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Les diagrammes suivants illustrent la m^thode. rrata :o pelure, T a □ 32X 1 2 3 4 5 6 / IPoS^ > u ^/ ^ 7.' THE EARLY HISTORY OF CANADIAN BANKING Currency and Exchange after the Conquest BY ADAM SHORTT, M.A. gi ken's L'nivrksity, Kingston TORONTO Journal of the Canadian Bankers' Association 1897. THE EARLY HISTORY OF CANADIAN BANKING II CURRENCY AND EXCHANGE AFTER THE CONQUEST TJAVING seen, in the case of our bankinij system, whence * '■ came the sapHnp; which has grown into the present wide- spreading tree, we have next to enquire as to the nature ol the soil int;o which it was transplanted, the streams of commerce which were to water it, and the social and pohtical atmosphere in which it was to flourish. Especially do we require to know in what manner and to what extent the services rendered by banks had been performed before their introduction. Banking facilities do not burst upon the business community as a quite new and developed service ; they simply afford an easier, more effective and generally less costly manner of rendering ser- vices which are already performed in more or less primitive fashions. The period between the Conquest and the appearance of the first banks in Canada has been, from an economic stand- point, the most obscure in the history of the country. To the student of economic history it is almost entirely virgin ground. It is only, indeed, since the valuable collection of documents and papers brought together in the Canadian Archives Office has been made available to the student of our country's history, that a continuous and sure-footed narrative in this department has been at all possible. The other sources of information, valuable though they are on many points, are yet very frag- mentary, and require for their full understanding the light which these volummous records throw upon them. I may be pardoned, therefore, if, in this new field, I give in some detail the prevailing ideas, methods and conditions of exchange which preceded and prepared the way for the introduction of banking. Practically all of the Canadian trade with the outside rfT. 3 EARLY insrOKV OF CANADIAN BANKING 'vorld, being mainly that with old and new England, and much the greater part of the wholesale domestic trade as well, passed, at the time of the Conquest, into the hands of the English traders. It thus took on quite a aifferent complexion, and was conducted on quite dilfercnl principh.s from those which prevailed under the French regime. Hence, though the monetary and general economic experience ot the French Canadians under Fiench rule, naturally continued to have much inllutnce upon their economic habits, as well as upon iheir attitude towards the English methods of trade and exchange, yet it is not necessary to go behind the period of the Conquest in seeking a starting point for our narrative. The chief feature of interest to us in connection with the passing of French power in Canada, was the enormous issue of paper currency during the closing years of French rule. The magnificent scale upon which corruption flourished in that small community, and the exhaustion of the French treasury, left an innnense amount of paper currency, or bills of exchange obtained for it, unpaid, and the cession ol the colony to Britain left little hope of the paper being redeemed. I'or some time before the Conquest, practically nothing but paper currency was in circulation ; while after the Conquest, and before the extracting of a promise from France to make a partial redemp- tion of its obligations, the paper money was almost worthless, and was not receivable m trade by the British merchants. It migiit seem at first sight, then, that the new British adminis- tration found in Canada a country almost entirely without a circulating medium. When, however, we look into the matter more closely, we find that when the last great issue of paper money began, though the metallic money in circulation rapidly vanished, yet very little of it left the country. It simply disappeared into the stockings and strong boxes which were kept by the people, even in the narrowest of circumstances, in accordance with a well known national characteristic of French- men. The same fate befell the considerable quantities of specie which accompanied the officers and troops coming to Canada under Montcalm. Soon after their arrival they complained that nothing but paper money was to be found in circulation. When, therefore, the paper money suddenly became practically HARLV rilSTORV OF CANADIAN BANKING worthless at the Conquest, though of course many of its posses- sors were greatly impoverished, yet the people generally were not entirely ruined, nor was the country (juite deprived of a cir- culating medium. Metallic money began to come out of hid- ing, and the English m<;rchants drove (]uite a brisk trade, even though they declined to take the paper money until there was some prospect of its being of value. That the people of Canada were in possession of a large (juaiitity of metallic money immediately after the ceding of the country to Britain, and that the money was French, and not IJriti^h, is evident from the two first ordinances passed by the British government for the regulation of the Caradiati cur- reucv. The first was passed in 1764 and the second in 1766; in both the Louis d'ors and the French crowns are rated some- wliat above their normal value, with the express intention of retaining them in the colony as the chief features of its cur- rency. Tiiat the French population generally still retained under British rule their characteristic habit of hoarding specie, is shown in an account of the colony given by an observant American revolutionist. Charles Carroll, who was in Canada in 1775-6. Speaking of the French Canadian farmers he says: " It is conjectured that the farmers in Canada cannot be pos- " sessed of less than one million pounds sterling in specie ; they "hoard up their money to portion their children ; they neither " let it out at interest nor expend it in the purchase ui hinds." This peculiarity of the French Canadian is well worthy of note, as it had a marked influence upon the whole economic character of Lower Canada, and was a very iiuportant factor in connection with the beginning of Canadian banking. We pass over the whole of the interesting negotiations and regulations connected with the collection, registration, long delayed, and in the end very partial redemption of the French paper money, which, as necessitated by the conditions of pay- ment, at once passed out of circulation in the colony. Among those who were the chief sufTerers from the vanish- ing value of the paper money, were the Canadian noblesse, or seigneurs, and the leading French merchants, or purveyors for the troops. The aristocracy had also sufTered from the curtail- ment of their feudal privileges, and the loss of the numerous 4 /CAA'/.r IIISJUKV OF CANADIAX HAXKISG offices and perquisites which tliey enjoyed under the Frencli government, and wiiich caused the maintenance of the colony to be such a lieavy drain upon France. This aristocratic ele- ment was, natuially enouf^h, the class with which the Enf^lish governors almost exclusively associated, and from whom they obtained their ideas of the country, the people, and the proper administration of the colony. Mow fatally mistaken these ideas were, after events clearly proved. The English element which followed the Conquest con- sisted almost entirely of tradeis or merchants, maitdy from the other ['English colonies to the soutii, though many of them were originally from Britain, several of them from that Highland emigration to America which followed the disaster of Culloden. These men were not slothful in business, but fervent in spirit, mainly serving themselves. The slipshod, easy-going, anti- quated business methods and corresponding law of the French Canadians did not suit these men who naturally believed, and with reason as the future was to prove, that the advantages of English commerce could only be secured under English methods and Englisii laws. They were not by any means all of one class, for while some were certainly not over-scrupulous as to their methods, others were exceptionally able and upright men. Unfortunately for themselves, they were all more or less tainted with the spirit of Jiriiish freedom and independence, and had an obstinate conviction that the British system of law and government was in evt ry respect superior to all others, and was the proper system to be introduced into British dominions, taking little account of any practical difficulties in the way. These ideas did not accord well with the opinions of men of purely military training and experience, suddenly converted into civil governors. The governors had to admit, indeed, that the Canadian colony owed its rapid recovery and flourishing trade almost entirely to the EngHsh merchants, yet they found them extremely troublesome to get on with, as they were always pestering the government for innovations and itnprove- ments in the administration. How much more attractive, to governors with military and aristocratic leanings, were the Canadian noblesse, with their polite flattery, their military training, and their feudal abhorrence of trade, enterprise, popu- KAKi.y nisroh'V oi' c.ix.i/>/.i.\- /.'./.vavay; lar freedom and ind('pend(;nce. Mow extremely natural that eighteenth century English governors should gravitate to the side of the FrenchmLn, with their admirable tastes, and their highly proper uh.as of the majesty of the governor. Such men were surely to be encouraged and supported. Did not, in fact, a dignified and well oidered government owe them a living ? On June 7th, 1762, while Canada was still under military rule, and its ultimate possession, though faiily certain, yet still unhxed, Ciovernor Murray sends to Egremont, the Secretary of State, a lengthy report on the state of the countrj-, which is of considerabU; interest for our present inquiry, on account of the plan for a provincial currency which it contains, and which incidentally throws considerable ligiit on several associated points. The Canadians, he says, labor uniler difficulties for want of cash, and hence the b^nglish merchants find some difficulty in disposing of their goods. He wishes some means could be de- vised for obtaining a circulating medium to enable the Canadians to stock their lands, and the English merchants to dispose of their goods. It would be a very good thing for both Canada and Jiritain. It will be observed that the governor is quite un- conscious of the radical difference between capital and a circu- lating medium. With this end in view he has a plan to submit. He proposes to put in circulation a certain sum in paper bills, say /^ioo,ooo to start with. However, as the Canadians are naturally rather shy of paper bills, after their late experience, it will be necessary to adopt special measures to get them into circulation, and to this end he wcnild suggest : First. That his scheme should receive the sanction of the home Government. Second. As it would be a popular act to assist the people in rebuilding their church, the first paper issued might be used for this purpose. This would enlist the interest of the clergy and give credit to the bills. Then some of the bills might be used as loans to the people of Quebec, to assist them in rebuilding their houses and improving their lands, security being taken. Third. The British merchants should be got to consent to receive this money in return for their goods, and for this pur- H.ARI.Y HlSrOKV OF CANADIAN RANKING pose the duties on imports should he made reccivahie in this paper, either in whole or in part. Fourth. A tax should be levied and the proceeds set apart for the gradual redemption of the pap^r money. This might take the form of a tax of half a dollar upon each house in the province, wliile the houses of the seigneurs, gentry, merchants and publicans, and all those in the towns, might be taxed one dollar each. The revenue to be thus derived lie estimates at ^"3,000 annually, reckoning the dollar at five shillings. After a time the tax might be increased or some other taxes added. As soon as this currency is well established it might be used for every purpose of government, such as repairing old and making new fortifications, etc. Thus, ho concludes, sur- veying his plan with sprightly confidence, Canada couW be made to flourish without any aid from the mother country such as the other colonies in America constantK require. No one, 1 fancy, with any sense of humor would have the temerity to attempt a criticism of such a financial work of art as this. The following year, 1763, when the fate of the country was settled and there was son u' prospect ot a partial redemption of the Canadian paper money, Murray again brings forward his self-acting scheme for (\inadian prosperity. Now, however, the new issue of paper money is to be given to tlie holders of the old paper money, at a certain proportion of its face value. A general tax is still to be levied in order to provide a sinking fund to retire the paper in time, though fresh paper is to be immediately issued to rep!^ ^"i the old, in its joint function of circulating medium and working capital. In these schemes the simple directness of the relation of means and end, the lielight- ful inconsetpience between the objects for which the money was to be issued and the sources from which the redemption fund was to be drawn, are strongly suggestive of the turn of mind and financial experience of a military man or a populist. Nevertheless, it is quite evident that Murray was consider- ably influenced in his views as to the necessity for the govern- ment coming to the assistance of the needy French Canadians, by his intercourse with the Canadian aristocracy. As I have already indicated, it was the most natural thing in the world, KARI.Y HISTORY Oh CANADIAN HANKING considfriiif,' their historic traditions and personal experience, that the distressed Canadian nobility, and the ^'overnors on their hehalf, should be most anxious to induce tht: liritish gov- ernment to provide a sufficient number of offices, military if possilile, which they mif^d)t till with becoming dignity to the governmnit and profit to themselves. As a sample of their views on this subject we may take the memoir dated May ist, 1765, prepared by the principal French citizens, setting forth the present state and abilities (;f the province. They contrast the fl 'rishing state of the colony under French rule, from 1749 to 1755, with the disastrous cindition of the country since the peace. They attribute this decline to the lack of sufficiently large expenditure in the col ny by the British government. The remedy proposed for this d.ingerous state of things consists of two alternatives, name! . that Britain should either support a siifficiently .".rge stanOii.g army '"•: Canada, or build frigates and other vessels at 'in annurd utlay of 3,000,000 livres, to be ijsiud in bills or paper aicnL y • n the credit of the government, and payable in London. In olh* r words, they advocate a com- plete restoration of the French system nf administering the colon). The first alternative was evidently the one most to their liking, and many representations in its favor were for- warded to the home government by Murray and Carleto.:, and we know how the latter em[)loyed it in connection with the Quelxc Act, and how, whtn the critical moment arrived, he found himself, to his great astonishment, with a fine stafT of officers anil no men. At the same time that this memoir appeared, representing the decaying state of the province from the point of view of the French Canadian aristocracy, other observers were con- firming it, in a manner, by contrasting the rapidly improving condition of the F'rt;nch Canadian farmers, with the poverty and declining state of the Canadian seigneurs. The statistics of the colonial exports for this period also indicate a great improve- ment in the condition of the common people. The British government at this time was too much occu- pl:d in its struggle with " Wilkes and liberty,'' and in laying the foundation for future discontents at home and abroad, to give much heed to the condition of the distressed nobility of Canada, or paper money schemes for their relief. 8 EARLY HISTORY OF CANADIAN BANKING After Murray's departure, in June, 1766, to answer the charges prererred against him, chiefly by merchants of London and Quebec, the command devolved on P. /Emihus Irving, pending the arrival of Sir Guy Carleton. One of his first duties was the framing of a new ordinance on the currency, in which, as he observes in his report to the Board of Trade, the Louis d'ors and the French crowns are still overrated in order to retain them in the country as has hitiierto been found suc- cessful. He adds that it is now desirable that a quantity of small currency should be sent into the province. The reason for the scarcity of the small currency is not far to seek. The overrating of the larger French coins already in the province, and of the Portuguese Johannes and moidores, which formed the chief elements of the specie introduced by the agents of the British government, caused values to adjust themselves to their standard. This resulted in a corresponding underrating of the smaller silver coins, which, in consequence, gradually disappeared from the country. When, owing to the great scarcity of fractional silver and even of copper, the mer- chants found themselves unable to make change for their cus- tomers, some of them resorted to the plan of issuing small paper due-bills which were to be received in future purchases of goods at their shops. Once established in this usage, the due-bills began to pass from hand to hand in other exchanges, and thus they afforded practical reUef from the difficulties of the situation. The right to issue this fractional paper not being confined to any one in particular, it was issued by any merchant or trader whose credit would enable him to do so, and much confusion must have resulted. Still, it became a firmly estab- lished factor in the exchange mechanism of the country, and, in various forms, it survived for many years both in Lower and Upper Canada. The range of circulation and the credit of the bills depended entirely upon the imputed credit of the person issuing them. From the fact that they originated in Lower Canada, and that they were generally introduced with the words, " Bon pour," etc., they came to be universally desig- nated bons. We shall have frequent occasion to note their appearance and influence in the course of the development of our subject. Here we may simply observe that the use of the EARLY HISTORY OF CANADIAN HANKING bons tended to prepare the country people for the appearance of bank notes; at the same time the inevitable difiiculties con- nected with them afforded a basis for several sharp criticisms upon the issues of the first banks. The scarcity of change continuing, and the system of bons becoming general, with obvious advantage to the merchants, it occurred to an enterprising auctioneer of Quet)ec, named William Titchbourne, that a fortune awaited the man Vvho could obtain a monopoly of the right to issue these small promises to pay. No doubt the general advantage which would result from uniformity of issue, and the consequent avoidance of confusion, seemed to him a strong argument in favour of his scheme. At any rate he decided to apply to the governor-in- council for an exclusive charter. Thus we find m the minutes of Council of August 27th, 1767, a record to the effect that there was read the petition of William Titchbourne, auctioneer, praying for the exclusive privilege to issue promissory notes for small sums by way of change for silver and lo supply the want of copper coins. This is undoubtedly the first attempt to obtain a bank charter in Canada. The council, however, dis- missed the petition ; it was, indeed, beyond their authority to grant it. It was, strictly speaking, the duty of the civil govern- ment to put a stop to the circulation of the paper then in use. But experience was shiowing that the laws and special ordi- nances then in force for the regulation of the currency, and which had been mostly determined in Britain, were not workable. On August 17th, 1772, Gramahe, who was administering the government in the absence of Carleton, sends to Hills- borough quite a full and interesting' report on the subject of the currency. He confesses that he had found it necessary, in the end, to leave the adjustment of the values of the diflerent larger coins, especially the Portuguese Joes and half-Joes, as they were called, to be settled by the Quebec and Montreal nierchants between themselves. The Montreal merchants, we find, were able to turn the scale in favor of their usage, which, in turn, was determined by that of the English colonies to the south, with which the Montreal merchants were always most intimately connected, and from whence both the government and the merchants of Canada obtained their supplies of specie. lO EARLY HlSrORV OF CANADIAN HANKING In the same despatch Gramahe refers to the continued high price of silver, which, as it circulated in Canada by tale and not by weight, and was underrated as compared with the gold coins, was still the more profitable metal to export to the other colonies in payment for supplies. Referring to the lack of small silver for change, he says, " It is so very scarce that "government has been under the necessity of winking at " every Httle retailer's circulating paper bills of his own, some, " if not much of which must fall a dead loss to the public, "whenever they are crie;! down, t)r the issuers come to wind " up their aflfairs." Me hopes that when the government here is fixed upon a permanent basis some method will be found to correct these evils. On Nov. 4lh, Dartmouth, on behalf of the Board of Trade, replies to (iramahc, admitting that his leaving the determination of the values of the Portuguese coins to the practical arrangements of the Quebec and Montreal merchants, was the wisest thing to do under the circumstances. With reference to the scarcity of the silver coins, he sa\s it is ;t diffi- culty to which Quebec, in its present commercial condition, must continue to be exposed ; [>ut nothing can be done until the colony has a more permanent constitution. Till then the circulation of foreign silver coin must be regulated by the pro- visions of the statute of Queen Anne. Thus were the currency difficulties of the colony left for the present to the practical adjustment of circumstances, and the colonial administration was virtually authorized to con- tinue winking, with as little loss of dignity as possible, at the circulation of the bans until the government of the colony should be settled. The measure which was to have that seda- tive effect was the noted Quebec Act of 1774. Ijut, much to the chagrin of its authors, that unfortunate measure had the very opposite result. It was the altemiu to enforce this Act which revealed the utter miscoiueplion of the real condition of the country, and the net'ds and dttitude of the general popula- tion, which Carlt ton, like his predecessor, had obtained from his almost exclusive association with the Canadian aristocracy, and his reliance upon their statements. This Act, also, by its intended effect upon the refractory colonies to the south, destroyed the last hope of reconciliation, and precipitate the EARLY HISTORY OF CANADIAN RANKING II general revolution. Instead, therefore, of the Canadian govi-rn- ment proceeding to deal with such details as the currency, it found its hands full of quite other work. In 1775 communica- tion with the southern colonies was cut off' by a revolutionary army sent to intercept the expected invasion from Canada which Carleton and the English government had planned to follow the Quebec Act, and the anticipated enthusiasm which would be roused among the people of that province, on account of the restoration of the French system of government and civil law. But there was no invasion from Canada. The Quel)cc Act liad indeed secured the enthusiastic support of the distressed nobility of that country, and the higher function- aries of the Church, but it had alienated the great mass of the French Canadian people, who regarded themselves as cruelly duped in being thrust back once more under the feudal power of their old oppressors. Hence, to his amazement, Carleton, instead of raising an enthusiastic army of French Canadians with whii a to suppress the rising in the English colonies, found himself unable to muster, with the utmost efforts of persuasion, threats, or inducements, a sufficient number to properly garri- son the towns. Learning that Carleton was thus in process of being hoist with his own petard, the colonial efTorts were chanj^'ed from the defensive to the offensive. (Canada was invaded and almost despaired of before the arrival of the English troops. Thus for I time was the prosperity of Canada check* d. But on this, as on several other occasions afterwards, the dis- tress of England was to be the joy of Canada, until the Can- adians came to be credited with including in their prayers joint petitions for a bountiful harvest, and a bloody war. Canada soon became the base of operations of a large British fotce, and the region from which supplies were drawn both for the forces in the country and for those engaged in the revolted colonies, as well as for the Indians of the west. It can easily be imagined then, that, with an excellent local market for almost everything which the country could produce, prosperity in its brightest form was once more smiling upon the province, and the French Canadian, as he stored away the precious coins, forgot the relapse from liberty which he and his country had suflbred, and while for the most part himsc If refusing to fight, he was eager enougli — for a onsideration — to feed those who would. 12 IIARLV /nsrORV OF CANADIAN li ASKING During the period of interrupted intercourse with the other colonies, one of Carleton's despatches to Dartmouth, from Montreal, dated 7th June, 1776, throws considerable light on the intimate commercial and financial relations which normally existed with the southern colonies. After dealing with other interesting matters, he refers to the condition of the money supply. " Our communications with the other provinces being " entirely stopped, we run the risk of being at a great loss for " money, to defray the ordinary and extraordinary expenses the "service here must be attended with, the money contractors as *' well as trade, at this time of the year, being used to procure '■ large supplies of cash from New Ycjrk and Philadelphia, with " which places we have at present no intercourse ; if £f 15,000 or " ^20,000 were sent here as soon as possible, it would be of great " use to government, which must lose considerably by the present " low course of exchange, likely to fall every day ; could it be " procured in dollars, and some part in small silver, the same " would prove highly beneficial to this country, where that species " has become extremely scarce." Here, among other things, we have an indication of that three-cornered system of exchange, which, beginning inuiiedi- ately after the Conquest, has prevailed with modifications down to the present time. The form in which it existed at that time may be briefly sketched. The general income of Canada was derived from two sources, namely, the exports to England or the other colonies, and the expenditure of the British government in the country. This was only partially offset by direct imports from England. A very large proportion of the Canadian imports came from the other colonies, being partly the product of these colonies, and partly imports from Britain or the East and West Indies. The Canadian claims on Britain were drawn in bills of exchange on London— those for exports by the merchants, those for govern- ment expenditure either by the governor or his representative, or, more commonly, by the resident agent of the money con- tractors, who were London bankers or brokers. After paying for the direct imports from England, the balance of the bills were sent to the colonial centres, such as Boston, New York and Philadelphia, partly to offset the imports from those and EARLY HISTORY OF CANADIAN HANKING 13 neighboring places, and partly in exchange for specie, which was returned to Canada, usually by way of the Champlam route to Montreal. A great part of the specie so obtained again flowed back in small streams to the northern fringe of colonies from which the Canadians received many supplies, as well as produce for export by the St. Lawrence route. A certain amount of this specie continued to pass, m prosperous times, into the small hoards of the French Canadians, who managed to make up by thrift for their lack of economic enterprise. Such being the normal circulating system of trade and exchange, when the connection with the American colonies was temporarily broken off, the bills of exchange on England found a very narrow market, the price fell, and the government suf- fered loss and inconvenience. Carleton therefore reconmiends the sending of specie, and asks that it be sent in dollars, to which the Canadians were now quite ascustomed. The further request that a considerable quantity of small silver be in- cluded indicates the persistent scarcity of fractional currency, and the continued use of bons. After several urgent calls for specie the home government began to send some. But the troops accumulated in the province, increasing supplies were required for the swarms of Indian retainers of the west and north-west, and some of the troops in the revolted colonies had also to be supplied ; thus the expenditure of the government in Canada mcreased enormously, and with it the need for a corres- ponding expansion in the medium of exchange. The special situation of the country caused the amount of circula^^'.ng medium required to be unusually large. Canada being frozen off from the rest of the world for about one half of the year, bills on Britain were saleable there during a very limited por- tion of the year. It would require, therefore, an enormous amount of ready money in the hands of the merchants to enable them to purchase all the bills of exchange in the autumn, and before they had well begun to dispose of their yearly sup- ply of goods. On the other hand, the same system involved the holding of a very large sum of idle money in the military chest or provincial treasury during a considerable part of the year. If the agent of the money contractors would consent to forego the immediate delivery of specie at the close of naviga- H EARLV HISrORy OF CANADIAN BANKING tion, when the bills were purchased and sent off, and would per- mit the mercliants to dehverit during the winter and spring in proportion as tht y disposed of thtir goods, then a better price might be nbtained for the bills, and a smaller amount of cur- rency would answer the needs of the country. Haldimand, then in command m Canada, joineti his voice to that of the merchants in urging this concession. The agent gave way ; bills on tlie money contractors in London were disposed of on credit, which, coming to the ears oi the contractors, brought forth a strong rebuke to the agent and a peremptory refusal to take any such risks for the future. This precipitated trouble in the colony, and a sort of financial crisis ensued, the particulars of which, however, do not belong to our subject. After this, for a time, the government continued to send large quantities of specie to Canada, until there was a plethora of it, and a corre- sponding scarcity of bills of exchange. About 1783 the Cana- dian merchants found it necessary to send a petition to the Treasury, praying that no more specie be sent to Canada, as the merchants there could supply all that was wanted in ex- change for bills on the Treasury. Many Canadians during this period accumulated consider- able fortunes. The prodigal expenditure in the western parts of the country in particular, enabled quite a number of Mont- real merchants to lay broad and deep the foundations of an extended trade with the western fur country and the newly established settlements in Upper Canada. The more prosper- ous French Canadians, in virtue of good prices and abundance of specie, converted considerable quantities of their private hoards into family plate, a steady source of pride and satisfac- tion while it continued in that shape, and a visible insurance against any future day of need. Much of this old plate is still to be found in Quebec province ; the people of Britain have a souvenir of it also in the shape of a considerable fraction of their national debt. During the revolutionary war English specie came to Canada for the first time in any quantity. The currency of the colony then consisted of three distinct elements— the French coins left in the colony at the Conquest, the Portuguese and vSpanish coir o introduced from the English colonies, and the EARLY HISTORY OF CANADIAN BANKING 15 British coins brought directly from England when the southern supply was shut off. These different coins were also of vary- ing valnes, according to the wear, mutilation, or sweating, which they had undergone. A good idea of the miscellaneous statf of the currency may be gathered from the following extract from the rt'port of the merchants of Montreal to Carleton in 1787, on the question submitted to them as to whether it would be advisable to attempt to bring all the gold coin of the country to a certain weight : " By the present laws '' respecting gold coin we pay considerably more than the mint " price for all Portugal gold, all guineas and French Louis '•d'lTs, and considerably less on Spanish and some kinds of " French gold, yet we apprehend that the loss occasioned by " this difference is not so great as the inconvenience would be " of altering the present rate. We are of opinion that guineas " should not be taken at 23s. 4d. unless they weigh fully 5dwts. " 8 grs., because they are at that rate about is. per oz. higher •' than in England, and to take them at a less rate would "heighten the difference and likewise encourage the sweating '• and clipping that is already too much practised. We pre- " sume that to recommend plugging coin is encouraging that " fraudulent practice of taking out good, and inserting false " plugs, and that the attempt to bring gold coin to a certain *• weight would be attended with bad consequence and loss to " the province.'' With such a plethora of specie in the colony we may natur- ally expect to hear little for some time of the necessity for paper money either in the shape of government issues, bank notes, or even hous. Indeed, had it not i een for the retrogade political and commercial movement introduced by the Quebec Act, Can- ada might at this time have entered upon a period of unusual prosperit} It was the only colony in America, except perhaps Vermont, which was intimately associated with it in commerce, which had emerged from the revolutionary struggle without debt, and in a rich and prosperous condition. Chief Justice Hey, of Quebec, who was at first inclined to favor the general scheme of the Quebec Act, after observing the practical effects upon the colony, reports to the Lord Chancellor that Carleton i)ad been n.ost injudicious in his concessions to the seigneurs, i6 EARLY HISTORY OF CANADIAN HANKING whose elation at the restoration of their old privilej^^es •' has j^iven " just oflence to their own people, and to the Englisii merchants ; " they insist that there be no alteration in the ancient laws, par- " ticularly in the article of commerce, the whole of which is in " the hand of English merchants, without whom there was not, " and will not be, any trade." While the Act remained in force there continued to be much trouble, confusion, and impediment in legal and commercial affairs. The French Canadian mercan- tile law was so antiquated and obstructive that business was immensely hampered, enterprise stifled, and the merchants dis- couraged. Even the remedy afforded by the new constitution of 1791 was very partial. Still that constitution by its permis- sive clauses brought liberty to the new settlements in Upper Canada, and as Montreal existed mainly by its trade with the northern States, the new settlements in Upper Canada and the north-west fur country, it did not suffer severely from the shackles which continued to bind the province in which it was situated. It also communicated considerable life to the city of Quebec, which, being the chief seaport of the country, likewise derived considerable advantage for a time from the timber and ship building industry which connected it with the outer world. However, as the Constitutional Act of 1791, and the begin- ning of the settlements in the western country, bring us to a new point of departure in the history of Canada, we may reserve our considerations of the currency and exchange fea- tures of that period for the next article. Adam Shortt Queen's University, Kingston •■■MMMMMlHMR'