1825, by an issue of small notes, from the Bank of England. At that time, the small note circulation of the Bank had been reduced to £400,000, but it found it necessary, in consequence of the ruinous drain on its specie, for exportation, to issue, for domestic purposes, instead of coin, £1,000,000 of small notes. A great outcry is kept up about a metallic currency, as if it were essential to the prosperity of a country. It may be a very good thing to have, provided we do not pay " too dear for our whistle." France luxu- riates in a metallic currency, there bein^ only one Bank, ' The Bank of France,' allowed to issue paper money, and that not in bills under 500 francs. Yet who refers to France, as a country making rapid 18 '( > ■ i t i 11 progress in its commorcc, its manufactures, or its agriculture. It will, I think, be allowed, by every reflecting and unprejudiced person, from what has been said, that the mere withdrawal of the small notes, does not thereby put the paper currency of the Bank on a more solid basis. It is only by exacting a security, in favor of the public, in the original formation of the Banks of issue, and Government keeping up a supervision over them, that safety to the holders of the notes can be secured ; and who will be bold enough to say, that this safety will not extend equally to one description of notes, as another. A writer states, that in Scotland the most ignorant inhabitants of its remotest parts, almost universally prefer Bank paper to coin ; and that there the cur- rency, which even at present is very partially metal- lic, would be almost entirely Bank paper, if iSovern- ment allowed the circulation of notes under £1. " In any calculation," he adds, " of the individual or national loss, which has attended the hoarding of specie, in England, the compound interest on, or the reproductive powers of so much sunk capital, during the last hundred years, will be found to be im- mense."J I have therefore used arguments, regarding paper circulation, applicable to almost any society, but they will apply, with peculiar force, to the present condition of Canada. We have here inexhaustible resources for the profitable employment of capital, but we possess no mines, and only a depreciated me- tallic currency ; and from the want of Registry Of- fices, and the existence of Feudal Tenures, we can- not, in Lower Canada, make use of our land as an active capital in trade, by pledging it, for money or credit. Besides, the balance of trade has been for years against us. Without the accommodation af- forded to the public, by the Bank issues, it is certain that this country could not have made the rapid ad- t Vide note at the end. 19 vancement that it has done, in the short space of twenty vears, since Banks first became estabhshed here. But this more properly belongs to the second division of my subject. If the foregoing observations, respecting paper money, be impartially and maturely considered, I think they will convince the most sceptical, that this description of currency can effect, the following among other desirable objects of domestic economy in a State, more perfectly than specie : — 1. It makes a great and valuable addition to the active capital of a nation, whereby local resources, and internal improvements, are more rapidly develop- ed and advanced. 2. That addition is made thereby at less cost to the public than by obtaining a metallic medium. 3. It facilitates the exchanges between distant parts of the country, and reduces the charges of mak- ing remittances, infinitely below the expenses of spe- cie transport. 4. It can be supplied to the distant and thinly- peopled parts of the country, far from the money marts, where specie either would not find its way, or must be forwarded at a great cost. 5. It has the faculty of expanding and contracting, when properly directed and controlled, according to the effective demand. The only questionable part of the matter is, the , establishment of a paper money that will remain uoi- J form in its value, and always possess the above pro- \ perties. I shall presently submit the project of a \ law, which I think would produce the result required, * as nigh as it is possible for human wisdom and authority to do. 20 PART U. i I- ' I' ! i if; if ■ :.| ! ^ I THE RISE AND EFFECTS OF THE BANKING SYSTEM OF CANADA. , Our early British emigrants generally arrived here with little capital, and that little was, in most cases, laid out in the purchase of land, leaving the individu- als wholly dependent on their industry. The soil and climate of Canada could always enable them to obtain, most amply, the articles of necessary subsist- ence. Unlike, however, the great bulk of the French§ inhabitants, who had but a rude idea of the comforts and enjoyments of life, and whose wants were easily supplied by the application of domestic industry alone, they had habits and wants, the results of for- mer connections and education, which could not be supported or satisfied without a recourse to a foreign market. But with the greatest abundance of provi- sions, unless there be a foreign market, for the sur- plus of its produce, a new country cannot purchase what it does not produce. Destitute of mines, and with not even enough of specie for their own internal trade, the earlier settlers were obliged to have re- course to barter, in many of their transactions among themselves ; and the want of capital, the great bulk of their usual products, and the difficulties of communication, in such an extensive and thinly-peo- pled country as theirs, necessarily restricted their fo- reign commerce within very narrow limits. This slow progress was not at all suitable to their desires, and by no means such as their energies had a right § Vide noto at the end. 21 to expect, under an alteration of circumstances, i'o assist, therefore, their internal trade, as well as to open to them a channel for their surplus products being conveyed to a foreign market, their circulating medmm was to be enlarged, and a body of men call- ed into existence, to act as the carriers of produce, between them and foreign consumers. The addition to the currency could not be immediately made by throwing more specie into it, as that was a foreign article, which was not to be obtained otherwise than by an exportation of products, beyond the value of the foreign merchandize imported. And in re- gard to the class of traders, required to act as the channel of communication, between the local produc- ers and foreign consumers, the early state of the country, and their small capital, necessarily limited them to few in number, and very much restricted their operations. To a combination of the foregoing circumstances, do our Banks owe their existence, as also one of their most valuable characteristics, — the having a large proprietary. The small capitals, in the hands of individuals, used independently and dispersedly, could not effect either of the objects above described. These small sums required to be thrown into large masses, so that they might again be distributed either in large amounts, or to the parties, and in the chan- nels, most likely to employ them to the greatest ad- vantage. But the intention was not that the efficacy of the measure should stop here. It was fairly ex- pected, that the confidence of the public would be readily extended to establishments, that had the com- mand of the aggregate capital of a large number of persons ; and that, upon such confidence, the Banks would be induced and justified to lend and circulate a greater sum than the amount of their respective stocks, and thereby, " to all purposes of trade and in- dustry, encrease the active capital of the country." I should have observed, that for some years previ- ously to the establishment of the Banks, the business of the country was greatly indebted to a large focal 22 '!• f t: I ,i ;:l 1:= expenditure by the Imperial Government, which, how- ever, has gradually been diminishing, since the close of the last war with the United States. The foreign commerce, as well as the stimulus to internal improve- ments, arising from the above source, when at its height, would have gradually decayed and subsided on its falling off, if a new and invigorating capital had not been promptly provided to meet the demands and exigencies of the country. And had local Banks not started into existence, we should, err this, have seen the capital and enterprise of our neighbours, usurping and enjoying those great advantages, which native money and energy have fortunately and justly secured to ourselves. The only paper part of our circulating medium, in this Colony, is the Bills of the Banks, Government not issuing any paper money. These Bank bills are not under one dollar, and not exceeding one hundred dollars, expressed to be payable to bearer, on de- mand, in the current coin of the country. A for- feiture of its charter, is made the penalty against the Bank, that refuses compliance with this engagement. In order still further to give this paper money a sounder character, by legislative control, it is enacted, that the total amount of notes issued by the Bank, must bear a fixed relation to its capital. Each Bank is also required to furnish statements of its affairs to the Le- gislature, whenever called on. These safeguards, in favor of the public, are nearly complete. I shall, however, hereafter shew how they may be still further strengthened, without at all 'cramping the fair opera- tions of a Bank. A table, which I annex to this chapter, will shew how rapidly our exports have become encreased in value, and our sphere of comforts and enjoy- ments, by our import trade, been extended during the last ten years. That all this has chiefly resulted from the use, and gradual enlargement, to meet the pro- gressive demand, of a paper circulation, must be evi- dent to every inhabitant of this Colony. Our Pro- vincial coin has remained, for years past, in the same ' ' rf — /•:■ I ;••* •*. 1 ,;*vi' > ' / ■"> v' * • ■• "•'■ ^^ *"*' '^'^ 'v 93 depreciated state, besides the greater part of it being kept out of circulation, by the propensity of the French hahitans to hoard their money, instead of em- ploying it to improve their farms, or encrease their comforts. The balance of trade with England and the United States, being generally against us, we have not been enabled to draw into circulation, any quan- tity of foreign coin. I have already referred to the valuable services of a small note circulation, but I must be allowed, in a few words, to point out its great importance to Ca- nada, in particular. The Banks provide the public, through their issues under $5, with an active capital of nearly $400,000 (a little less than one-fourth of the entire amount of their paper.) Should the $400,000 of small notes be withdrawn, the Banks would of necessity be obliged to curtail their accom- modation to the public, nearly to that extent ; for it is the profit derived from the small note circulation, that enables them to pay the heavy charges incurred in replenishing their vaults with specie, from New York. The Banks in this Province, besides keeping large reserves of specie on hand, are constantly im- porting coin in order to meet the country business, which is nearly all done in specie, the hahitans being ignorant of the uses and convenience, and suspicious of the character of Bank paper, and requiring to be paid in * Vargent dure^ which is hoarded by them to a great extent. Remitters to the neighbouring States, also drain the Banks of much silver. The prudent conduct of the Banks has sustained their currency in both Provinces on equal terms with specie. Indeed a more uniform value has been produced, in the entire circulating medium here, than can be found cither in England, or among our neighbours — notwithstanding their large supplies of the precious metals, and more improved internal communications. I The exchanges, between the most distant parts of the two Provinces, are now effected, in almost all cases, at a quarter per cent, premium, and frequently even lower, Wc have had U Vidt note at tho end. 24 j r .« t' commercial distress, and been twice visited by a dis- ease, that seemed to threaten the dissolution of so- ciety, and yet the Bank paper of this Colony has re- tained its value and stability, unimpaired and unim- peached throughout these severe trials. Some parties have objected to the chartered rights of the Banks, on the ground, that the high profits they have reaped, are the consequence of monopolising privileges, and an oppressive use of them. Such ca- villers are those, who have not credit enough to ob- tain accommodation, and whose passions blind their judgment. There is an intimate connection between the prosperity of the borrowers, and the large returns of banking capital ; and the more the latter promotes the progressive advancement of the country, and the more it is profitably employed by its customers, the greater is the re-action in favor of the Bank, in en- larging its business, and enhancing its gains ; indeed there is a mutual dependence and relation between a Bank and its customers, m regard to their well or ill-doing. The present prosperous condition of the Chartered Banks in Canada, may, therefore, be fairly adduced in proof of such relation and dependence having hitherto had the happiest results, in forward- ing the interests of the country at large. The following table will, in one view, shew the con- nection between the trading prosperity of Canada and the gradual extension of Bank circulation : — • 1 •o 1 1,145.461 1,512,909 * • 1 .1, Co 1 Tolls collec. ted on the Lachine Ca. nal. Bank Circulation, Down, wards. Up. wardd Lower Canada. Upper Canada. 90.000 125.000 366i920 1825 1830 1833 1835 731,855 1,555,403 » 762 855 li32 191,614 225,138 323,'305 1089 3708 4844 190 1604 2310 125,370 270,000 403i057 * Tho returns for this season have not yet been made up, but from enqui. ries of the bent iBformed persons on the subject, I am led to believe that the trade of the Provinoes has increased since 183U, in a still greater ratio thau during the five preceding years. Is 25 The above table does not include any returns of the trade with the United States, over land ; nor any estimate of the paper circulation of private Banks, in either Province. Had I at hand the necessary materials to compose a statistical table for the purpose, it would be seen, that the internal improvement of the country — (the encrease in cultivated lands — the additional mills, &c., erected — the number of bridges, roads and canals made, &c. &c.,) since the first establishment of a Bank here, has advanced in a much greater ratio than the extension of its foreign commerce. 26 PART III. THE REGULATION OF HANKS OF ISSUE, ■ ! r. t I I READILY admit, that the degree of utihty and secu- rity of the paper currency of a country, which I have described it to be capable of possessing, must very much depend on the original constitution, and the prudent management of Banking establishments. It, therefore, behoves our Legislators, to consider well how by salutary restrictions, and prudent regulations, they could give the greatest security to the notes of a Bank. It must be acknowledged, that the Legisla- tures of both Provinces have hitherto shewn an anxious desire, by chartering large bodies placing their funds under certain restrictions, and requiring statements of their affairs to be published, to put banking on a sound basis. But I think, the temporary system of legislation, hitherto adopted, ought to be disconti- nued, as productive of great uncertainty and injury to the commercial interests of the country ; and a gene- ral law passed, under the provisions of which, bodies of individuals might start into existence, concurrently with the real demand for their services. Besides, it is not sufficient, in order to preserve the currency from depreciation, to charter large Companies ; but it should be an object with Government to prevent pri- vate dealers from issuing any paper money, below a certain sum. These are the parties who endeavour to force out an excess of small paper ; and it is well known, that the bills of insolvent or doubtful per- sons, have obtained a circulation in company with 27 those of sound Banks ; especially wherever there exists a general preference for, and confidence in^ paper money : and a large portion of the commu- nity cannot discriminate between the various issues afloat. There cannot be a doubt, that the greater extension and prosperity of Banking operations in Scotland^ than in England, and the almost freeriom from losses^ on the part of the public, by Bank failures, in the former, while the people of the latter have repeatedly been involved in tne greatest difficulties, almost ruin, from such causes, must be chiefly ascribed to the ab- sence of any restrictions as to the number of partners. Scotland has always shewn a disposition to avail it- self of this privilege ; and by a return before me, (the latest date to which I could get access,) it appears, that in 1819, there were thirty Banks in Scotland, twenty-eight of them having 1478 proprietors — the two others, the Bank of Scotland, and the Royal Bank of Scotland, not having made a return of the number of their Stockholders. In England, on the contrary. Banks, until within a few years, were restricted to six partners ; so that the smaller amount of capital and credit, engaged in these institutions, was the cause of their instability. In discussing the comparative advantages of a large number of small rival Banks, or a limited number of large incorporated Companies, I wish it to be under- stood, that I mean to view the subject, solely as it is connected with paper issues. With their own actual capital, let moniea men deal as they think proper. They have as much right to a freedom of action, in lending their money, as a manufacturer, or farmer has in disposing of his goods or produce. Money Brokers can often render services to individual customers, which the large Banks, by being obliged to act within defined rules, could not do : — for example, in discount- ing business paper, at long dates, and on terms suitable to each particular transaction. But when it comes to a question of the employment, not merely of their actual, but a fictitious capital, — the coining of their 28 I 4 K ! ( credit, it is then the duty of the Government to en- sure the people, as much as possible, from the effects of imprudent conduct, or deliberate frauds on the part of those who substitute money, of their own creation, in the stead of the legal coin of the country. That this is not a novel exercise of authority on the part of Government, the practice of the State Legislatures among our neighbours, is a sufficient proof. As early as 1810, the Legislature of Pennsylvania passed a law, prohibiting unincorporated institutions from issuing notes, or pursuing any of the operations of Banking. The advocates of a restricted copartnership, as to numbers, say, that " the smaller the Banks, the keener their rivalry, thereby presenting the public with every desirable accommodation, and diminishing the risk of loss to the public, in the failure of any one of them ; besides affording stronger checks to any of them over- trading." The fallacy of this theory has been suffi- ciently exposed, by dear experience in England. In- deed, without a knowledge of its practical failure, one may readily conceive, that, in the too great eagerness of the several small Companies, to gain business at the expence of each other, they will often be found engaged in picking up each other's notes, to excite a run against some of their rivals, which will, in all probability, end in a run against them all. Besides, these small establishments are too apt to be conducted under the influence of sanguine notions, ari the keen- ness of men desirous of making rapid fortunes. The partners are also too frequently induced to use their Banking resources and credit, in other trades ; thus not only weakening their support against a run, but extending some monopolizing mercantile establish- ment of their own, instead of encouraging a whole- some rivalship among traders. On the other hand, public Banks are obliged to attend to the wants of a krge body of shareholders, and cannot use the Bank- ing funds in any one channel, or among a certain class^ of meny to the detriment of other trades, and> the ma- 29 jority of the applicants, but must distribute their funds, as equally as circumstances will admit. Their more ex- tensive operations, and the absence of a direct personal feeling, or rivalship, between larger institutions, pre- clude all petty manojuvres to injure each other. Many persons are also interested in more than one of these Banks ; — and it is not, therefore, to be supposed, that they would knowingly act in opposition to their own interests. The greater the extent of numbers, com- posing a Bank, the less liable is it to be affected by a run, it being the interest of each partner, to use his influence to check any panic, at its commencement — not only the safety of the Bank, but a speedy restora- tion of public confidence, is thereby secured. Such salutary results cannot be expected from restricted partnerships. It ought, therefore, certainly to be the duty of the Government of a country, in the position of ours, where a paper currency is essential to the progress of improvement, to place the issuing Banks on such a footing, that will render them efficient checks to the extension of commercial difficulties, and public panic and distress. It cannot be a matter of doubt, that " many dealers could, under secure Bank- ing arrangements, stand out, against a natural fall of prices, who otherwise would be involved in the ruin of other really insolvent traders." Another advantage to the public, of a few large In- stitutions, in the place of many small Banks, under the control of two or three partners, has already been hinted at. I refer to the establishment of agencies, which, from their less expensive management, and being supported by the general credit of a rich and powerful Parent Institution, can often flourish, where local independent Banks could not sustain them- selves. To illustrate this, I cannot do better than give the words of a writer on the Scotch Banking system : — " Two or three branches are frequently seen in places or districts unequal to the formation of a local Bank, with sufficient capital to ensure sue? cess. From this competition of Bank branches, the poorer, or less important districts, arc placed in the 30 { It B 11,1 , possession of all the Banking facilities enjoyed by the richer, or more populous portions of the country, whose surplus funds are thus, frequently and most beneficially, transferred to the points most in want of them. By the reciprocal interchange of information, the office-bearers, or directors, at head quarters, have a general and correct knowledge of the Provincial traders, through their agents and partners, dispers- ed throughout the face of the country ; and the latter, of course, acquire, at the same time, a similar know- ledge of persons carrying on business, at a distance from their own positions ; — ^thus enlarging the circles of individual credit, and presenting many induce- ments to the cultivation of commercial intercourse, betwixt individuals and places the most remote from each other. 3mall local Banks, whose partners re- side mostly in one place, and whose trade is, chiefly, among manufacturers of, or dealers in some staple article, are liable to be affected by the vicissitudes of that locality, and apt to rise ana fall accordingly in their credit with the public, and are, therefore, oblig- ed to restrict their advances, at the moment their customers stand most in need of them. On the other hand, branches of Banks, whose partners are scatter- ed over various districts, and whose business is not confined to one or two towns, or to one or two classes of persons, experience little or no fluctuation of credit, from the cause alluded to." From the foregoing observations, it must be obvi- ous, that my opinion is against allowing private par- ties to issue notes, at their own discretion. I, therefore, offer to the consideration of the Le- gislature, and the public generally, the following out- line of a law, to regulate Banks of issue. Remarks, on the several sections, are subjoined. 1. That no private individual, or any partnership, except as hereafter mentioned, shall issue any Bank bill, or promissory note, whatever, under the value of £12 10s. or $50. 2. That, before any Company shall proceed to is- sue any bills or notes, under the above value, the fol- h' 31 lowing certificates, on oath, shall be forwarded to the Executive, viz. : — a certificate of the names, and places of residence, of the individuals who compose the Company, and of the number and value of their respective shares; — a certificate, or deposition, by each partner, that he is a bona fide holder of the shares standing against his name, or as trustee for minors, or creditoxs, or some public or charitable in- stitutions ; — and a certificate, specifying the amount of capital subscribed for, and the amount actually paid in, and the quantity and description of coin in the vaults of the Company. 3. That on the receipt of such certificates, or de- positions, and it appearing, that at least thirty sub- jects of His Majesty, and resident in this Province, compose the said Partnership or Company ; — and that they have a subscribed capital of at least £75,000, two-thirds of which being, at the time, in current coin of the country, in the vaults of the Com- pany, — it shall be the duty of the Executive, by pub- lic proclamation, in the Official Gazette, to empower the said Company to issue bills or notes under £12 10s. or $50, the certificates to be published at the same time. 4. That no individual or partnership shall at any time be a holder of more than one-twentieth part of the stock of any Bank under this act, except by vol- untary gift or will, on pain of forfeiting any amount or share beyond such part for the general benefit of the concern. 5. That no Bank shall extend its capital beyond £500,000. 6. That the total amount of its issues shall not ex- ceed the amount of its capital paid up. 7. That the aflTairs of the Bank shall be managed by a Board of Directors, — not less than seven, or more than thirteen, in number, each Director holding at least £500 of stock ; — the Directors to be chosen annually by the stockholders, — only four, where there arc seven, or six, where thjre are a greater 32 Hi ;ii: I i number, to be re-elected, — the names of the Direc- tors to be published in the Official Gazette. 8. That the Bank shall sue and be sued by and in the name of the " Directors and Company of — [the title used in the certificate]." Service of any writ, &c., to be made on the chief officer in charge, at the principal Banking-house. 9. That the several partners shall be bound in dou- ble of the amount subscribed by each, for the debts of the Company. 10. That the Bank shall make a return to the three branches of the Legislature, during the first week of each Session, or to the Executive, whenever called on, when the Parliament is not in Session, of the state of its afikirs, and that when it shall appear, by such statement, that the Bank has lost one-third of its subscribed capital, it shall be the duty of the Exe- cutive to appoint two Commissioners, to wind up the affairs of the said Bank, in conjunction with the Board of Directors. 11. That no dividend shall be paid except out of the clear profits ; and that when the profits shall have reached over £6 per cent, on the paid up capi- tal of the concern, the excess shall be placed in the hands of Government, at 4 per cent, interest, until a sum equal to one-tenth part of the capital paid up, when under £250,000, and one-fifteenth part, when above that sum, shall be accumulated, there to remain until the Bank shall be dissolved, or become insol- vent, as above mentioned. 12. That the Bank, on refusing to pay any bill or note, on demand, in the current coin, shall forfeit its right of issuing any description of paper money whatever, and shall also pay to the holder of the note or notes, so refused payment of, double the value thereof. 13. That in the first week of January, of each year, the Executive shall appoint, by proclamation in the Official Gazette, five persons, as Commissioners, to inspect the state of the vaults of the several Banks ; such Commissioners, or any three of them, to make such inspection at the time or times the Exe- cutive may direct, without any previous notice given to the Bank or Banks to be visited ; and that if, on such inspection, any Bank shall be found not -^ have in its vaults, a sum in the current legal coin of the Province, equal to one-fifth of its paper in circula- tion, the said Bank shall forfeit a sum equivalent to the amount deficient, and a like sum every week, during which the deficiency exists. The above are the principal features of the law I would propose for adoption, in order to regulate the issue of paper money, of a small value ; and the char- ters of the existing Banks would furnish several other salutary provisions. With these restrictions, Banking ought to be left to the action of the public, like any other business. I proceed to offer some re- marks on the several parts of the above project of a law. The first section, restricting the right of issuing notes, under a certain value, to public companies, is intended to secure the public against the miseries of a spurious and depreciated paper circulation, more particularly the lower orders, who are incapable of judging regarding the relative value of Bank notes, and among whom a large portion of the small notes must circulate, I have already endeavored to justify this restriction. I have, however, left to private indi- viduals, the power of issuing notes above £12 10s. currency, or $50, as notes of that value will not go into general circulation, and will only pass into the hands of parties, who can form a judgment regarding the solvency of the maker. The four following sections are intended to place the issuing Banks on a broad basis, as to the proprie- tary, and to give to each a capital not too small, to prevent it acting independently and firmly in the midst of its opponents, or in times of trouble ; and yet, not so large, as to give it the power of acting hostily towards inferior institutions, or oppressing 34 *r ^'1 the mercantile commtmity, — or, perhaps, defying Go- vernment itself. The sixth section provides a limit to the paper issues of the Banks. Where the demand for Bank accommodation is so urgent and steady, as to enable a Bank to keep afloat notes equal to its capital, it is time to call into existence an additional quantity of real capital, to give a more extended and firmer sup- port to the paper circulation, and to disperse the rich stream of Bank profits more widely throughout the country. This plan will force the public to subscribe for new Banks, if they wish further capital, and where there arc many rivals no Bank will issue beyond the real demand, for its notes will immediately return on it. A number of Banks always secure, particularly where weekly exchanges are made in cash, or its equi- valent, (as in Scotland, by bills on London,) an ade- quate limitation of paper issues. In the seventh section, I have provided for a rota- tion of the members of the Board. To use the words of Hamilton's Report, 1790 : — " The argument in favor of rotation is this ; that by lessening the danger of combinations among the directors, to make tne in- stitution subservient to party views, or to the accom- modation, preferably, of any particular set of men, it will render the public confidence more firm, stable and unqualified." The principle of rotation has been ob- jected to, on the ground, that knowledge is derived from experience, but really in the business of a Bank, there is nothing but what the common sense of a man may grasp with. The successful administration of its affairs, depend, perhaps, as much on integrity, as great abilities. The eighth section requires no comment. The ninth is drawn in conformity to the views of the British Government, and, I should think, cannot be the subject of any reasonable opposition, while in other trades parties are liable in the whole of their property. Besides — The tenth section prevents the entire ruin of the 35 I Bank, by providing for its being wound up, v ,en one third of the subscribed capital has been lost. The eleventh section provides, in the first place, against the capital of the Bank being paid away to the stockholders, in priority to the creditors of the insti- tution ; and in the second, for a fund being deposited in the hands of Government. This fund, while it is a safety fund to the creditors of the Bank, is in the na- ture of a tax or premium, by the difference of interest between the prescribed and legal rate, paid to the public, for the privileges conceded in favor of the Bank. The twelfth section, most men suppose to be the real guardian of the holders of Bank notes, and I have inserted it agreeably with their opinion, as also — The thirteenth section, as an adjunct to it, I cannot, however, but think, that a paper, support- ed by the local wealth, enterprise, and industry of a people, needs not this protection ; indeed, that a pro- vision of this sort, is only offering a temptation to speculators, and capricious and factious persons, to injure the Bank, which is, by its operations, develop- ing and extending the resources and trade of a coun- try. I must, even at the risk of being tedious, say more on this point. Where Banks are safely constituted, and under public supervision, from periodical reports of their affairs, — there can be no sufficient reason why specie, except in small quantities, for change, or for balances due to other Banks, (which would have a salutary restraint on their issues,) should be legally demand- able. These Banks, while they are lending capitals to those who are employed in promoting the growth and collection of local products, for the foreign mar- ket, are also, by that very course, placing the greater part of the specie of the country at the command of the outward trade. Since then, the foreign trade of the state is thus doubly encouraged and supported, by the measures of the Banks, it would be a short-sighted policy to cramp their means of affording accommo- dation, by requiring them to keep large reserves of 36 t \'l ii ' I ftpccie, to meet dcnmnds for exportation, by parties who have picked up their notes for hat purpose. The quantity that all the Banks could muster, would be comparatively trifling to the demand. But trifling as might be the effect, for the moment, on the foreign exchanges, of any assistance derived from a drain on the vaults of the Banks, yet great and immediate would be the injury to th6 domestic business of the country, from the Banks, in self-defence, withdrawing their usual accommodation from it ; and the foreign trade would also speedily feel the effects of it, from the diminished means of meeting the demands of impor- tation, from the legitimate source of local products. Let the holders of the notes buy from bullion dealers, or the foreign debt be extinguished by an encreased exportation of home produce, which the Banks will, by lending additional assistance, enable the country to prepare. It should be remembered, that the bal- ance of trade being against a country, does not ne- cessarily prove that it is getting poorer, because it is getting into debt. It is the balance of produce over consumption, being in its favor, that causes the capi- tal of a society to encrease ; — and it, therefore, fol- lows, that it is the internal trade that ought first to be carefully guarded and stimulated, as being the only sure means, as well of advancing the domestic condi- tion of a people, as of meeting foreign demands. " The balance of produce and consumption," says Adam Smith, " may be constantly in favor of a na- tion though what is called the balance of trade be ge- nerally against it. A nation may import to a greater value than it exports for a century, perhaps, toge- ther ; the gold and silver which comes into it during all this time may be all immediately sent out of it ; its circulating coin may gradually decay, different sorts r, w wrmg the same period, have been encreasing in a /; Va. iV » r f:- A.' (fci' \ ■ h,^ i ■ Ja^iU * i^fiv ■L.kiSi&.jLl I >'/•>■ S ^."i-'.-tl'^; /.. .^A.'- ,4 V- ■*;•>■;...->> mXw"'^-" •.A-*- "'*'' 0M 37 much greater proportion. The state of our North American Colonies, and of the trade which they car- ried on with Great Britain before the commencement of the present disturbances, (1775) may serve as a proof that this is by no means an impossible supposi- tion." Simultaneously with the establishment of a sound paper system, our Provincial crowns and half- crowns should be reduced to their real intrinsic value, and allowed to take their chance in the circu- lation with the paper currency of our Banks, which is of a uniform value throughout the Provinces, and even at but a trifling discount in the neighbouring States. A large sum, in coin, is confined here, only to enhance the price of all consumable articles, — for that is invariably the effect of raising the denomina- tion of the local coin. It does not add any thing to the stability of our Banks, or the credit of their pa- per. In the Province, the holders of Bank notes rely on the character and conduct of the Directors of the Banks, and the large capital, and widely-diffused in- terests involved in them. And among our neigh- bours, the notes are received, or goods sold to us, from a confidence in the great natural resources of the country, and its means of meeting demands against it, with an export of its products, and not from any reliance on the quantity of debased coin it possesses. A'- ) I 111 I \^i' < .- 1 1 W/oi i produced. NoTEt, Page 10. The following notice in the Commercial Advertiser, New York Decem^r 1 Jf .Vr k3y confirms this view of the subject. That journal ha. refer- re\rthe7all Tf^l calamity, the destruction by fire of the chief bu.mes. r:7ele\\::!L^^^^^ we are enabled to state, the Banks wUh one a cord are acting in this emergency upon a scale of the most extended Itberahty. Todly t^^^^^^^^^ have taken the responsibility, in all necessary cases, of doing as they would be done by." NoTEt, Page 18. A 1.1. number of the Boston DaUy Ad^rtioer and Patriot, h« th. follow ine sound and annronriate remarks. i/Oi Note §, Page 20. I would not wish to be understood, as casting any degrading reflection, on the French Canadian habits, or character. I only intend, by this contrast, to •hew, that trade, particularly as it is connected with foreign commerce, is much more necessary to, and fostered by, tha English emigrant, than the French native. For the social virtues, simplicity of manners, and fidelity as subjects, the French Canadians may be said to be pre-eminently distinguished. H Note ||, Facie 23. Extract from the Report of the House of Representatives. U. S., 13th April, 1830. - - .,,.,....."• of such large denominations as to be U!/dfl Hn .flection, on , contrast, to commerce, »■ ant, than the ^ tnd fidoUty a» diatinguiahed. re«» U. S., 13^*» anation.astobe_ *