Making beaver, bank and bitcoin in Canada

Have you been to Old Montreal? 

Like its counterpart in Quebec City, it’s like walking back in time. 

Some of these buildings date back to the 1600s marking a period when the fur trade was king and Montreal was a center of that universe. 

And if you head down to St. James Street, you can see the original headquarters of our first bank. The Bank of Montreal HQ was built in the mid-1800s. 

But hidden under the magnificent architecture of the old city is a wild and crazy monetary history. 

Canada may be a young country, but we have more than 400 years of monetary value discovery under our belts.

Part of that history involves wampum, beaver pelts, and moose hides. It involves wheat and coins referred to as specie. There are several episodes of card money. 

And all of this got me thinking about the crypto experience so far. 

Frankly, it’s been a wild ride. And when you look back two, three, four hundred years, you see that wild rides are part of the package. 

And what you discover about money in Canada is that it’s something more than a simple piece of paper.

A pile of loose Canadian change and a 5 cent coin with a beaver in the middle. Image courtesy of Pina Messina at Unsplash.

Early Canada had several monetary eras 

Canada has numerous different monetary periods. Our story here starts with the arrival of the French in 1608. So the first period runs from 1608 to1760. The French period had almost everything, including pelts, skins, coins, card money, shells called wampum, and even wheat. 

The French period corresponds with numerous wars and John Law’s infamous Mississippi Bubble

In 1760, the British took over, and that period ran until the British North America Act of 1867. This period has coins until the first bank in 1817. Then banks start issuing their own notes until the BNA Act. 

In 1841, Upper and Lower Canada were combined into the Province of Canada. And 1842 was when a legal value for British, American, and Spanish coins in the Province was determined. 

In the 1850s, a decimalized Canadian currency existed in parallel with British coins. 

Then as of 1858, Canadian dollars were priced in relation to British gold sovereigns. US, British, and Canadian coins were all legal tender, but all others were excluded. 

The dollar went off and on the gold standard a couple of times before we had our very first central bank. 

What is intriguing is the evolution of money and exchange across time. When we look back through history, we see numerous solutions. Sometimes there are numerous solutions interacting simultaneously. 

Some of these fail. Others came and went. 

Although, at first, you Made Beaver. 

Make Beaver

Economic historian Adam Shortt described the role of Beaver pelts in his series on The Early History of Canadian Banking, published by the Canadian Bankers Association in 1898. 

In his book he said, 

“The dealings with the Indians took the shape of direct barter, and the product of that trade passed to the company in exchange for other goods for sustenance and barter….To meet this need there was one article of universal acceptance which answered all the purposes of a medium of exchange, except for small currency, and that was the beaver skin.” 

So starting with the arrival of the French back in the early 1600s, you Made Beaver. 

The story goes that beaver hats became a thing in Europe in the late 1500s. Canadian beaver skins replaced a dwindling supply from Eurasia. The skins were exchanged by native trappers for goods from Europe brought by the French.

Beaver skins were a sort of standard versus all other skins at the time. Yes, even moose hides were legal tender for settling debts in 1684, and of course, there were other furs. 

Which got me wondering, what was a beaver worth in terms of traded goods?  

In one record, “1 Made Beaver” (1MB), or one adult male skin, could be exchanged for a variety of goods. For example, 

1MB = 1 1/2 pounds of gun-powder

1MB = 1 brass kettle

1MB = 2 yards of flannel                

1MB = 1 pair of breeches

1MB = 1 pair of shoes

1MB = 20 flints                                 

1MB = 2 pair looking glasses

1MB = 2 hatchets

1MB = 1 blanket 

1MB = 2 shirts        

A pistol or a musket would cost you a bit more.            

4 MB = 1 pistol

11 MB = 1 musket

Values of 1MB varied based on factors including seasonality, demand, and supply. 

Throughout Canada’s early history up to the 1860s, the beaver pelt was a staple of early Canadian trade and exchange.  

Make Card? 

Under French rule, there was also card money. We aren’t talking about hockey cards here but playing cards. 

The necessity for card money was the constant outflow of specie (coins) for goods from France. The colony was small, but all the coins that came would leave to cover supply from France, leaving the colony barren for internal trade. 

So to pay the troops, they came up with a card money scheme. Playing cards were divided into four parts representing different values. These would be redeemed by the state. This worked for a while. 

Although card money was restricted by edict, it was subject to counterfeiting, which worried the French government. 

Each time card money was suspended, the value of the cards depreciated for redemption. 

These card money schemes were used from 1685-1719, 1729-1749, and from 1750-1760. In almost every case, the final result was significant depreciation at the end of its term. 

The French period was punctuated by war, strife, and scandal in the home country. This necessitates frequent monetary experiments, revaluations, and new money schemes.

Throughout, coinage was moving in and out of the colony. These coins were from South America, The United States, and some from Europe. 

And one must bear in mind that during this time, there was no gold standard. And, of course, there are no banks in the colonies. This entire period prior to the founding of the first successful bank in 1817 was just pure trade between individuals, state representatives, and various merchants. 

You could issue a promise to pay in any form

When the British took over in 1760, there was no more paper money, at least initially. The only money that existed in the precursor to Canada was specie, as they referred to it. 

And British coins were used as a standard, but again, all sorts of coins existed from other nations. These were freely exchanged between individuals. 

B.E Walker, writing A History of Banking in Canada in 1899, stated that “In Canada we began with the very simple and obvious theory that, without the existence of laws to the contrary, an individual had the right to issue his promise to pay in any form, the only deterrent to the exercise of such a luxury being the difficulty of inducing anyone to accept it in payment.”

Prior to 1810, you could also counterfeit with impunity, which is why Canada became a haven for US counterfeiters. But in 1810, the government put a stop to this.

Here is how Roeliff Morton Breckenridge describes the penalties for forgery in the 1800s. 

“For forging the common seal of the bank or its bonds, bills, and obligations, or for passing them, knowing them to be forgeries, the penalty was imprisonment for not less than six months nor more than six years at hard labor, with the picturesque options, in the discretion of the court, of a public whipping or of standing in the pillory.”

And then there was this: 

“But for making or engraving plates or tools for counterfeiting the bills of exchange, promissory notes, undertakings, or orders of the bank, the punishment provided was death as a felon without benefit of clergy. ” 

The early 1800s also brought another first, the first Canadian banks. 

Make Bank

The Bank of Montreal came on the scene in 1817. The founding name and location were natural, given the long-standing role of Montreal as a fur trading hub. The trade in furs tied together a relationship from Montreal down to Albany, New York. This relationship was said to have had a direct influence on early Canadian banking rules. 

The bank was sort of official when it was founded because it wasn’t granted a charter until 1821. It received royal assent the following year. 

Other banks also popped up in Nova Scotia and parts of Upper Canada.

Now, the thing about these banks was that they could issue their own notes based on a Provincial Charter. Those notes could be exchanged at other banks. However, notes from other institutions might receive a discount or be refused. 

And for several decades, every bank essentially issued and redeemed its own paper. They were required to keep a certain amount of reserves on hand, including a defined amount of coins of specie. 

They had numerous restrictions on their lending activities, for example, no real estate. 

After 1867, the Bank Act was put in place, and there was a single national currency. And banks were provided with a significant economic incentive not to issue their own paper going forward. 

Canada on the gold standard

Canada’s currency was officially started at the beginning of 1858. The Canadian dollar was set at 15/73 of a British gold sovereign. This was changed in 1910 to one Canadian dollar being priced in fine gold, or the gold equivalent of the US dollar. 

The Canadian dollar was taken off the gold standard at the start of World War I until 1926. After a brief period back on the standard, it was removed for good in 1929. 

So when you hear people talking about the gold standard, in our 400 years of monetary history, our experience with the idea was for around 60 years. Prior to this, circulating gold and silver coins were discounted or received a premium based on a whole host of factors. 

Since 1929, the Canadian dollar has floated freely except during the war from 1939-1950 and for the period from 1962-1970. Here the dollar was fixed at a discount to the US dollar in an effort to promote growth. In 1970, it was returned to a free float. 

For much of the last several decades, we’ve traded at a discount to the US Dollar. With a brief foray to par and above around the period of the financial crisis. 

And that was heavily influenced by our ability to export an abundance of raw materials to the rest of the world, minus the beaver skins. 

Money is a continuous experiment 

Throughout the Canadian experience from New France to Upper and Lower Canada, there was a constant tug and pull with currency. 

Many different currencies were used. Forms of currency were sometimes discounted and revalued. This was to influence flows in and out of the home country.  

Sometimes certain coins were valued more in one location than another. And the value of coins could fluctuate based on the existence or lack thereof of tradable goods. 

Some coins could be used in one period and were no longer legal tender in another. 

And the history of the 1600s through the 1800s was filled with frequent innovative arbitrage schemes. Certain forms of currency were more desirable than others for different items under different circumstances. 

Throughout much of Canada’s early history, the lack of a consistent presence and flow of money was an ongoing issue. 

And the changes in the values of currency over time were transmitted back and forth from what today would be the equivalent of another planet. Today you can speak to someone in France in real time. Then, you had to wait for the next wooden ship to sail across the Atlantic to get your currency price change. 

From Making Beaver to Bitcoin

When you read the writing from the 1890s, it has a sense of clarity and matter-of-fact to it. You get the idea that money is malleable, contextual, situational, and evolving. It has an organic quality to it. You can see how different solutions can coexist simultaneously. 

And this is an important thing to consider right now. 

Because the financial system has something brewing. 

Recalling the story of John Paulson getting short for the implosion of the liar loan situation in 2007, I remember him talking about what happened. He was early, but even though he was right, the entire situation was wildly unpredictable. The timing was difficult. The outcome became erratic. 

Imagine the US government suspending short selling in financials. A lot of crazy unthinkable things happened, making even being right difficult to execute. 

But our national ancestors had a whole lot of crazy too. 

Now, if we look back over 400 years, we can see how people dealt with currency challenges. Some of these were in new frontiers. Others during war and strife. Sometimes there was more than one authority. 

Different instruments were used, like beaver skins, bank notes, cards, and various kinds of coins. People’s use flowed between options based on necessity and sometimes in the absence of strong central authority. 

Now we have bitcoin and lots of other crypto options.

And with crypto has come a belief that the dollar will experience another evolution and be replaced.  

But what if the future is more subtle than that?

Maybe the future has more options, where no one option becomes a central point of failure.

Now the question is, what will that look like? . 



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