CIHM Microfiche Series (Monographs) ICMH Collection de microfiches (monographies) m Canadian Inttituta for Historical Microroproductions / Inttitut Canadian da microraproductiona hiatoriquaa 995 Technical and Bibliographic Notes / Notes technique et bibliographiques The Institute tias attempted 'o obtain the best original copy available for filming. Featurf;s 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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I I Opposing pages with varying colouration or ' — ' discolourations are filmed twice to ensure the best possible image / Les pages s'opposant ayant des colorations variables ou des decol- orations sont filmees deux fois afin d'obtenir la meilleur image possible. n Adcfitk)nal comments / Commentaires suppl^mentaires: This ittm is filmed at the reduction ratio checked below/ Ce document est fiime au taux de reduction indique ci-dessous. 10X 14X 18X 22X / 1 12X 1(X 24X ax Tha COPY fUmad h«r« hu baan raproduead thanks to tha ganaroiity o<: Libriry of the National Archival of Canada L'axamplaira film* fut ra (toduit grlea 1 la ftnttotitt da: La bibliothique dei Archives nationalei du Canada Tha imasas appaaring hara ara tha bait quality poulbia considaring tha condition and laglblllty of tha original copy and in kaaping with tha filming contract apaclficationa. Laa imagat luivantai ont M raproduita* avac la plui grand toln, compta tanu da la condition at da la nattat4 da l'axamplaira flimt, at an eonformita avac laa condition* du contrat da fllmaga. Original copiaa in printad papar covara ara fllmad baginning with tha front eovar and anding on tha last paga with a printad or illuatratad impraa- slon, or tha back covar whan approprlata. All othar original copiaa ara filmad baginning on tha first paga with a printad or illuatratad impraa- sion, and anding on tha laat paga with a printad or illuatratad impraasion. Laa axamplalras origlnaux dont la couvartura an papiar ast imprimta sont filmts an commancant par la pramiar plat at an tarminant soit par la darnlira paga qui compona una amprainta d'Impraaslon ou d'iltustration, soit par la sacond plat, aalon la caa. Tous las autra* axamplairas origlnaux sont filmas an commanfant par la pramMra paga qui comporta una amprainta d'impraaaion ou d'illustratlon at an tarminant par la darniira paga qui compona una talla amprainta. Tha laat racordad frama on aach microficha ahall contain tha symbol -^ (moaning "CON- TINUED "I. or tha symbol V (moaning "ENO"). whichavar applias. Un das aymbolas suivants ipparattra sur la darnitra imaga da chaqua microficha. salon la cas: la symbols —^ signifia "A SUIVRE". la symbols V signifia "FIN". Mapa. platas. charts, ate. may ba filmad at diffarant raduction ratios. Thosa too larga to ba antiraly includad in ona axpoaura ara filmad baginning in tha uppar laft hand eornar. laft to right and top to bottom, as many framas as raquirad. Tha following diagrams illustrata tha mathod: Laa cartaa. planchas. tablaaux. ate. pauvant itra filmii i das taux da rMuction difftrants. Lorsqua la documant ast trop grand pour ttra raproduit an un saul clichi. il ast filma * partir da I'angla sup4riaur gaucha. da gaucha i droits. at da haut an baa, an pranant la nombra d'imagas ntcsssaira. Las diagramma* suivsnts illustrant la mithoda. 1 2 3 1 2 3 4 5 6 MICROCOfY RESOLUTION TUT CHART (ANSI ond ISO TEST LriAPT No. 2) 1.0 If is I& !: u ■ 2.0 i.^ 1^ . 1.6 rj^PLED IIVHGE THE HISTORY OF CANADIAN CURKENCY, BANKING AND EXCHANGE One Curkency for the Empire ADAM SHORTT, M.A. yiEKNN L-MVBKSITV. KiNiiSTON TORONTO [0l«N«L OF THt C.NAUI.S B«.i«l.«S' A^SOCI.rlON THE HISTORY OF CANADIAN CURRENCY. BANKING AND EXCHANGE* II. ONE CURRENCY FOR THB EMHIRB 1 N entering Upon the next phase in the history of Canadian * currency and exchange, we have to deal with a very exten- sive and interesting experiment in currency res'ulation. This was the attempt, undertaken by the British Government in 1825, to extend the British currency and its standards through- out the Colonial Empire. While the great wars were going on round the turn from the last to the present century, while the currency was demoralized and specie payment by the Bank of England suspended, throughout the Empire Britain made use of whatever coins she could com- mand in exchange for bills on the Imperial treasury. The internal trade of Lower Canada, so far as carried on with the French Canadians, employed almos* entirely the old French currency, to which the Habitant clung as part of that cherished nationality which markeJ his independence of British institutions. But in the extensive payments of the British Government, in the whol-s.ile and foreign commerce, and in the •Chief sources: Dominion Archives; State Papers, Lower and Upper Canada, Journals of the Assembly and of the Legislative Council, Lower Canada. Journals of the Assembly and of the Legislative Council, Upper Canada. The Laws of Lower Canada, Vol. VIII. Statutes of Upper Canada. Revised 1831. A History of Currency ia the British Colonies. By Robert Chalmers, B.A.. of Her Majesty's Treasury. With Appendix of Documents. London, 1893. Review of the Proceedings of the Legislature of Lower Canada in the Session of 1831. (By Andrew Stuart). With Appendi-K. Montreal, 1832. Considerations on the Currency and Banking System of the United States. By Albert Gallatin, Phila., 1S31. Montreal Herald. 1835. Montreal Gazette, 1830. Kingston Chronicle, 1825-31. » THE H/STOHr OH CAXADIAX ClgSEXCr "^JZ °' ^PP*'^""'*' "« Spanish and American doll.,. mT X ""«=•""«»" '"■>»!« of gold coin,, furnished th. ch.ef metallic currency and standard of value In 18.6, however, Britain, chiefly with a view to preventing stand rd' ' s",""' """ ""'"K "'""'<'■ ''^fi-'i'ely adopted gold standard. Stiver was made a token money by raisine its far, •Sao to .8,4 was one of commercial d.^tress ^ s v« o^^^^^^^ coIon.es, particularly the West Indies and Canada whlhh^ suffered in common with the United States. "* In the face of this combination of circumstanr.. .1, cess which had attended the readjuslen, oT h^ 'iH h""'" rency a. home naturally suggested an ex^L o^ oft ys"m ;™ThT;hThr^i-^i^^^^^^^^^ X.^rt-t:--£Er^— -" -PS .d the purch4 1. s;i:srrr ^:::: "thFelu:;'\°8'r:et^;rTi;;" ^ T"""''«-- --ed .He several British colonies and ptt^s 'abVoaT^'rh^; TUP. HisTonr of ctNAniAs ci hkh.vci- . affect Ihe expenditure f^ ■ a public service, both military and civil. The present time - peace atTords an excellent oppor- tunity to remedy the many evils and inconveniencer, winch have accumulated during and sinc.i the last war. In n-.ost of the colonies the Spanish dollar is ;it once the prevailing com in circulation, and the standard liy ivhich the values of all other coins are determined. Yet the tat.at which it is paid out by the Government, namely 4s. SJ. stg., is not in accordance with its intrinsic value. As compared with Uritish standard silver, the value of the dollar is slightly less than 4s. 4d., while at the pre- vailing market price hr silver it is scarcely above 45. Recent complaints with reference to the rates at which the Spanish dollars are paid are tliercfoie w:ll founded. But, in further considering the subject, it has been found that recent conditions aflfecting the supply and standard of the dollar make it necessary to look for some other and better means of pay. mei.t. bnder the circumstances it ap- -, to the Lor, Is of the Treasury that at once the fittest mediu... lor the payment of ihe forces, and the best standard of circulation for the colonies, will be the silver and copper curren' y now in circulation in Great Britain. Means, however, must be afforded of convening the currency at will into the standard gold coins of the United Kingdom, by means of bills of exchange to be issued at a specific rate. They fully expect that since the British silver currency is issued at a nominal value hig' ■ r than its bullion value, it will tend to remain in the colonit. as a permanent circulating medium : while its ready convertibility into bills on Britain, should maintain it at the same value in the colonies as in the mother country. The rate at which the exchange on Britain is to be fixed must bt jch as to prevent the coin being sent back to Britain, in preference to being converted -ito bills of exchange. Such a rate they estimate to be about three per cent, premium, for the majority of the colonies. Hence they direct that the proper officers be authorized to d,aw bills, in ihe colonies, on the Treasury Board in Britain, on ihe basis of .f 100 stg,, payable in Britain, for every £103 stg. paid to the officer of the Treasury in the colony. On this basis the Lords THE HlSTOKy C" CA.tAM.4\ CIKIIKMI Of th. Treasury will d.recl .upplie, o( «"'f •"«' ^'j-" '° ^' „„, ,0 th. various colonie. lo the extent of th. probable needt of the Government payments. . , . „j But, as it may ict be expedient to dispense «..h the u«i of the Spanish dollar all at once, even >n Government payments. they recomn>end that it should l« rated m future a. 4s. 4d..»nd that all other coins employed be rated in proportion. The necessary instructions .0 accomplish these objects ar. to be sent to the proper officers in the various colonies. Ale:^sting contacts are .0 be fulftlled on the cond.t.on. stated n them ; but in all future contracts the Commtssartat .hculd "serve t; itself the option of paying <". con-actor e.he n llntish silver, or in bil on the Treasury Board at the rate of r.oo payable for every ^.03 of the contract. When any com- miwaryhas not sufficient silver on hand for th. nee-'.s of h,s Tvic. he is required to advertise for Spanish d°"ars or other coins, to be offered in public competition for b" b>"» °" ^J« Treasury. The money thus obtained is to be paid out at the rate of 4S. 4.d. for the Spanish dollar. Copies of this Treasury Minute were to be sent to the various departtnents of the Government having dealingswi.h the co onie. •nd esoecUllv to the Colonial Secretary, Lord Bathurst, that "enecrssar instructions r-.ightbe sent to the colonial governor,, to insure due attention to the execution of the prescribed mea- ,ures. Such are the essential features of the comprehensive scheme devised in .825, and which it was confidently hoped would unit, fh. whole British Empire in the use of one uniform medium of exchange. All parts of the Empire should henceforth 1 old com- merciaUntercourse in one currency language, .0 the great benefit of trade within the Empire and its extension beyond it. Wher- ever the British flag waved the British shilling would circulate. each an emblem of British rule. To the eye of pure reason the scheme was fau'tless. Even official minds trembled on the verge of ^J"'™'"' /" ""; templation of its vast imperial possibilities But, -fortuna ely the shield had another side, the colonial, from -h.ch ' ««t'd little enthusiasm. Hence, in the course of the official at empts tol ,h. ideal in practice.it encountered the most unlooK d for obstacles and caused no little bitterness. So lar as actually Tim IIISTiiltv III- I .i,v.i/;a|.v , (A'*' I J' 5 put in operation, It produced many almnrmal results. lirin,'inK to light niirncrous latent pecnliaritits of cuiiency never l.efuru fully reioi;nized or understiiod. At present, Imwcvcr, wc must lor.line our .itlctilion t^j the Canadian aspixt of the sul.jcct. •riioiiKh not re.ili/ini,' the expectations of its authors in any pan of the Knipire, jet it was in Canail.i tli.-.t llie measure most completely failed of its ohjcct. In order to Rive efTect [,, 'le plan adopted liy the Treasury Hoard, an OrderinCouncil was passed, 2jrd March, i^jj, in which it is stated that in order to secure the circulation of the British siK jr and copper money in the colonies, " In \\'. tli.^se colonies where the Spanish dollar is now, either by I.t.v, fact, or practice, considered as a ie^al tender for t' e dischari;.; ol debts, or where the duties to the fl.n-emmeiit a rated nr collected, or the individuals have a ri-ht to pay, in .. description of coin, that a tender and payment of liritish silver money to the amount of +s. 4d. should be considere.l as equivalent to the tender or pay- ment of one Spa-ish dollar, and so in proportion for any t' 'iter or less amount of debt ; " •■ .\n.l also that liritish copper' -M be made a legal tender in all the liritish colonies, for its di nd proper proportions of liritish silver money, as by law established in Great Britain, but that no person should be compelled to take more than lid. in copper money at any one payment." Vhe Lords of the Treasury and Lord llathurst. Secretary of State for the Colonics, are to give the ne.xssary instructions for putting this order into efTect. The only one amonj,' the British officials who seems to have doubted the feasibility of the measures taken, was James Stephen, afterwards Sir James Stephen, for many years by common con- sent the ablest man connected with the Colonial Department, and after 1S35 the Permanent Under Secretary of State for the Colonies. He was a: this time legal adviser to the Colonial Office. On the 31st of March, 1825, in reportinson the Order-in- Council just referred to. he gave it as his opinion that His Majesty had no power to alter in this way, such rtiles as had been established by the lei^islitures of any of the Colonies, with respect to the value of the Spanish dollar or other corns. How- ever, the matter being referred to the Attorney and Solicitor 6 THt HISTORY OF CANADIAN CVRRESCY Generals, Ihey reported that the Order-in-Council was quite legal. It was therefore sent to the colonies with instructions to have it enforced. Lord Dalhousie, then Commander of the Forces in North America and Governor of Lower Canada, reports to Bathurst on Dec. 2oth, that he had called upon the King's law officers in Lower Canada to prepare the draft of a proclamation for giving effect to the instructions sent him, " respecting the establish- ing of tha British metallic currency in this colony." But he has received from ti.em a report, which he encloses, giving it as their opinion that such a proclamation would be an infringe- ment of an act of the Legislature of the Province regulating the currency. By the existing act the sterling value of the dollar is fixed at 4S. 6d., while the proposed measure would reduce it to 4S. 4d. The object of the proclamation, they say, can only be accomplished by an act of the Canadian Legislature. Dalhousie sees no alternative, therefore, but to wait for the meeting of the Legislature in January and recommend the measure to it, yet he has to confess that he has little hope of the Legislature alter- ing the existing regulation of the currency. When this despatch with the enclosed report was laid before Stephen for his advice as to the next move, he simply said " I told you so," and recommended that the law officers of the Crown, who had over-ruled his opinion, should be called upon to show how the Governor of Lower Canada could remove the objection and issue his proclamation. The matter was of some importance, for, as he remarked, now that the measure is blocked in Lower Canada the other colonies having representa- tive government will get wind of it, and will be apt to follow the example set. However, they decUned to take up the challenge, and Dalhousie was left to do what he could with the Legisla- ture of Lower Canada. On Jan. 21st, 1826, Dalhousie laid the matter before the Assembly, together with the regulations and instructions sent him. His unpromising forecast of the attitude of the Legisla- ture towards the measure was quite fulfilled, for the Assembly showed no anxiety to deal with the subject. When, over a month later, they took it up, apparently at the special request of the Governor, it was only to refer the whole matter, with the THE HISTORY OF CAXADtAX CI KREXCy j documents furnished by the Governor, to a committee of five with mstructions " To enquire into and report on the expediency of enactmg that no coin shall be held to be a legal tender, other than such coins as are legal tender in the United Kingdom, or in the United States of America, or what other alterations it may be expedient to make to the laws now in force declaring what coins shall be a legal tender." And that is the last we hear of it in that quarter. The Legislative Council, however, to whom the matter had also been referred by special message, in an address to the Governor gave reasons for their opposition to the measure. They admit that it is a matter of indifference what the real value of a money token may be, so long as it is redeemable in coins of standard value or their equivalent. But the British silver which the Home Government is anxious to introduce as the Canadian medium and standard is of such a character that if, on account of the fluctuations in exchange it were found expedient to send it to Britain, it would not be received there as legal tender for more than forty shillings. The remainder would simply drop to the value of bullion, which is considerably below its face value. As regards the mere circulation of the British silver in the colony, they are quite willing that it should be encouraged ; but this requires no alteration of the existing law which provides for its circulation on a par with the Spanish dollar. Finally, they object to the proposed change as injuriously affecting the large number of feudal rents and dues in the province, where accounts are kept in livres and sols connected with the Spanish dollar in the ratio of six livres to the dollar Such was the attitude of the Council, whose tone was normally strongly British, and therefore usually in conflict with that of the Assembly, which was equally strongly French Canadian. In the meantime the Lords of the Treasury, being informed of the difficulties which had arisen in Lower Canada in connec- tion with the carrying into efl-ect of the proclamation, stated that they would refrain from giving any further instructions on the subject until they learned what action the Legislature of Lower Canada proposed to take. But they took occasion to point out to the Colonial Office that the absence of British coins from the currency of Canada was due to the incorrect manner ■1 8 THE HISTORY OF CAXADIAfi CUKKEXCy in which Ihe different coins had been valued, and especially the silver coins. The British coins have generally been placed at a lower value than the foreign coins, thus leading to their export. The British crown is rated in Canada at 5s. 6d. cy., and by the same standard the valuation of the dollar, Spanish and Ameri- can, should have been 4s. 8Jd. instead of 5s. as at present. Again the French crown should have been rated at 5s. 2d. instead of 5s. 6d. as at present. But the British crown wliich was thus rated at 5s. 5d. was coined at the rate 01 5s. 2d., face value, per ounce of silver, whereas under the new coinage the crown is now issued at the rate of 5s. 6d., face value, per ounce of silver. This should have the effect of correcting the former under-rating of the British crown and will now cause it to be slightly over-rated as compared with the foreign coins. Thus the Lords of the Treasury appear to have reached the conclusion that, whether the Canadian Legislature gave efiect to the wishes of the Home Government or not, the natural course of exchange would operate to bring the new British silver into circulation. This would be further assisted by the policy to be pursued in the payment of the troops and the pur- chase of supplies, which were entirely under Imperial control. Hence when the Treasury was informed, in the course of the summer, that the Legislature of Lower Canada would take no action, they stated to the Colonial Office that it did not seem necessary to press this matter further upon Lower Canada. In Upper Canada the Home Government was apparently somewhat more successful. But the situation in Upper Canada differed considerably from that in the Lower Province. In Lower Canada, as already remarked, a large and important sec- tion of the French Canadians possessed small individual hoards of specie, composed almost entirely of old French coins, much worn and considerably over-rated. They were distrustful of paper money, and exchanged it as speedily as possible for coins. In this exchange local prejudice and the interests of the banks favoured French silver. Hence Canada became a haven of rest for all the maimed and wayworn French coins on the continent. Lower Canadian accounts, rents and contracts were chiefly specified in French currency on a silver basis. To alter the value of the French silver, or to adopt a new standard, was THE msTORy OF CAXADIAX ClRKE.Vcy 9 therefore a very serious matter for the French Canadians. Hence the radical objection to any such change as that pro- posed by the British Government. In Upper Canada the situation was very different, .\mong the .\nKlo..\merican settlers and traders there was no tendency to hoard coin. The few who had money readily invested it. bank notes, Canadian and .American, circulated freely and con- stituted the greater part of the exchange medium, even fractional currency for change being scarce. Alterations in the values of coins winch few possessed could not affect many interests. A change in the currency standard, however, would have been a serious matter, as that would immediately affect economic obligations and contracts. When, therefore, the proposals of the Home Government with reference to the currency reached Upper Canada, the people heard with gladness of the prospect of receiving a large supply of British silver and copper coins through the channel of Government expenditure. They received with meekness the statement of the British experts that the dollar was over-rated in sterling, and the British silver under-rated in currency, and they were quite willing that this should be remedied. But as to adopting the British monetary standard, that was quite another story and the idea was quietly ignored in the action tak.n by the Provincial Legislature. It was early in January, 1826, when Governor Maitland in a special message, laid the subject before the Assembly of Upper Canada, together with the documents furnished him from Britam, and before the end of the same month the responding act was pa.ssed. In this act, the Legislature, without in the slightest altering the existing currency system with the five shilling dollar as its basis, simply raised the value of the British silver and copper coins. They made British silver unlimited legal tender at the following rates :-The crown to be 5s. gd. instead of 5s. 6d. as before, and the shilling to be is. 2d. instead of IS. Id. as before, with all higher and lower denominations in the same proportion. British copper is also made legal tender in the same proportion to the silver as in Britain, but the aniount of legal tender in copper is limited to is. currency, and lod. m British copper is declared equivalent to is. currency. 10 THE HISTORY OP CANADtAS CURRENCY Further, to facilitate payments it is enacted that 17s. 4d. in British coins shall be equivalent to 20s. currency. The act had at least the effect of further increasing the differences between the legal regulations of the currency in the two Provinces. While the British Government got but little assistance from the Canadian Legislatures in carrying out its Imperial currency scheme, it had still the chief instrument of its purpose in its own hands. It entirely controlled the military expenditure in the colonies, ana that was then a very considerable factor in the economic life of Canada, being especially influential in the Canadian exchanges. In this field the British Government was free to experiment, so the payment of the troops and the purchase of supplies were regulated accordingly. The command of the exchanges was also employed to the same end. Some /'so.ooo sterling in British silver, together with a quantity of British copper coins, were sent out to Canada on Government account. In August, 1825, formal notice was given in the Canadian papers, " That the pay of His Majesty's troops, military departments, out-pensioners and certain other appoint- ments, in this command has been authorized to be issued at the par of 4s. 4d. sterling per Spanish dollar, commencing from ;he 25th of May last, and that the issue of British silver and copper money (of which a consignment has been received from Eng- land) when established to take effect, will be at its nominal value. The same also to apply to all payments to be made into the Military Chest." All tenders sent in to the various com- missariat offices, in response to public advertisements for sup- plies, must be stated in British money. It is to be a condition of all such contracts that it shall be at the option of the com- missariat officer to pay for all future contracts, either in specie at the foregoing rates, or in bills of exchange on His Majesty's Treasury, at thirty days after sight, at the rate of ^100 in bills on the Treasury for every £\oi due on the contract. With reference to the exchanges, notice is given that British money will be received into the Military Chest, in sums of not les= than ^103 from one individual, and that bills on the British Treasury will be given in exchange for it at the rate of £100 in exchange for every /103 in British silver of standard quality. Before tracing the practical effects of these measures we have THE HtSTORy OF CAXADlAy CI KREXCy 1 1 to note some special circumstances attending their introduction, and connected with payments to be made into the Military Chest. In 1825, the Home Government, under the influence of Mr. Huskisson, made several important concessions to colonial trade in modifying the old Navigation Laws and permitting a freer trade between the colonies. One phase of this was the permission granted to the East India Company to send its teas directly frcm China to Canada, instead of through com- mercial houses in Britain. Messrs Forsyth, Richardson & Co., of Montreal, were appointed agents of the East India Company for the sale of their teas. By an arrangement with the British Treasury, the receipts from the sale of the teas were to be paid into the Military Chest in Canada. This arrangement was notified to Messrs. Forsyth, Ricliardson & Co., and, in accord- ance with the new plans of the British Treasury, they were instructed to make the payments in specie. On receiving these instructions the agents wrote to Mr. Turquand, in charge of the Military Chest, on March 31st', 1825, stating that very serious difficulties would arise if the pay- ments were to be made wholly in specie. They point out that there is very little specie in circulation in the colony, since the greater part of the currency consists of bank notes, and especially the notes of the Bank of Montreal. Payment for the teas will naturally be received in these notes, which, in turn, will be readily accepted for any payments which the Govern- ment has to make in Canada. As the bank is thoroughly reliable, they urge that its notes may be received, in part at least, in the payments to be made to the Military Chest. If specie alone is demanded it must be brought from the United States, an operation which is both expensive and risky, and m spring and autumn almost impossible. What supply of specie there is in the country is -hiefly in the shape of small silver coins. The dollar pieces and gold, being at a premium, have mostly disappeared. They then proceed to expatiate on the credit and stability of the Bank of Montreal and the entire safety to the Government in accepting its notes. Should there be any doubt on this point they are quite willing to furnish additional security. It is proposed that the Military Chest should accept the bank notes to the extent of /aj.ooo. 12 THE illHTORV OP CAXAIUAS CrRtiESCV It is observable that in this appeal t lie Bank of Montreal alone is referred to, and the anxiety felt is in the interest of the bank, and not of the agents of the Compan> , who could have required the bank to furnish specie for the notes wliich they received for the teas. The promise of the bank to redeem its notes on demand is urged as one of the reasons for the security of the notes. The simple fact was that the bank would have found it rather difficult to redeem its notes in any q'lantity at that period, and the anxiety of Messrs. Forsyth, Richardson & Co. arose from the fact of their being personally very much interested in the bank. At the same time it was quite true that the Government would have had no difficulty in obtaining its supplies for the bank notts. The merchants were quite willing to take any kind of respectable currency for their wares, and only the hoardipR French-Canadian was to be reckoned with. Turquand, in forwarding this letter to the Treasury, con- firms the statement as to the scarcity of specie and the practi- cal universality of bank notes as a medium of exchange. He admit.s that the Military Chest could readily employ the bank notes, though they are not legal tender, yet the privilege of paying in paper should be strictly confined to the proceeds of the sale of the East India Company's teas. When the matter was brought up before the Treasury Board they replied that the very argument urged in favour of accepting the bank notes, namely the dearth of specie in the colony, compels them to decline the application in order that pressure may be applied "i bring specie into the country and re- tain it there. In other words, they see in this an opportunity to promote the special object they have in vie\v. by supplying the want of specie in the colony with British silver. The following year, 1S26, a similar case was presented by the Canada Company which applied to be permitted to pay part at least of its obligations to the Government in Bank of Mont- real notes. But the Company is informed that a similar re- quest has been denied to the agents of the East India Co., and cannot, therefore, be granted to it. A letter from Turquand to Majo. Hillier, Secretary to Gov- ernor Maitland of Upper Canada, dated 21st Feb., 1824, throws THR HISrORV OF CAXADIAX CVBRESCY , , cons,derable light upon the relation uf ,h. liank of Montreal to Government payments about this tin,e. It appears that in nrl v.d.„g funds for military purposes wi.l.in th^c' I 'rur^rnd had an arrangement with the Bank of M.-ntreal/wherehyhe the banl, at someth.ng of a premium, Upon the bank, m turn, to oth.rs, ,n tins case to Governor Maitland who drew upon the bank ,n payment for his mihtary supplies. These drafrwe « .,urse pa,d by the bank in its own not.s. Thus the net suit of the transaction was that the Bank of Montreal pur- chas,d b,Us on the British Treasury wuh its own note , 'and then sold .ts own exchanges on London at a conside ab"e premium to merchants in Canada or the United States A letter to the Kingston ClncicU, of the san.e vear B^t::oVfo'r°t^ ^"" """"V '"^ ^P-'^ ""'^h -•'"-' Kingston for the payment of the troops, etc., ,s not put into crcu afon, hut ,s paid over to the agent of the bankTMontr a^t Canada m the very cases ,n which it arrived. Some five y-ars he R.deTcInaT TT' 'J'"'"' ^'^'^^ '"" "^^ contractors on the K.deau Canal and elsewhere, instead of receiving cash take a draft on Montreal, payable in dollars, and they dispo of thi llirs-uTphef '""'""''• '-'' ""'^^ '^^"^^ "■- ---^ At the time of inaugurating the new currency scheme it was s„ll one of the anomalies of Canad.an public finance tha dut.es were levied on imports to Canada by both Imperial and Provmcal statutes. The Imperial statu.e^vas ,4 Go III cap. 88 (t„4), and the duties exacted under it were requt" o be pa,d ,n sterhng, whereas the Provincial duties were co lected LikJ" .'""■'"'''• ^'P '° '«^5 the sterling rating of the dolar had been 4s. 6d. But. on the basis of ^he new B i, sh otnage, tt was accepted at 4s. gid. after i8,5. Then „ accordance w,th the last move, u was reduced in ,8.7' Z 4S. 4d. Thts had the effect of considerably raising the duty for C nadian importers when they paid, as they commonly did T„ do las or other corns rated on that basis. The Canadian mer chants considered the action of the Treasury Board as illegal > ^'l 14 THE HISTORY OF CASADlAy cmRK.\CV and refused to pay the extra duty. The result was a law suit in which the question was argued with considerable show of reason and ni)t a little subtlety on both sides, but the judges decided in favour of the Treasury. At first sight it might appear that, in consequence of all the influences brought to bear upon the Canadian currency, the new policy of the British Treasury should have been fairly suc- cessful and that a large amount of British silver should have been infused into the circulation, which might in time have led to the adoption of the British standard. Yet such was not at all the result, and for the following reasons : The specie sent to Canada by the Government was not greater than the requirements of her international exchanges. Indeed, the more the British Government spent in the colony the greater the quantitj of goods purchased abroad, and there- fore the greater the amount of exchange required to pay for them. Most of those supported by the Imperial payments were not commercial producers, and hence did not furnish additional exports to meet the increased imports. From the very necessities of a poor, though developing country, the imports tended to out-run t' j exports, including all specie of standard value. Such being the case, the British silver sent to the country always found itself at a premium, and was eagerly bought up by those who had payments to make to the British Treasury, either for duties or in return for bills of exchange. It had been hoped that, inasmuch as the new silver coinage had, in virtue of its being over-rated, remained steadily in Britain, it would likewise tend to remain in circulation in the colonies. But the inference was not well founded. The new silver coins remained in circulation in Britain because there was no other country which would receive them at their face value. In the colonies, however, these coins found a country which would receive them at their face value, namely, Britain itself. So that, whether in the purchase of exchanges or in actual shipment, they were as good as gold in their command of the British market. Their intrinsic deficiency counted only with reference to the American exchanges, and that was one chief reason why they were confined to the function of procuring THF. HISTOHr OF CAXADIAX ClXKBXCy 13 British exchanges. For all purposes of internal trade, the banii notes and the greatly over-rated Spanish pistareens and French coins were still used. Thus every one of the expedients adopted by the Treasury for Lisuring the circulation of the British coins in Canada directly operated to put them out of circulation, for no sooner were they paid out of the Military Chest than they returned to It through the medium of the banks or the importing merchants. As the currency chiefly employed to buy up the British Sliver was the bank notes, the consequence was that the chief result of the new policy was to increase the circulation of bank notes, which were all expressed in dollars. Though at first the Lritish coins steadily returned to the Commissary General for the purchase of exchanges at the fixed premium of three per cent, yet it was afterwards found to be more economic to export the coin. The British coins leaving the country, the Military Chest itself began to depend on dollars for its supply of specie. The Treasury had, there- fore, to meet the new situation, and the result was that by the middle of 1828 the premium on Government bills was reduced from three to one andahalf per cent.,or^ioi los. were accepted for a bill of ^100 on the Treasury, and similarly in the case of the Government contracts. This had the effect of checking the further export of British silver, though it had no influence in keeping it in circulation. British silver being exclusively associated with the British exchanges, the values of the coins themselves fluctuated with the rates of exchange. Thus the British half crowns, which were legally rated in Upper Canada at as. lojd., and in Lower Canada at 2s. gd. when exchange was high, passed for 3s., and when it declined for as. iid. After a few years of unpromising experiences it became apparent to the British Treasury that if any real progress was to be made it must be accomplished by changing the basis of legal tender in Canada, which meant a legislative readjustment of the currency. It must not be supposed that the ill success of the British authorities in their efforts to introduce the Imperial coins and standard was due to the fact that the Canadians were entirely |6 THE HISTORV OF CAXAP/Ay ClRREycV satisfied with the existing currency system. The business men of both the Canadas were anxious to get rid of a currency con* dition which both Montreal and Kingston papers agreed in describing as *' a disgrace to any civilized nation." The country was at this time a very paradise for the coin col'iLCtor, since its metallic circulating medium consisted of the odds and ends of the coinage of all the commercial nations. Had t not t n that the banknotes formed the greater part of the cir* culating medium it would have involved much time and patience on the part of the merchants to simply keep account of the money received for their goods. The very difficulty of deaUng with such a medley of coins greatly favoured the circulation of the bank notes, and thus reduced the chief practical evils of the metallic currency to the smaller coins used as change. Gold coins were rarely met with. Now and again a glimpse of a sovereign was to be had while on its way from the pocket of an immigrant to the frontiers of the colony. The copper cur- rency was in a worse condition, being composed chiefly of dis- carded British half-pence and farthings, various sorts of tokens, native and foreign, and even brass buttons beaten smooth. Still the supply was inadequate to the needs of the country. In Upp'^r Canada the enterprising firm of Edward Leslie & Sons, who had stores at Dundas, York and Kingston, finding constant inconvenience from the want of small change, and especially coppers, determined to import on their own account a considerable quantity of copper tokens. Their first impor- tations were absorbed so rapidly that they felt compelled to continue the operation from year to year. Other merchants sought supplies from them, but, being doubtful of the legality of their enterprise, they declined to furnish them and confined their issue to the needs of their own business. It was yearly expected that either the Government would meet the want or that one or more of the banks would be authorized to issue tokens. These expectations not being fulfilled Messrs. Leslie & Sons in 1831 formally applied to the Government to either fur- nish an adequate copper currency or sanction their method of meeting a public want. Governor Colborne, in forwarding this petition to the Home Government, stated that about THU HISTORY OF CAXADUX ClRRKXCy 17 ^50,000 in copper coins would b« necessary to adeciiiatcly supply the Province, and failinR that importations such as those mentioned in the petition would be constantly received AmonK the small silver coins used as chanRe thepistareens had becon.. e most numerous, chiefly in consetiuence of the reform in the American currency. The gravitation of pis- Ureens towards Canada is no mys:ery when it is l4 Dollar of the United States !. !!!!...!![ 5 o Half dollar of the United States " 2 6 French crown (weighing 18 dwt, tS grs.) '.'.','. 5 6 20 THE HISTORY OF CANADIAN CLRRENCY The quarter and eighth dollar pieces were to be legal tender to the extent of ^lo currency, the others to any amount. British copper coins were to circulate freely, but to be legal tender only to the extent of is. currency, loW., British copper to be equal to IS. currency. Provision is made for the calling in by the Rtceivet- General of the Spanish pistareens and French half-crown-, .ind the giving of lawful money in return to the extent of their iiunu- nal value as previously rated. In the matter of gold coins the bill is quite radical as it drops the whole of the previous list and adopts the new British sovereign alone. In the silver list the dollar remains at 5s,, while the French crown, in deference to the French C.inadian element, is still rated at 5s. 6d., though it had fallen to 5s, in ihe neighbouring States, but the other French pieces and tlie pista- reens are dislranchised. The British silver is rated at its token value in gold. The bill, however, did not pass, being regarded by the majority as too radical. A rough practical measure, dealing merely with pistareens and bank notes, took its place and was rushed through, apparently under the influence of what was being done in Upper Canada. The new act consisted simply of two clauses. The first reduced the legal rating of the pista- reen from is. to lod. and its half to 5d., and the second excluded from circulation in Lower Canada any bank notes, or other notes, under live dollars, except those of the incorporated banks of the province. I have said that this measure was apparently hastened by the action of Upper Canada. In the Upper Province an ill- digested act was passed, March 6th, which was intended to deal with the accumulation of depreciated silver coins which then formed the metallic currency of the province. It was a short act formally excluding from the list of legal tender coins all British coins which were depreciated more than one twenty-fifth of their standard weight, together with all pistareens, French crowns, French pieces of 4I. 10 sols and of 36 sols, and all higher and lower denominations of these coins, and it was declared no longer penal to counterfeit them. The result of this hasty measure was that, while no regular provision had been made to THB HlSTOSr OF CAXADUN CURRENCY JI supply the province with an adequate fractional currency, practically the whole of the change then in use was suddenly deprived of the privilege of legal tender, and hence of the benefit of any rating whatever. Thus while, in default of a substitute, the people were compelled to use the disfranchised coins as change, yet their current rating was demoralized, and the evils which formerly existed were multiplied. The people were left to bring order out of chaos as best they could. The Kingston merchants set the example by calling a public meeting in the Court House, at which it was resolved to accept French half-crowns at 2s. 6d.. pistareens at iid., and half-pistareens at 7id., these being the chief coins used as change. During the same session the currency question was taken up by the Legislative Council of Lower Canada. A hill was introduced there, under the influence of the Executive, to assimilate the money of the province to that of Great Britain. It was referred to a committee which took a good deal of pains to obtain from various quarters expert information on the sub- ject of currency standards and equivalents. As a result they discovered so much disagreement among the doctors that they were fain to confess themselves rather more in the dark at the close of their investigation than at the beginning of it. The committee was divided on the question as to how a change from currency to sterling standard would affect contracts and vested interests. Some contended that it would greatly affect values, others that it would make no appreciable difference. The latter regarded the change as little more than a matter of terms, and held that securities would be worth as much under any other name, but they need not have gone further than those Canadian merchants who were suffering from a change of standard in the case of the customs duties, for vigor- ous proof that the adoption of the sterling standard was not a mere matter of names. On certain points, however, the committee were unanimous. They were in favour of calling in all the deteriorated coins in circulation and redeeming them at their nominal value at the public expense. In this they agreed with the committee of the Assembly. It may be interjected that Commissary General Routh had said in his haste that he believed the Home Govern- aa THE HISTORY OF CANADIAN CURRENCY ment would redeem the colonial currency to get rid of it. Safeguards, however, would be needed to prevent such coins from being brought into the province for the profitable purpose of being redeemed. They further agreed that a supply of proper copper coins should be imported to " supersede the necessity of using the trash at present in circulation." But, unfortunately, the points on which the committee man- aged to agree were just those on which the Council could not originate bills as they involved the appropriation of money. As regards those points upon which they had both the power and the will to legislate, they found them under discussion in both Britain and the United States, and therefore considered it in- expedient to do anything at the time. Before anyone had the courage to take the question up again the political troubles of the country had obscured all minor issues. Much the same is to be said of Upper Canada. Having once more failed to accomplish anything of any consequence the British Treasury seems to have given up the struggle, though the commissariat regulations were not with- drawn till 1838. We must now return to deal more particularly with the part played by the banks during this period. Qdbbn's University, Kici^ston Adam Shortt