People, and besides the usual profits, acquired added gain by the easy process of buying up the People's notes, really their own, at the discount in Lower the specie rate, the selling rate in one province being always compared with the selling rate in the other, or the buying rate with the buying rate. Canada, and remitting them to the Upper Province for re-issue. The restraint imposed by the mutual competition of the banks was exercised through the weekly exchanges carried on between them. Now a regular redemption effectively prevents inflation of a bank note currency, and imposes upon the participating banks, if they are to continue in existence, the necessity of prudence in their conduct. The experience of New England with the Suffolk banking system has proved this and proved it for all time. The power to refuse at the counter the notes of a suspended bank was a power of coercion. The Bank of Upper Canada employed it to enforce the settlement of the weekly balances in exchange. In Lower Canada, also, the specie payment of balances could not be exacted, and notes could not be received because they were not redeemable. But redemption was obtained notwithstanding. The debtor banks were forced to hand over in settlement some of their best discounted paper. And these notes were redeemed in due time by the makers, leading export merchants, by sterling bills drawn against shipments of grain, potash, ginseng and timber. The good effects of their careful policy, and the restraints imposed by law, by circumstances and by their mutual competition, were evident in the strength and stability of the banks, as well in the depression that followed the crisis as in the revival of commerce and agriculture that finally came. The four factors have served now to explain the moderate dividends paid during the suspension, because in 1837, 1838 and 1839 they served to prevent an immoderate expansion. With this in their favor the banks found the resumption comparatively easy, the country, innocuous. $16.-INCIDENTAL DETAILS The government of Upper Canada was in far worse straits during the suspension than the banks. It was reduced to the negotiation of its debentures through the local banks, who remitted the securities to various English houses, and drew sterling exchange against them. The proceeding provoked the protests of the Barings, across whose counters the interest was payable, and who objected, as they wrote, to "having our names inscribed on stock, the issue of which had not our previous knowledge and consent." Various proposals to issue inconvertible notes for circulation on the credit of the government were defeated in 1837 and 1838. In reply to Sir George Arthur's letter of the 20th November, 1838, Lord Glenelg advised him that it was impossible to grant him provisional authority to give the royal assent to an enactment permitting the issue of such notes, even though the proceeds were intended for public works or local improvements. The second financial measure of 1839, however, was an act authorizing the issue of Treasury notes for £1 each to the amount of £250,000 stg. Concerning this act Lord John Russell wrote to the Governor-General: "Her Majesty cannot be advised to confirm it. The issue of such an amount of small, inconvertible currency, as a resource for sustaining the public credit, is not to be justified even by the present exigency of affairs. 2 ** * * * * "It is of great importance that the scheme devised to meet the pressure of the passing day should not be such as to preclude the early return to a more salutary course of financial operations." 'Journal, U. C., 1839, Appendix, vol. II, part ii, p. 547. 2 Ibid, p. 553, Letter of the 31st January, 1839. "Journal, Can., 1841, p. 395. It had been necessary, some time previously, to authorize the Receiver General to secure a loan on the government's stock in the Bank of Upper Canada. (1 Vic., cap. 1, U. C., assented to 6th March, 1838.) In 1840 the act was repealed and the Receiver General authorized to sell the stock, with the sanction of the Governor-in-Council. Since 1822, the province had received in dividends and bonuses £38,315 on its subscription to 2,000 shares of the par value of £25,000. It received in 1840, £25,250 for its stock.2 The authority of the Lieutenant-Governor annually to nominate four of the fifteen directors was repealed, and the Bank of Upper Canada lost, in law, its official connection with the government. This was one of the measures preparatory to the Union of the Canadas, the constitutional change which, since the restoration of peace, had been undertaken as the plan most likely "to relieve the financial embarrassments of Upper Canada, to enable her to complete her public works, to enable her to develop her agricultural capabilities, to restore constitutional government to Lower Canada, to establish a firm, impartial and vigorous government for both, and to unite the people, within that one common feeling of attachment, to British institutions and British connection." On the fifth of February, 1841, the disappearance of the Upper and Lower Provinces, the birth of a new Province of Canada, the creation of a common legislature and the completion of the political 1Journal, Can., 1841, Appendix O. 2 Ibid, Appendix B. Journal, U. C., 1839-40, p. 17, Message of His Excellency the Governor-General, dated the 7th December, 1839. |