CIHM Microfiche Series (IVIonographs) ICI\/IH Collection de microfiches (monographies) Canadian Inttituta tor Hiatorical Mlcroraproduction* / Institut Canadian da microraproductiont liiitoriquat 995 Technical and Bibliographic Notes / Notes technique et bibliographiques The Institute has attempted tj obtain the best original copy available for filming. Features of this copy which may be bibliographically unique, which may alter any of the images in the reproduction, or which may significantly change the usual method of filming are checked below. 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D Ackfitional comments / Commentajres suppldmentaires; This ittm ii filmad at tht rtduetion ratio chaekad batow/ Cc documant est filmi au taux de riduetton indi^ui ct-dessous. ^OX UX 18X a 22X KX J 32 X Th* copy fllmad h«r« hat bMn raproduead thanki to tha ganaroiity of: Library o< th« Nitional Archivn i>< Ctnidi L'axamplaira film* ful n produit grlca i la gtnttoaitt da: La bibliothiqut dai Archives nationalas du Canada Tha imagti appaaring hara ara tha baat quality pouibla eonaidaring tha condition and lagibility of tha original copy and in litoping with tha filming contract tpaelf icationa. Original eopiaa in printad papar eovara ara fllmad baginning with tha front eovar and anding on tha laat paga with a printad or llluatratad impraa- •ion. or tha back covar whan appropriata. All othar original eopiaa ara fllmad baginning on tha firtt paga with a printad or illuauatad Impraa- alon. and anding on tha last paga with a printad or llluatratad impraaaion. Tha laat racordad frama on aach microficha than contain tha symbol ^^ (moaning "CON- TINUED"), or tha symbol ▼ Imaaning "END"), whiehavar appiias. Mapa, plataa, charts, ate, may ba fllmad at diffarant raduction ratios. Thota too larga to ba ontiraly includad in ona axpotura ara fllmad baginning in tha uppar laft hand eornar, laft to right and top to bottom, at many framat at raquirad. Tha following diagramt illuttrata tha mathod: Lat imagat tuivantat ont ttt raprodultas avac la piut grand toin, compta tanu da la condition at da la nattati da l'axamplaira filmi. at an eonformita avac lat conditiont du contrtt da fllmaga. Laa axamplalraa originaux dont la eouvartura an papiar ast imprimte tont filmts an commanqant par la pramiar plat at an tarminant soit psr la darnitra paga qui comporta una amprainta d'Impraasion ou d'liiustration, soit par la tacond plat, aalon la caa. Tout lat autrat axamplairat originaux tont filmtt an commandant par la pramMra paga qui comporta una amprainta d'impraation ou d'illuttration at an tarminant par la darnitra paga qui comporta una talla amprainta. Un daa tymboiat tuivantt apparaitra tur la darnitra imaga da chaqua microficha. salon la eat: la tymbola — ^ tignifia "A SUIVRE". la tymbola ▼ tignifia "FIN". Laa cartaa, planchat, tablaaux, ate. , pauvant ttrs flln,Counc„,:.„er Canada, TMi ConstiluUm. Toronto. 1837 The Montreal Gasette, 1837 The Quebec Oatetle, 1838. The Chronicle and OaMette. KinRston. 1839-40 2 IHK IIISTOHr OF CtHADI^y vrRKKSCV IwinR urgent, was alnne considered. The Assembly took the matter up in Lominiltee on January ind, lH3fi. The debate on tlie subject indicated that the Krench Canadian leaders intended to radically amend the charters of the banks with a view to alter- int! their system and niana:.;ement. There was a tendency to adopt tlie constitution of the Hanc|ue du I'euple as a standard and to sanction a system of free banking,' on that basis. In the discussion on the Quebec Hank charter, several amendments were suf^'j^ested by French t'anadian members, with a view to restrictinj; the powers of the ollicials of the b.ank. abolishin),' votes by proxy, preventing members of the same firm from being direc- tors of two different banks, and entirely prohibiting the banks Iron, dealing in exchanges. However, Mr. I'apineau intimand that even mure radical measures would have to bi' adopted with reference to the banks. In common with the majority of the House, he took tl ,'round that the wiiole banking question would have to be gone i the following year, and that therefore it was unnecessary to 0.. uore during the present session than renew th(; ciiarter of the (Quebec Bank for tnirteen months, so iliat all the bank charters might expire on the same date. Thus the Act 6th Wm. I\'. Cap. 4», consists of but one clause, and simply renews the charter of the Quebec Bank till June ist, 1837. But before the next session ot tb.; Legislature was called, the political troubles of Lower Canada had reached a very acute stage. The Governor found it necessary to prorogue the Legis- lature before it got beyond the discussion of the Speech from the Throne. The rebellion breaking out shortly afterwards, the con- stitutional government of Lower Canada was entirely suspended and the affairs of the Province carried on by a Special Council, Meantime the banks of Lower Canada, realizing the attitude of the majority towards them, found themselves in a somewhat awkward position. They were threatened with the double danger of failing to secure the renewal of their charters, and of meeting a threatened commercial crisis, in common with .American banking and exchange. During the winter of 1836-37 it became evident to the banks that they had little hope of getting their charters renewed in any form during 1837, hence they prepared to face the inevitable. At a meeting of the shareholders of the Bank of Montreal, hela on THE msTOm OF CAXAHIAS ClKHKScy revert .„ ,h /^T. , '" ' '^^ '^'""■'"' "'= I''">1^ -l'""ld April and remam open for ten days, for the purpose of receiving the subscr,p„ons of the present shareho' ^ -rs to .he nL ar .c e! THIS HISTOKr OF C.I.'HOIAfl c ( KKHXCY I sAme date i r Hank i iiLi ( issued u s tkholdtrs to subscribe to the new articles of association. Durinn May tlie crisis in the I 'nited Stales culminated in the suspension uf the New York banks. The Lower Canadian banks, following their lead, passed the first uf Jvine, which marked the expiration of their charters, in a condition of suspended specie payment. There beini; no legislative relief possible in Canada before the bank charters should expire, the banks, early in the year 1837, souRht aid by a direct appeal to the Sovereign. SettinR forth the special and peculiar circumstances in which they were placed, and the serious injury to themselves, alonn with the commercial and agricultural interests of the country, should "hey be forced M close their doors, th ■ petitioned for royal charters to enable t'lem to tide over the difficulties of the period. Their petitions were granted, an.l the Montreal, Quebec and City b.inks received royal charters, dated the 31st of May, 1837. The Hank of Mont- real charter simply reproduced the leadinR features of the acts which embodied its existing charter. It fixed the capital at ^250.000 as before, instead of at ;{'5oo,t»o to which the share- holders had determined to raise it. Evidently not anticipating' any serious interruption of the regular government of tlie I'rovince, the legal duration of the charter was fixed at twelve months from the conclusion of the nevt session of the Legislature. .\s that session opened and closed in -Vugust, 1837, the charter was not valid beyond August, 1838. The royal charter ot the Quebec Bank wa-. practically identical with that of the Hank of Montreal, and evidently the City Hank's charter was of the same nature. The capital of the Quebec Hank was fixed at .^75.00°. "*":h was the actual capital of the bank, though, as already observed, its authorized capital was ^225.°oo- 1"™>" some manuscript papers of Vlr. Noah Freer, of the Quebec Hank, in the Canadian .\rchives, we learn that the expenses connected with obtai.iing these royal charters were as follows :— Hank of Montreal, £j(>^ i8s. 8d., of which £1 10 represented tlie stamp duties on the document itself; Quebec Hank, /:55+ 8s. Kd.; City Bank, iTs^fi 3s- 8d- This was no small tax for little more than one year's lease of life. As soon as the Special Council was established in Lower inn Ills /,«.)• uf , .,.v.(u/.,.v CI **/?.vc>- Canada, ,1,^ li^nk „f M„n,r™l invoked ,ts aid i, bninin r....... ,,.,. ,1... „„i„„, ,. ,H, .„„, „, ;;.,;;■•;' '; .■;'."=s :;;:;:, sr::„ri -'^" '•"■"'" .h.t ,h.,.bii. «(.i„„. .;°ri„,'i,':f •'""•"»■»" « ho were then ,he president and directors of the bank 1 ' McO.I President: Chas. Mas»n, \ice.President Ch" liLe Thos H. Anderson, Jos. Shuter, John McPherson H iT J. Kedpath,John llolson, John Torrance Um Lu'nn l' V ' ' ■son. The necessary ordinance was du,y passed t; th'e^C rn'cT, It ,s rather remarkable that the bank, in its petition "the Cou,cd, ,«nores entirely the roya. charter which if 7e i ed and snnply refers to the action taken by the shareholders of he ^:";h;::;-^^::^r-rd";™~- ^-^ Councl chartermg the Quebec Bank makes very full referefceTo the royal charter, reciting' its leadiuK features .„d 7^ sanctioning and continuing its powers ^"^"""'^ inallessenfal respects With theori.na;:hr;"r:^i:!r" l4 6 THE HISTORY OF CANADIAN CCRRENCV bank .0 .he newly <=^"^;7^^,°: ;, J'p .^ „" change was raretrth^XT^iaU-at^IppoU Jdeath of a felon rnrLeftt of cle^gy - -^^fThU" aS^.^'adTe r'i;rr;i^rrrs::r*:":fe.ed . ... ""' The'Bank of Montreal having carried on a large business in the Province of Upper Canada, previous to '"e eKp.r^g of ^ , TnTr Canada during the session of ,836-37. authonzmg inr one'c tfdebtrnrtwifhstanding the e.piry of its charter^ rb'Br^oTMtrhld'^^t^Uwedthedifficultybypurc^^^ THE HISTOSy OF CASADIAX CI XKEAcy ■, ing, apparently in the beginning of 1838, the affairs of the People's Bank, one of the Upper Canadian joint-stocl< hanks which had been exempted from the action of the law a.rainst private hanlis. Hut what the Bank of Montreal desired wa's the chartered privilege to carry on banking in Upper Canada in its own name and with its own notes. This, however, was not at- tained until the union of the Provinces, when the People's Bank ceased to have a separate existence. The Quebec B.inlv, finding that the Bank of Montreal had been successful in its application for a charter at the hands of the Special Council, followed its example and petitioned for a charter the following year. On March 13th, 1839, the Governor sub- mitted to the Council the draft of an ordinance to prolon - the term of the royal charter incorporating the Quebec Bank, and to make further provisions for its government and management. X he ordinance was duly passed and became law. In addition to continuing the royal charter, with certain conditions and provi- sions necessary to give it effect, until .842, it increased the capital of the bank from /-75.000 to ^225,000. In all essential respects after the somewhat lengthy preamble, this ordinance was identi- cal with the former legislative charter of the bank, and with that of the Bank of Montreal, except as regards the criminal clauses of the latter. The City Bank does not appear to have applied lor any special ordinance continuing its charter; at least no record of it appears. It was but natural that the mania for banking, which pre- ceded the crisis of 1837, should have bred not only those fairly honest, though not always strongly founded institutions which have already been described, but also a swarm of more or less fraudulent undertakings. These ventures were obviously intended merely to prey upon the public, through the issue of paper money which, under the peculiar conditions of the time, was likely to remain in circulation. They professed to be private or joint-stock banking corporations, and employed the means and usages which even the most respectable institutions were compelled to employ during the suspension of specie payments and the withholdin.. of public charters. All things considered, many of these spurious or pretended banks were cleverly managed and successfully evaded the law as it then existed, or was necessarily relaxed. 8 THE Hismsy OF CANADI^S CVRRENCY Most of them had their origin and chief field of operations in the neighbouring States. ' The laws against private banking in those States being quite stringent, they were forced to use the Canadian Provinces, and especially Lower Canada, as abatis of operations. Thus most of them pretended to be Canadian banks and circulated their notes on both sides of the international boundary. , , j r .u. One of the first of these institutions to be heard of was tne Commercial Bank of BrockviUe. Its notes were made to resemble those of the Commercial Bank of Kingston, which had a branch in BrockviUe. Five and ten dollar notes were being circulated among the farmers of the western portion of the Province early in January, 1837. Nothing was known of it at BrockviUe and no attempt seems to have been made to circulate its notes in that neighbourhood. A more tangible institution was the Commercial Bank of Fort Erie, which appeared towards the end of January, with a nominal capital of ^500,000. It was a joint-stock bank, the president and all the directors, except one, being from Buffalo, the one hailing from Black Rock. The cashier was a Mr. Forsyth of Waterloo, Upper Canada, and the stockholders were reported as partly Americans and partly Canadians. This bank made a pretence of setting up a regular establishment, but evidently its chief anxiety was simply to issue notes, a number of which it suc- ceeded in getting into circulation. The suspension of specie payments by the American and Lower Canadian banks afforded an excellent opportunity for these and similar ventures to push their paper, without being forced to disclose the nature of their operations by meeting demands for the redemption of their notes. Accordingly, during May, 1837. Montreal became the nominal centre of a number of new banks. The public becoming alarmed, a meeting was called about the 1 8th May, "To take into consideration the circumstances of individuals, entire strangers to the community and to the country, establishing themselves as bankers in this city, and issmng notes purporting to be bank notes, and also to elicit an expression of opinion thereon." Two institutions were specially under consid- eration, namely, the Merchants Bank of Montreal and the Ottawa Bank, also of Montreal. Mr. A. P. Hart, a lawyer, appeared at the meeting on behalf of the president of the Merchants Bank. THE HISTOKY OF CANADIAN CURKBNCy g He stated that it was not the intention of that bank to issue notes in the city until the public should express confidence in tne institution. Their only reason for opening an office in the city ^ u",.'?,-^' "^ "'^' "'^>' ■"«■" ^«''«'" «'°o°f their notes wh,ch had been issued at Buffalo. Mr. Johnston, of Bytown, on behalf of the Ottawa District, repudiated all connection with the Ottawa Bank which he regarded as simply the work of some Yankee speculators. Though one of the promoters of the Ottawa Bank was declared to be present at the meeting, yet he would not come forward to defend his bank. However, Mr. Wm. Lyman was able to contribute some information with reference to the latter enterprise. During a recent visit to New York, he had been asked by the police to attend the examination of certain parties caUmg themselves the president, directors, cashier and stockholders of the Ottawa Bank of Montreal. As Mr. Lyman had to admit that there was no law in Lower Canada against the establishment of such a bank, the parties were discharged. From another account, published in Toronto, it appears that there were four of these persons, and that the police of New York found them in the act of preparing and signing notes, of various denorai- nations, of the Ottawa Bank. They explained, on examination, that they were a private banking company, consisting, apparently of a president, a vice-president, a cashier and a stockholder intending to set up banking in Montreal. They had signed notes to the extent of $jo,ooo, unsigned notes to the extent of neariy Td and about $700 in specie. There being no ground on which the police could detain them, they were discharged. At the Montreal meeting various resolutions were passed. The gist of these was that, since there was no general law in the Province regulating the privilege of banking and the issue of bank notes, It was the more urgent that the public should be warned against irresponsible parties issuing bank notes, and especially at the present disturbed period in the affairs of the Province However, the promoters of these spurious banks were shrewd enough not to make trouble for themselves in the neighbourhood of their nominal head-quarters, hence none of their notes appear to have been issued in Montreal or its vicinity. The notes were put m circulation partly in the western portions of the upper Province, but more generally in the newer regions of the Ameri- 10 THE HISTORY OF CAXADIAK CI KRHXCV can west, bordering on lakes Erie ^nd Huron. In July there appeared an account of the arrival at Toronto of the captain of a schooner from Michigan who had acquired $600 worth of Ottawa Bank notes. About the middle 01 July, 1837, the editor of the Montreal Gazette received a letter from the police magistrate of Buffalo, wishing to be informed, through the medium of his paper, as to the character and standing of the following banks, whose notes were being circulated in that neighbourhood :— The Hank of St. Lawrence Lumber Company, at Malbaie ; The Merchants Bank of Montreal; The Mechanics Bank of St. Johns, L.C.; The Bank of Brockville ; The Mechanics Bank of Montreal ; The Bank of Ottawa; The Canadian Bank of St. Hyacinthe. To this the editor replied that so far as was known none of those banks had any paper in circulation in that city or neighbourhood. Some time before, the Canadian Bank of St. Hyacinthe had notes in circulation which were redeemed by an agent in Montreal at a small discount, but they had been recently withdrawn and were now redeemed at only one-half their value. He refers also to the public meeting with reference to the Merchants B.ink and the Bank of Ottawa. This public statement brought forth a reply from the agent of the Banque Canadienne of St. Hyacinthe, an institution already referred to in these articles, stating that the bank had only suspended specie payment in consequence of simi- lar action on the part of the United States and Lower Canadian banks. The agency for the redemption of its notes being no longer needed in Montreal, it was withdrawn. People might indeed have sacrificed their notes at a discount, yet there was no doubt but that they would all be redeemed in time. The editor was also waited on by two gentlemen representing the Mechanics and Merchants banks, who stated that the notes of the banks in ques- tion were redeemed in current bills on application at their offices. Their offices however were found to be in very ooscure locations. This extreme modesty and retirement on the part of the head oflSces of banks which were vigorously pushing their notes in the west would seem to indicate that while they might actually redeem such notes as found their way to them, yet they were by no means anxious that many should find their way there. In the meantime these banks continued to do a thriving THI- msTORy OF VAKADUN CRKE.SCY , , those manipulatin. the baTks Tl "i""' "'" ''^="'" '"»' amounts of their notes thn ''f*^ .T''"™'''">' ^^''^'^■"'''f ^'"''" States note for notes of the M^rln ^,f ■""«'='' => «5°° L'nited that the), would be redeem H f m f ""''• ""''" "'" ''^^"""^ Montreal, ho " he co" d ffn 1 f " '" "™'^^^'- '" Buffalo seeking red e^st""™';'' '""'' =""' ^'^'"^"'^d 'o cover of e.chanyt^../::rhl' hlr Z.tT\ """" put mto circulation and flooded the western St^f , v " ""' bank was discredited, p .ther took i.rnl ru ^^ ''™ °"= Brockville and Merchant, lln J '^f"' ^''"' ">" "«"«'>. tain districts and in r , 'T' '" ''" '°°"'^" '"'™" i" cer- such banks 'asthe M haTcI ° f„r -'t-PP--" «"- of t' ".r "'- -'■"■ ~»",x;t;. its; ventures maintained their^opera.lo'ns W.h "rrrabirrif '^ in regions far from home Ti,„ • , remarkable boldness .i~ appeal r^e ^:;:-^::-^^'!'t;:! "r r--fi:^-ff~^^ Aaron Goodrich, HoTc'eoXorr Refe'::^ hIuV 'b Rochester and Messrs. Stevens Ld Co.. ol S L. a! Spruld-' 12 THE HIiTOSr OF CANADIAN CVRRBUCr ing, Lockport, and Messrs. H. H. Brown and Co., Detroit." This advertisement coming to the notice of the Hon. W. B. Rochester, he publicly repudiated all knowledge of them or their doings. Stevens and Co. did likewise, declaring that they had no knowledge of them and no confidence in their notes. About the same time in an Albany paper appeared the following : "Bank of Ottawa, Montreal. Joseph C. Frink, late teller of the Monroe Bank at Rochester, has been appointed president of the Bank of Ottawa. The stock of the institution having recently changed hanU;, the bank is now placed on as good footing as the other banks in that Province." Finally, about the beginning of October, the people of Buffalo and its neighbourhood took more decisive steps towards suppres- sing these institutions. The grand jury of Erie County issued a presentment against the notes of the following pretended banks : The Mechanics Bank of Montreal, the Merchants Bank of Mont- real, The Bank of Ottawa, The Oxford Bank, The Bank of St. Lawrence Lumber Co., The Mechanics Bank of St. Johns, L.C., The Bank of Brockville, The Kirtland Society and The Georgia Lumber Co. In the course of its presentment the grand jury makes a statement to the following effect. Large quantities of the notes of these pretended banks have been put into circulation in this country and at the west, but it has been proved to us that these banks have no existence, save in name. As an evidence of their character takt the Merchants Bank, which is owned by one man of no standing who lives in Buffalo. He hires both the cashier and manager at Montreal to keep an office. It has been proved that quantities of the notes of some of these banks are deposited with persons to issue as opportunity offers. An office has been established at New York which enables them to adver- tise that they will redeem, at the usual discount, the notes of some of these banks. But the jury is convinced that the object of these pretended banks is simply to defraud the public, and they therefore warn the public against accepting their notes or having anything to do with them. So long, however, as suspei.sion of specie payment by the regular banks continued, there was no adequate means of finally checking the operations of these spurious banks, which always managed to keep technically free from the clutches of the law. THB mSTOKY OF CANADIAN CURKESCY ,3 puzzTthe an. nuarra; "T"";'"! "---"'I "ote turns up ,o of banking. ' ""* essentials of a sound system able premium. No bank „'. k ^^ P^''^'' '" '^ ""^'"l"- less than iiv" hillings or on H r^" ''"'"'"^'' '" >"= ■^^"^<' f°^ currency inevitab ^ resu, eT U r;Tr -"-'^ "^ f-tiona, system of issuing Us wlroniem ^™fq""«. the old the merchants o' bml ^^rncL Al"?' '^ '^ "^"^ "^ importance had its local c, rr.n 'VT .^™'''' '°*" "' ^"'y the surrounding disc Thil L"t r'"'""'" "''""S""'" issued in denoJnation Vad (50)^ r - T^ T "^"^"^ shilling), IS. ,d (2^0. \ nnH ; Lj ' '^ ''*^- ("l'=- " York. of theSuntry they werecommo /T'-' \ "^ ^"S"^" ^^"»- of "shin.plitersr In thrcteTth^''-''^"^^^^^^ merchants, redemption of these sm^ 'otes""" "'"'"""'"'= presented in sums of five shmingTt ove" rotCr"""'/ redemption was promised in h=,„l °™ I '" °"i«r words, upwards. " ''^"'^ "°'^= °f one dollar and -.ever^hlltdtptsa^Ter t'"1 """ '"^^^ ""^""'--'' "« difficult to avoiff^dte^tt^irotSu'esTr^T^^^ or .0 abolish the whole system, uponihe other Wr °"' ""'■ doubtful e.pern:T^:;t%t:°Xl;rcS:f T^^ °' the issue of a Provincial paper curreTcv 'nH i ''' "^' all others except that of the'cha tered btiL This"rr'"'r °' seen, was specially advocated in Upper C^ada' ™ '"^^ H THE HISTORY OF CAXADIAX CiKSEKCY Proposals to deal with the matter were also urged upon the Government in Lower Canada. Finally, on March the 22nd, 1839, the Governor-General sent to the Special Council the draft of an " Ordinance to prevent the circulation of an unauthorized or unsound paper currency in this Province." The propose 1 ordinance was not very favourably regarded by the Council. It was referred to a special committee but was never heard of a^ain. Apparently the Governor was asked to submit a more palatable measure, for on April 4th he submitted another draft of an ordi- nance under the title of, "An ordinance to regulate private banking and the notes of private bankers." This was passed without any trouble. The preamble states that, " It is expedient to regulate, by law, the issue or circulation of notes and other written promises and other undertakings, for the payment of money, intended for circulation in this Province, and not being those of any bank chartered or recognized, or authorized by the Legislature of this Province, or by a competent authority in any part of Her Majesty's dominions, or in the United States of America." Under this law no person is to be permitted to issue notes, bills, or any other form of undertaking to pay money intended for circulation under ^5 cy., without a license to act as a banker. Any one having a license and refusing to redeem notes on demand shall lose his license. The same applies to the agents of authorized banks, not being chartered in the Pro- vince, who shall refuse to redeem their notes in specie, except when suspension is permitted by law, when they may redeem with the notes of the chartered banks of the Province. No notes of any kind were to be issued under five shillings, and licenses were to be granted for not longer than one year. Those obtain- ing licenses to issue bills, notes or bons, were required to furnish the Government with a statement of their affairs showing their efTects and liabilities. It will be observed that this ordinance did not prohibit the practice of issuing notes by merchants and private bankers, but simply regulated it, with a view to weeding out the spurious and insolvent issues such as were being made. We have already seen that there was a growing element in the Canadian Provinces in favor of some direct Government issue of paper currency. The views of this element had found expression in efforts, on the one hand ,„ . ur ^ bank, and, on the other, ,0 secure ^'dir T "'' "" P™""-"' note:., the idea «t present TJ od. d 7 uf D "' '"""^■'" Huherto these efforts had been without success h'"'°" ""'"■ hnancol embarrassment of the country due 7oh ''"' """ yj. revved the project in a very ur« nt'form Th T" °J ""■ of the Lomnmtee on Finance vrtkh """'' ^'-■P''« Assembly of Upper Canada 1 V l "'"' P''''^^"'^'' to the .Heembarrassed^ndir:^™ tetnt>,^-;<-«3. ^^^rs to the same time the necessitv f„r . *^rovince, and at already undertaken, for re s.abi shin ^k""''- ""^ ^"'"'^ ^■°'^- and restoring the tr^de and ^omne t?:, t """'^""^' ■"^''■"•"' Pl.sh these very pressin,- obiecTs i, is ™ . """"T' ^° ""°"- should be passed authorizing ^t' R .'"'°"""<""'''<' 'hat an act biils, payable on .he fi "oV une ,8:o"''^T"k '° '^^"^ ^"-" received on Government account Ih ' "^'' ™"''' ""^ country with a medium of exchaL h .' '™"''' '"PP'^ ">« Province. It is pointed out thit Zv u k" "* "'''" "' "■« able as the notes of the Commet arar'ththV^"' " ™"'- spece payment and yet whose note, Ir ^' suspended transactions as nearly^ciualtX to ^r'rh" '''';"'''^" Province should be better than th=„ r .^ ^^ "'••" °< 'he paper would be recelttVt" a mj^'f -bl"''r'^"^ =■" ''^ Government would have time to effect a loan hf ""' ''^' were due, and in the meantime Th ''^°''' ">= ""'es the country would be restored The ""'""^ '"'' "'"^'''^ °' H.Merritt,aschairmaI, ' '"P"" ""^ ='«°ed by W. a«oJ^zr:^C.t:sr:;;';: '-'-' -- '^-, even the more intelligent men o.hec ^ ""P'^'ely at sea of .he functions and limiuIL of nan'' ""' °" ""^"''J^^' tinction is made betweetTcap ita, and ^^'" """"^- ^'^ ''^' dis- and paper money. Al.he ev L of Z""' °' ''""^''" -""^"'-^ 'o .he scarcity of money, and ^t^pplyorr"''' "^ "'"''"'^'' a bacWng of reliable credit to ~t t fnto r""' """^^ ""'h 'o be a thoroughly reason! IC rc;::t"™' ^""^■''"^'' prosperity. The conception was a. ha2 asTha." f ""°™^ an eura pump to prevent a well from ;^i'd ' '""'"' '" Together with th.s report Mr. M^it.lnt.^uced a bill «. To m I6 THK HISTOKr Of C.i.-'AOIA.S CI RHIi.SCy authorize the issuing of bills on the credit of this Province." The bill passed the Assembly, but was rejected by the Council. Durmw the following session, in the spring of 1 839, another bill "To author- ize the issue of bills of credit," was passed by both Houses, but was reserved by Lieutenant-Governor Arthur in accordance with his general instructions from the Home Government. In the course of the agitation for the issue of a Provmcial currency it had been discovered that an Imperial Act of 4th Ge.i. HI, with reference to the American Colonies before the Revo- lution, still blocked the way of any legal action on the part of the Provincial Legislatures. This act prohibited any paper bills of credit which might be issued in any of His Majesty's colonies or plantations in America, from being made a legal tender. In February, 1838, when the first bill on the subject was passed by the Assembly of Upper Canada, that House, through Its Speaker, Allan McNab, sent a petition to the Queen, stating that this act was greatly to the detriment of the prosperity of the Province and praying that it be repealed, at least as far as it applied to the Province of Upper Canada. Ths Colonial Secre- tary acknowledged the receipt of the petition, and promised to return I'.e report of the Lords of the Treasury upon it. In reply it was pointed out to the Assembly that by an act of 12th Geo. Ill, it was permitted to make Government notes, bills, or deben- tures receivable for public dues, but not otherwise legal tender. Knowing that the bill of 1839, authorizing the issue of bills of credit, was likely to be passed, Lieut.-Gov. Arthur had written to the Colonial Secretary, Lord Glenelg, on the 20th of Nov.. 1838, asking for special instructions in connection with this matter. In his general instructions, Lieut.-Gov. Head had been required to reserve any bills dealing with currency or banking. His successor, however, wished to know whether he would be allowed to give provisional assent to a bill having for its object .-m issue by the Receiver General, on the credit of the Province, of bills or notes payable at Toronto twelve months after date, to the extent of £"100,000, to be made chargeable on the prospective revenue of the Province. For his own part he thinks the Pro- vince may be driven to something of this nature. He cites the Army Bills as a precedent, which of course they were not, since thty were direct commands upon P.ritisn capital and were used as such. Go "«///«o*,o.cv,.v..«„.vc,*,^.,,,.,. Arthu *" no „ni.al to take ,""'. ;/"'''""'««"« 'h". London .. .,,« the credit Tf , he Pro "'^ "■"" "°' "^ «"<• i" ordinary circumstances he 4 h.wouMb^° *"«"""'• ^■"'" of inconvertible paper mo^ buT" fe^ "fr?' '^ '''' '^^"« country are peculiar. There is a irrV-M """""'^nc" of the and property of all ^^inln^l^Z^T'l '" '■"^''•"'• •mmigralion and capital has Cn ^ '"''°"' "' '^fi'i^h only circumstances un^er which a Gov'' '''"'''''• ^'"^ '"« paper currency is when the exn,nH ""^'"' "f"'!' -*»»« a stands in need of an enlarged IT ^ ^'""^"'^ °' » country condi.io„stheGoverr^:r™T:rta1:re'bT """" ^"^^ share of the paper currency a^^n Z . ^"^' ""'' ^"PP'^ » But when business is stag^n^t and ^V "' ''°"""'°" "°'«- capital, to issue a paper crencvi, ^T"""""" '" "«'' »' evils whichaireadyS As "jreJ '"""^ '° -agfferate the Governor Head Jd the crrtto tof fh^r "ri/''*' """^^ "' ■n preventing the suspension nf .1 °^ '^PP" Canada had added to the nXr ' b^rdens'^nr'""'^ ^' "'= '''"''^- abnormal shrinkage in the currenrv A. """""""^^ crisis an «he conditions t^^n exi^.^g'T Li 'haVd""'^"- ""'"""" banks had suspended specie navm", u u"^ "' ^'"^' ">« and there was now plentTof J„? r ' ''*'" ""^ "'^'^ *a^ over. fo; I. was capita,rt7ml;!Z ;Th'the b"" '""" '^^ '^ the Government wanted. "■" ''"'""«" "en and However, before the T i«i,t r- enquiries, Lord John Russenh^i'h""°; «"' =* ^'P'^ '° his •he Right Hon. i. P. Son If :rrds Sdf h" T ^' '"" Gov.-General. In his instruct onslrth; ^'^ ^y^'"^^-^. was Russell refers to the reserved bin '° "'^°'«' Governor, Lord bills of credit of one porndrch" ote:"t^:nf J^"' "°'" " measure, he says, cannot be confirm d be" eh';f°'°°°-. '"'" a large amount of inconvertible mn„. '^™* °^ ^"'=^' more harm than good in "s Luri T"^ would do much monetary transactfons ^d ori T "^'" °" ">= ^^^ncy, the credit of the Provirce c'an b ' Td'T' °' ''" ^^°""«- " in any ordinary way he mav author Vl™''^'" "'^ "^^^^^^y --ohavet^fuLe--:;--::;-!^^^^ ,g THt HISTOKY OF CASADIAN CCRKg.VCy an early return to sound financial operations precluded by expedi- ents resorted to in tiding over temporary difficulties. Lord Russell sent similar instructions to Lieut.Governor Arthur. In default of this method of employing thi: Provincial credit the Government attempted to dispose of its regular debentures as best it could, though the results were far from encouraging. ■Vs was but natural, the popular .\merican conviction of the period that paper money was both wealth and capital wherever the credit upon which it was issued was good, was held to be applicable to other spheres than that of government. One of the important enterprises of the day was the Welland canal, a most useful and even indispensable undertaking with reference to the future development of the country. Like most other undertakings of the time, its promoters had their own difficulties in financing the enterprise. Mr. Merritt, the leading advocate of a Provincial paper currency, was the most active promoter of the canal. Hence, when other sources of capital failed, and the limited Gov- ernment aid v/as exhausted before more had been secured, Mr. Merritt and his associates fell back upon an issue of paper money, based upon the actual accomplishment and the future prospects of the canal. This paper was issued, apparently about the end ot .335, in the shape of small debentures, a common d'5\ice in some of the American States. They were to be paid at the end of a year, with interest. Hut to issue is easy, to redeem hard, and the times not improving the paper was not redeemed. There was som< talk of redeeming it in 1837 by the issue of Govern- ment debentures in aid of the canal ; but this was only partially, if at all successful, there being no eagei market for Upper Canada debentures at that time. However, the subsequent history of Welland canal money belongs to a later period. Still another direcrion in which the prevalent monetary heresy of the time was leadir.g the unsophif .icated, and [or which there was also considerable American precedent, was that of the municipal issue of paper money. The corporation of the recently chart.:red city of Toronto was, even in those days, ini lined to be somewhat extravagant, was at any rate always outstripping its revenue. The banks be'ng partly unwilling and partly unable to afford further assist- ance, the corporation decided to adopt the panacea of the age and i '■"'"""'*'■ ""'^'/V^A- „,>.,*,,• i money i issue 1 fnea.sure i _ corporation .o";r:ue'«m'l,!l,f ^ "1""' '" ''"'''°-' ''H^ dollar „o,„, payableliT e ^'i;!'"' '" '-'= '^"l* "'"- notes were to be receivable .t,!, "' '""""'''■ These «ny ".her debt d^t: .Hr'i' ^Ij; '^-"^ f- '»«»■ fines, or merely an anticipation of tiJ r """"'"«*'»» fPi-esented as intended to give'! "p" " „™' ?'""' °' i'"' ^'-' -" "- Hefore the middle nfjSe I; 7"' "^ *"' "'™ '""*• They were made payiTt , Xn ^^'^ ''''"''" ''«'' ^Pl^o^ed. ^y Mayor Ournetra^d'-'^rr rCo'^dTd" iCrlr ^^'''"^'' However, when tli» „:. , "-'-ora and V\ ashburn. Hade^pired. <>.Z^::Z^Z':JZ f^^'^^ ^"^ ^^^"'^ this was too easy and effective a conclusion that embarrassment to he lightly resiL-ned^'p' °' "^''P'"'li financial the ground of a purely ph L hr .i '""""'■' "'""^'ves on of the country at We hvfu"r"'""'''° •'"''' '° ""= welfare of sound mo/ey h t d ided ' " "'"' " """^'' "^^''''' «'PP'y in a more perm'^nem orm " l™:;:""': ='"" -'""- ">- -u'es 'he extent of S.6,ooo, in Lne Ld t™ hI^ ™' """"''"='' '" to Mew York to procu e re^rar!^ i" ""'"• ''''"^y ' " continued to circS,at:;:r?„t„t;:ryrrs '""'^- ^''^ "°- o^T.on:^;t::j:^;:~rr?;r"'"'^"'"-^"^ Though McKenzie was a sir™,, ' issues of paper money, ye. ",e„ h' '' °'""'"'"' "' '"°^' "' "'« of his own on Navy LCd rdt o~h:.' "" ^' ■'•'"-''"■™' governments are not alwavs ,„ffi^ ,1 ^' "■*•'' Provisional meet the pressing needs :r;^r"lr"^'''''' T'' ^""'"^ '" the issue of paper money, which with m!S 7 """ '^ "'"""^ '° payable four months affr date aT^e C°f " r,!"";" "'^ '"'"'^ We have now pretty fullv L . ^ ^" '" ^°'°'"°- the end, instructive anrsoh^'^ "^ '"" ^^^ varied, but, ,„ Provnces with ba:^ ng and^-^fer^ro™""; "' '"^ ^''-''- period which preceded%he unTn o7thTp"'"^""'"°""''' remams to deal with the vicissit, ^ r u '^"■"''""s- '< only exchange from ,8=8 to thluntn ! 1 ^' u"''"'-' ^""'"cyand «o .aKe up the monetary his^rorut:: til'" ^ "'^^-'^ e"««»is L-.MIV,,,,,,, Kin8.io„ Acah Shortt