Many persons helped to make this second
edition possible. I would like to thank Mike Bordo,
Pierre Duguay, Tiff Macklem, John Murray, and
Larry Schembri for their helpful comments and
suggestions. Special thanks go to Paul Berry, Chief
Curator of the National Currency Collection, for
his comments and assistance in choosing pieces to
supplement the story and for providing captions.
Additional thanks go to the museum staff, including
David Bergeron, Rebecca Renner, Lisa Craig, and
Gord Carter who worked with Paul to provide
the excellent illustrations.
Jennifer Devine and
Debbie Brentnell from Library and Archives
Canada were also extremely helpful in locating
and processing some of the editorial cartoons used
in this book. Lisette Lacroix, Joan Teske, Judy Jones,
and Taha Jamal provided invaluable research and
technical assistance. The superb French translation
was done by Lyse Brousseau, Sylvie Langlois,
Shirley-Ann Dulmage, Denyse Simard-Ebert, and
Andréa Pelletier, supported by René Lalonde and
Sylvie Morin who proofread the French and
English texts.
Lastly, I would like to thank Publishing
Services for pulling the project together in an
incredibly short period of time. Jill Moxley and
Lea-Anne Solomonian, supported by Eddy Cavé
and Glen Keenleyside, edited the manuscript.
Michelle Beauchamp provided the very creative
layout, and Maura Brown the comprehensive index,
while Darlene Fougere kept us all on track.
James Powell
A History of the Canadian Dollar i
Acknowledgements
ii A History of the Canadian Dollar
The history of Canada’s money provides a
unique perspective from which to view the growth
and development of the Canadian economy
and Canada as a nation. Building on an earlier
edition, this expanded History of the Canadian
Dollar, traces the evolution of Canadian money
from its pre-colonial origins to the present day.
Highlighted on this journey are the currency chaos
of the early French and British colonial period, the
sweeping changes ushered in by Confederation in
1867, as well as the effects of two world wars and
the Great Depression.
The book chronicles the ups and downs
of the Canadian dollar through almost 150 years
and describes our dollar’s relationship with its
U.S. counterpart. It also examines the forces that
led to the adoption of the dollar as our currency
during the nineteenth century, instead of the pound,
as well as the factors that led Canada to move from
the gold standard in the 1920s, to the Bretton
Woods system of fixed exchange rates in the 1940s
and, ultimately, to a flexible exchange rate regime
in 1970.
Finally, on the seventieth anniversary of the
establishment of the Bank of Canada in 1935, at
the height of the Great Depression, this book
examines the formation of Canada’s central bank
and its ensuing quest for a monetary order that
best promotes the economic and financial welfare
of Canada. While its tactics have changed over
the years, the Bank’s enduring goal has been the
preservation of confidence in the value of money
through achieving and maintaining price stability.
Introduction
A History of the Canadian Dollar 1
The First
Nations
(ca. 1600-1850)
1
The word “Canada” is reputed to come
from the Iroquois-Huron word kanata, meaning
“village” or “settlement.” It is thus fitting to begin
the story of the Canadian dollar with “money
” used
by Canada’s First Nations.2 The Aboriginal peoples
of eastern North America placed a high value on
strings and belts fashioned from beads of white or
purple shells found on the eastern seaboard. Early
English settlers called such articles “wampum,” an
abbreviation of an Algonquin word sometimes
spelled wampumpeague. French settlers called shell
beads porcelaine.
Wampum was highly valued, partly because
of the difficulty in making shell beads even after
European tools became available in the seventeenth
century. By one estimate, it took 119 days to make
a 5,000-bead belt (Lainey 2004, 18). Strings and
belts made from purple beads were roughly twice
the value of those made from white beads, since
the purple shell was much more difficult to work.
Wampum is particularly associated with the
Iroquois nations and features prominently in the
legends surrounding the formation of the Iroquois
Confederacy. The use of shell beads by the
Aboriginal peoples of the St. Lawrence River was
described by Jacques Cartier in the sixteenth
century and by Samuel de Champlain in the early
seventeenth century.
Early Europeans viewed wampum as a type
of money. A mid-seventeenth century observer
writes,
Their money consists of certain little bones, made of
shells or cockles, which are found on the sea-beach;
a hole is drilled through the middle of the little
bones, and these they string upon thread, or they
make of them belts as broad as a hand, or broader,
and hang them on their necks, or around their bodies.
They have also several holes in their ears, and there
they likewise hang some. They value these little bones
1. This section draws heavily on Lainey (2004) and Karklins (1992).
2. Anything that is typically used as a medium of exchange to buy goods and services can be considered to be money. Other functions of money include
serving as a store of value and a unit of account.
Wampum belt
As early as the seventeenth century, Native peoples
in northeastern North America used wampum belts to
record significant events. In the absence of coinage, colonists used
individual pieces of wampum as money.
2 A History of the Canadian Dollar
as highly as many Christians do gold, silver and
pearls . . . (Reverend Johannes Megapolensis, Jr., 1644
in Karklins 1992, 67).
Wampum became an essential part of the
fur trade as European settlers used shell beads to
buy beaver pelts from the Iroquois and other inland
peoples. Wampum had all the hallmarks of a useful
currency. There was strong demand for it among
the Native peoples, beads were difficult to make,
and they were conveniently sized. Indeed, for a
period during the mid-seventeenth century,
wampum was legal tender in colonial New England,
with a value of eight white beads or four purple
beads to a penny (Beauchamp 1901, 351).3 In 1792,
legislation was passed in Lower Canada to
permit the importation of wampum for trade with
Native peoples.
While useful as a medium of exchange, the
significance of wampum to the Aboriginal peoples
of eastern North America far transcended its
monetary role.
Wampum had considerable symbolic
and ritualistic value. In an oral society, the exchange
of wampum helped convey messages and was
used to cement treaties between Indian nations, as
well as with Europeans. Wampum was also
exchanged in marriages and funerals and used in
spiritual ceremonies.
By the mid-nineteenth century, the
exchange of wampum in diplomatic and other
ceremonies had fallen into disuse, although there
are reports of its use in Iroquois funeral ceremonies
into the twentieth century (Lainey 2004, 82). The
use of wampum for ceremonial purposes has been
revived in recent years.
While shell beads were also valued on the
west coast, copper shields were the ultimate
symbol of wealth among the Haida people.
High-ranking chiefs could own many shields, which
were often exchanged at increasing values at
potlach ceremonies.4 Like wampum in the east,
copper shields and other copper items were a key
element in the culture of the peoples of the northwest coast. Haida symbols are featured on the 2004
$20 note, linking our heritage to the present
