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The silver nuisance and a question of copper
During the mid-nineteenth century, U.S. silver fractional coins—dimes, quarters, and half-dollars—circulated freely in Canada, alongside British shillings and, after 1858, Canadian coins minted by the Province of Canada. U.S. coins in circulation increased significantly during the U.S. Civil War (1861–65), as U.S. Army agents used silver to purchase Canadian grain and cattle to supply the Union Army. A substantial brokerage business also flourished, with Canadian brokers importing large quantities of fractional U.S. silver coins.

(United States, half-dollar, 1859
Images representing Liberty figured prominently on American coins during the nineteenth century. Here, Liberty is a young woman seated and holding a staff topped with a Phrygian cap, a symbol of freedom, with a shield at her side emblazoned with the stars and stripes and a sash reading "Liberty.”)

Initially, the U.S. silver, while not legal tender in Canada, was well received because of a shortage of small coins for small transactions; day-to-day transactions typically involved amounts less than one dollar. Canadians also preferred the U.S. silver quarter over the Canadian 20-cent piece issued in 1858, given their familiarity with U.S. coinage. But, although U.S. coins were accepted at par by individuals and merchants, their bullion value was approximately 2.5 per cent less than their face value. Consequently, as the amount of U.S. silver coins in circulation began to increase, banks either refused to accept them or accepted them only at a discount. The acceptance of U.S. silver coins at par by merchants and individuals but only at a discount by banks was a considerable nuisance, especially for merchants. They were, nonetheless, willing to tolerate the practice because of competitive pressures, the customary acceptance of U.S. coins at par, and the lack of an acceptable alternative. This problem was largely confined to the Province of Canada—Ontario and Quebec—since the Atlantic colonies had passed a law valuing U.S. coins at only 80 per cent of their face value.

20-cent or 25-cent coin?

In 1858, the Province of Canada issued silver coins in denominations of 20 cents, 10 cents, and 5 cents, in addition to 1-cent bronze coins. The Toronto Leader, a newspaper linked to the government, argued that a 20-cent coin was a logical choice since it was consistent with the Halifax shilling, and five Halifax shillings equalled one dollar. The newspaper also contended that a 25-cent coin was just a "convenience of habit” and was not a necessary feature of a decimal coinage. Regardless, Canadians disliked the 20-cent coin since it was easily confused with the similar-sized U.S. quarter. William Weir noted, "I never heard what fool in the Finance Department suggested the twenty cent piece, for in spite of the special pleading of the Leader, everyone saw it was a mistake . . .”. The 20-cent piece was withdrawn from circulation after Confederation and replaced by a Canadian quarter, first minted in 1870.

William Weir, 1823–1905

Born in Greenden, Scotland in 1823, William Weir emigrated to Canada in 1842. He initially worked as a teacher near Lachute, Quebec, and, after learning French, moved to Montreal to work in a large wholesale and retail business. In 1847, Weir struck out on his own, first as a commission merchant and later as an exchange broker. Moving to Toronto in 1856, Weir came to prominence as publisher and editor of the Canadian Merchants’ Magazine. He also became an early proponent of protection for Canadian maufacturers, a policy later adopted by the Conservative Party under the leadership of Sir John A. Macdonald and known as the National Policy. Weir returned to Montreal in 1859 and operated the brokerage firm Weir and Larminie. Weir is best known for his involvement, along with Sir Francis Hincks, in dealing with the "silver nuisance” in 1870. Weir later became vice-president of the Banque Jacques Cartier. In 1881, he became general manager and cashier of
the Banque Ville-Marie. In July 1899, the Banque Ville-Marie failed because of fraudulent lending by Weir to himself and his friends. Even after its closure, the Bank continued to issue bank notes. With notes the first charge on the Bank’s assets, note holders were well protected from loss. Depositors, however, received only 17 1/2 cents on the dollar. Total losses amounted to roughly $1.5 million. Weir was subsequently prosecuted and went to jail for two years. It took a jury just 15 minutes to convict him.

With the discount on silver relative to gold widening in the mid-1860s, there were appeals to Parliament to do something. In 1868, the new Dominion government exported $1 million worth of U.S. silver coins to New York through the Bank of Montreal. But this move was insufficient. The following year, William Weir, an important Montreal financier, exported a further $2 million. Weir assumed the market risk associated with a possible adverse move in the price of silver, as well as the costs and risks associated with transporting the silver to market in New York. In 1870, Weir, backed by merchants, negotiated a deal with Sir Francis Hincks, the Dominion Finance Minister, to eliminate the remaining U.S. coins circulating in Canada. Despite considerable resistance from brokers who stood to lose business, it was agreed that banks would purchase and collect the unwanted silver coins, paying for them largely with their own bank notes. They would also receive a small commission from the government, as well as a government deposit of up to $100,000. The government assumed the transportation costs and market risks of exporting and selling the coins for gold. In total, the government shipped to New York and to London slightly more than $5 million in coins, sold at a discount of 5 to 6 per cent, at a net cost of roughly $118,000. Weir himself exported a further $500,000 in U.S. silver coins, as well as a considerable amount of overrated British silver coins that were also in circulation.

(Weir tea service, 1880
In recognition of his efforts to help remove depreciated American silver coins from circulation in Canada, William Weir was presented with this sterling tea service in 1880. Manufactured by R. Hendery, a prominent silversmith in Montreal, it incorporates various silver coins and is part of the National Currency Collection, Bank of Canada.)

The government took immediate steps to replace the foreign coins with an issue of Canadian silver coins in denominations of 50 and 25 cents that would be legal tender in amounts up to $10, as well as issues of $1 and $2 notes. As a temporary expedient to supplement the coin issue and meet the needs of commerce, the government also issued 25-cent "shinplasters,”51 redeemable in gold. To ensure that depreciated U.S. silver did not flow back into Canada, the government also passed legislation stating that after 15 April 1870, U.S. silver coins were legal tender in Canada at a 20 per cent discount, a rate far below their bullion value.

(Dominion of Canada, 25-cent fractional note, 1870
Although created to facilitate the removal of depreciated American silver from circulation before the arrival of the Dominion’s first coinage in 1870, the shinplaster became popular and was issued until the end of the century.)

After settling the silver nuisance, the government turned its attention to the reorganization of Canada’s copper coinage, which was also in disarray. Prior to Confederation, Nova Scotia, New Brunswick, and the Province of Canada had all issued small-denomination copper coins, as did Newfoundland. However, large quantities of token copper pennies issued by banks based on the old pre-decimal system were still in general circulation. A wide range of European and U.S. copper coins also circulated freely, along with private tokens issued by merchants or individuals, and even brass buttons.

In 1870, at the prompting of Weir, Hincks authorized the government to accept bank-issued pennies and halfpennies as 2 cents and 1 cent, respectively, in amounts up to 25 cents, and encouraged banks and the general public to do the same. It was not until 1876 that the Dominion of Canada issued its own 1-cent coin.

The removal of U.S. and British silver coins from circulation in Canada, along with the reorganization of Canada’s copper coinage, did much to promote the circulation of a distinctive Canadian currency.

(Dominion of Canada, 5, 10, 25, and 50 cents, 1870
The Dominion of Canada’s first coinage consisted of these four denominations. It was modelled on the provincial issue of 1858. One-cent coins were not ordered until 1876, since there were still adequate numbers of provincial cents on hand.)

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Category: 1841-71 | Added by: gogoshvab (2010-02-18)
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