Historical Sketch

In the 16th century, French settlements were founded on the east coast of Canada, from which the colony of New France was formed. Around the same time, England took possession of the island of Newfoundland. After the Seven Years' War, Britain took over the French possessions in 1763 and created the four colonies of Nova Scotia, New Brunswick, Lower Canada (Quebec) and Upper Canada (Ontario). Shortly afterwards, Prince Edward Island was separated from Nova Scotia. The consolidation began in 1841 with merger of Upper and Lower Canada into the Canada Province. It then united with Nova Scotia and New Brunswick to form the independent Canadian Dominion in 1867. The continental expansion continued with Manitoba and the Northwest Territories (former Rupert's Land) in 1870, British Columbia in 1871 and Prince Edward Island in 1873. Only Newfoundland remained British for the time being. It finally joined Canada in 1949.

Monetary History Overview

French accounting was applied in all possessions in America by law of 1670, and French coins became current. The scarcity of specie quickly led to an overvaluation, and in consequence, the 1672 currency law created the French Colonial Livre as a distinct unit of account at 75% of the metropolitan French Livre (of Tours). In 1726, the ratio was lowered to two thirds. The scarcity, even absence, of coinage also triggered the creation of substitutes made from playing cards. The government tried to withdraw the emergency money and to issue French silver coins instead. But as they quickly disappeared from circulation the substitute money came back and remained until the transition to British rule. After the British take-over in 1763, the scarcity of specie continued, so that each of the four colonies issued local ratings for the circulating foreign coins. Several colonial governments authorized the issuance of treasury notes to overcome the money shortage. During the mid-19th century, the colonial accounting systems all converged on a common rating of 5 Shillings to the US Dollar in gold, so that the Canadian Pound which the Canada Province had created with the 1841 currency act might have become a common currency standard. However, the colonial accounting systems all differed slightly in the rating of the British currency. During the 1850s, the decimal system after the model of the United States was introduced everywhere. The Canada Province adopted the Canadian Dollar in 1854. Two years before, the New Brunswick Dollar had been created, and Nova Scotia followed in 1859. The remote territories of Newfoundland and Prince Edward Island went decimal in 1865 and 1872, respectively. The three currencies of Canada, New Brunswick, and Prince Edward Island were in fact identical, with the same rating of the British Pound at 4.867 Dollars, while the other parities were 4.80 Newfoundland Dollars and 5.00 Nova Scotia Dollars. To add to the confusion the western colonies of British Columbia and Vancouver Island came up with their own with a rating of 4.85 British Columbia Dollars in 1863. The 1872 Uniform Currency Act began to put an end to the currency varieties. The standard of the Canadian Dollar was adopted by New Brunswick and Nova Scotia and was to be applied to the inland territories that had not introduced their own currency legislation before. The scope of the act was extended to British Columbia and Prince Edward Island in 1882. Since Newfoundland had not joined the Dominion of 1867 yet, it did not adopt the Canadian currency. However, the Newfoundland Dollar was slightly revalued in 1895 to be on par with the Canadian Dollar. Paper money issuance had always been dual in the different Canadian territories with state treasury notes and private bank notes circulating alongside. The initial free banking system was restricted by the Bank Acts of 1870 and 1893, after which private note issuance was regulated. The Department of Finance, acting as a de facto currency board after 1870, took responsibility for the state issuance until the Bank of Canada began operations in 1935. In 1944 the central bank finally obtained the monopoly for paper money, and the private bank notes had to be withdrawn by their issuers until end 1949. In August 1914, Canada suspended the gold standard, and the Dollar fluctuated around parity with the US currency. It took until July 1926 that gold parity could be restored at the pre-war parity, but had to be abandoned again in 1933. With the outbreak of World War II the Canadian currency got pegged to the US Dollar, and the 1946 up-valuation re-established parity between the two for a short time. In September 1949, the Canadian Dollar got devalued again by 10% against US currency, and in October 1950 the exchange rate was set to float. For the period of 1962-1970 the fixed parity system was revived but abolished for good afterwards. In the 1980, the Dollar began to depreciate against the US currency and lost about 25% of value until the early 2000s. The subsequent recovery almost restored parity with the US Dollar in the early 2010s, but since then the Dollar has depreciated again by around 20%.

Canada joined the International Monetary Fund (IMF) on 27.12.1945 as a founding member.

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