In contrast, following the U.S. War of
Independence, Upper Canada used the York rating,
as did merchants in Montréal, for a time. This
rating had originally been established in New York
and was brought to Upper Canada by Loyalist
immigrants (Turk 1962). In York currency, one
Spanish dollar was valued at 8 shillings.
In 1796, parallel legislation in both Upper
and Lower Canada led to the adoption of the
Halifax rating of 5 shillings to the dollar in
both colonies, although ratings of other coins
continued to differ to the inconvenience of
trade between Upper and Lower Canada.
Notwithstanding this legislation, the York rating
remained in use in Upper Canada. In 1821, the
legislature reaffirmed the colony’s adoption of the
Halifax rating and provided sanctions against the
use of the old York rating. Nonetheless, there
were reports of its continued use in rural areas
until the unification of Upper and Lower Canada
in 1841
(McCullough 1984, 92).
The lack of a standard currency, and the
wide variety of ratings given to the many coins in
general circulation in the colonies, undoubtedly
hindered trade, and was a major source of
economic inefficiency. But the prevalence of the
practice suggests significant countervailing forces.
These included the weight of custom, as well as the
varying trade links among the colonies and with
Great Britain. In addition, the implementation of a
common rating would likely have led to winners
and losers, as well as to deflation in those colonies
required to reduce their ratings.
The introduction of paper money
As was the case in New France, British
colonies in North America also experimented with
paper money with mixed success, issuing “bills of
credit.” These bills, typically, although not
exclusively, used as a means of wartime finance,
were denominated in convenient amounts and
circulated widely as currency. The Massachusetts
Bay Colony was the first British colony in North
America to issue such bills of credit in 1690. Paper
money issued by Massachusetts, or “Boston bills,”
circulated in Nova Scotia during the first half of
the eighteenth century owing to close economic and
political links between Massachusetts and the
British garrison and community in Annapolis Valley,
formerly Port Royal (Mossman 2003).
Army bill, $25, 1813
Printed in Quebec City, these notes were used to pay
troops and to buy provisions during the War of 1812. At
the end of the war, the bills were redeemed in full, which
restored trust in paper money.
A History of the Canadian Dollar 15
Bills of credit were not backed by specie
and fell into disrepute because of overissuance and
high inflation in the U.S. colonies prior to and
during the American Revolution. Trust in paper
money was restored in Upper and Lower Canada
by a successful issue of army bills to help finance
the War of 1812. The initial issue was for £250,000
worth of bills, denominated in dollars, by the
government of Lower Canada; later issues raised
the amount outstanding to £1.5 million. These bills
were legal tender in both Upper and Lower
Canada. Larger bills, those with a value of $25
or more, earned interest. By 1816, after the
war ended, all bills had been redeemed in full
(McArthur 1914, 505).
Other provinces had broadly similar
experiences. Prince Edward Island (then called the
Island of St. John) experimented with paper money
as early as 1790, when the colony issued £500 of
Treasury notes to make up for a shortage of coin.
These notes were legal tender and were issued in
amounts of up to £2. Further issues followed
through the first half of the nineteenth century.
In New Brunswick, the authorities issued
Treasury notes on several occasions, first denominated in dollars in 1805 and 1807, and then
in pounds following the War of 1812. The
government discontinued such issues in 1820.
Nova Scotia also issued Treasury notes to
help finance its military expenditures during the
War of 1812. (See Martell 1941.) Although Nova
Scotia was little affected by the war, the colonial
authorities developed a taste for paper money as a
means of financing public works and continued to
issue new series of Treasury notes after the war.
The first issue was interest-bearing and redeemable
in specie at par. In time, however, the backing of
the notes deteriorated, and by 1826, the notes had
become inconvertible. The amount in circulation
also increased dramatically over time.
Island of St. John, 10 shillings, 1790
The Island of St. John, now known as Prince Edward
Island, was one of the first colonies in British North
America to issue Treasury notes.
16 A History of the Canadian Dollar
Initially, Treasury notes were well received
by Nova Scotians and were used widely. But as
their quantity increased and quality (i.e., their
convertibility) decreased, they began to lose their
value. In 1832, efforts were begun to establish a
sound currency in Nova Scotia and to strengthen
the credit standing of the province. The stock of
outstanding Treasury notes was reduced, and in
1834, all private notes issued by banks, firms,
and individuals were required to be redeemable
in specie. This sharp monetary contraction
exacerbated a serious economic downturn in 1834.
Some years later in 1861, the Colony of
British Columbia issued Treasury notes, first
seemingly in pounds and, subsequently, in
dollars. These notes, which were used to finance
public works, circulated freely, given a shortage of
minted coins.25
25. Gold dust was also used as a medium of exchange in the colonies of Vancouver Island and British Columbia following the discovery of gold in the
Fraser River in the late 1850s. The use of gold dust was open to abuse, since the dust was of uncertain quality and had to be weighed (Reid 1926).
Bank of Upper Canada, York, $5, 1830
The Bank of Upper Canada was the first bank to conduct
business at York, now Toronto. For most of its existence, it
acted as the government bank for the Province of Upper
Canada, before going bankrupt in 1866.
Montreal Bank, $1, 1821
The Montreal Bank was chartered as the Bank of Montreal in
1822. This note is from a pre-charter issue produced by the
American printer Reed Stiles and Company. The design features
Britannia with a ship, the symbol of commerce, together with a
representation of a city, perhaps Montréal. At the centre bottom
is an image of a Charles IV Spanish dollar, an indication of value
for those unable to read.
Bank of Upper Canada, Kingston, $5, 1819
One of the earliest notes issued in Canada, this bill bears an
early image of Fort Henry, built by the British to help secure
the St. Lawrence waterway.
A History of the Canadian Dollar 17
Government experiments with issues of
paper money met with mixed success in both the
French and British colonies in North America.
Typically introduced to meet the exigencies of war,
government-issued paper money was initially
well accepted by the population and helped to
facilitate commerce. But with few controls in place
to limit the circulation of notes, the temptation of
governments to rely increasingly on issues of
paper to finance their operations often proved to
be too great. Rapid increases in the stock of
paper money relative to demand led to inflation, a
growing reluctance to accept paper money
at par with specie and, ultimately, the need for
monetary reform.
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