A licence to print money? The 'Panic of 1837'

EMC Lifestyle - The year 1837 was a tumultuous time throughout North America, but especially in Canada, where the economic crisis that had gripped the whole continent helped bring about armed rebellion.

One Perth family actually helped their community ride out the crisis by printing their own money. Why this came about is a little complicated, but interesting nonetheless.

In the United States, the years from 1830 to 1837 were a time of solid economic development, but also of unbridled financial speculation. Eventually, the country experienced runaway inflation. As rising inflation made paper currency virtually worthless, banks demanded payment only in hard currency, known as "specie." Under a system of specie payments, it is required by law that paper money (referred to as "scrip") be redeemed at par and upon the request of the issuing bank or government treasury in metallic coin: gold or silver.

The economies of both the U.S. and Canada depended heavily on credit, and when banks demanded payment in specie only, a dramatic deflationary backlash resulted. Several banks failed.

The economic slump spread from the U.S. to Canada, and unemployment rose as business dried up. This atmosphere of desperation helped bring about the armed rebellions against the British authorities which broke in both Upper and Lower Canada in 1837. (The rebellion in Upper Canada, led by William Lyon Mackenzie, broke out in December and was finally put down a little less than a year later.)

As conditions worsened, Canadian merchants urged the government of Upper Canada to suspend specie payments as a way of saving the province from bankruptcy. Provincial governor Sir Francis Bond Head was opposed to the idea, claiming that the banks were morally bound to pay out specie on demand as they had promised. He declared that, "Upper Canada would prefer to lose its specie rather than its character."

The Bank of Upper Canada accordingly decided on May 17, 1837 to continue specie payments. But within a few days it became clear that this policy would lead to economic ruin, and the provincial legislature was called to an emergency session at the end of June. The legislature voted to suspend specie payments and make bank notes and provincial debentures legal tender.

One result of this policy was the disappearance of silver currency. According to a chapter in Perth Remembered (published by the Perth Museum in 1967) by Dr. T.W. Beeman, "As the business of the district was conducted almost entirely by the silver currency in circulation, the sudden withdrawal of this coin from the community produced a marked effect."

At the time, currency used in Upper Canada consisted of Upper Canada Bank notes and silver coins made up of not only English and American currency, but also Spanish pieces of eight. Without coins to spend, people at first did business entirely on credit. "But this condition of affairs could not last and for a time many devices were tried to ease the situation," wrote Beeman. For example, a barber issued some tickets, printed on ordinary paper, with the words "Good for one shave."

To the rescue came William and John Bell, natives of England who came to Perth to go into business in 1827. The Bell brothers decided they would print their own paper money. Eventually they had in circulation over $10,000 worth of "scrip," printed in small denominations from six pence to 30 pence, to take the place of coins. The paper money was printed in Scotland from engraved copper plates.

Beeman wrote that, "Such was (the Bells') standing in the community that this was accepted readily on all sides, although it was not recognized in any way by the authorities."

A number of these "bank notes" survive to this day and are part of the collection of the Perth Museum. One 15 pence (shilling) note, also worth a quarter, was issued on Sept. 15, 1837, by W. & J. Bell.

The home-grown currency was in use for only two or three years, as both the economic crisis and the rebellion in Upper Canada came to an end.

Perth's Past is a regular feature exploring some lesser-known facts about the town's history that are being discovered during preparations for 200th anniversary celebrations in 2016. Next week: D'Arcy McGee's Perth connection.

Source: EMCPerth.ca