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Canada's Playing Card MoneyA historical parabola on inflation and deficit spending |
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Canada's Playing Card MoneyA historical parabola on inflation and deficit spending |
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1 |
Scarcity of coins in the French colony |
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| Metallic coins were hard to find in Canada. People hoarded the coins and paid in hides. | Part of what we call today "Canada" was french until 1763.
The king of France used to send a Governor that administered the colony with some civil
servants and soldiers. Trade within the community was limited because of the scarcity of
means of exchange, namely, coins. Earlier trappers used hides as money, but the people
that came from France regretted the so practical metallic money used in their country. The
problem was that, as in other colonies, metallic coins had a tendency to leave the colony
very soon or disappear. People, in accordance with Gresham's Law, hoarded these rare
coins, not willing to give them away to pay for goods unless forced to do so ;
furthermore, if they wanted to buy manufactured products from France, they had to pay in
coins. Thus often coins sent at great expenses left Canada by the same boat on which they
came. All kinds of things were tried to retain the coins on the colony's territory, but
none succeeded.
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2 |
Why not just print money ?
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| The boat that brings the troop's pay is late. The Governor decide to issue fiat money, using playing cards. | A break occurred in 1685. The annual boat that brought goods (including
a load of metallic coins) from France usually came in the Summer, but this year he only
reached Canada in January. The coins were meant to pay the troops, and thus the soldiers
had waited for 8 months ! The Governor, having tried everything possible, like feeding the
soldiers on credit, letting them work for peasants...) decided to requisition all decks of
playing cards in the colony. He then had each card cut in quarters, wrote a monetary value
on each, signed and stamped them. Then he let it be known that these cards had to be
accepted in payment for anything that was for sale in the colony, without any raise in
prices. The soldiers were paid with these cards, and the merchants wily-nilly accepted.
When the boat arrived each and every card was exchanged at par against metallic coins in a
week.This was an emergency solution, and had worked fine. All the card were destroyed
after the conversion, and life returned to normal.
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3 |
It worked so well the first
time
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| The Governor use this trick every year, issuing more and more cards each time. | But the problem was recurrent, and soon the story began all over again,
and repeated itself year after year, notwithstanding the "strong disapproval" of
the King. Sometimes paper was used instead of playing cards (which had become hard to
find), and this system could have given Canada an efficient monetary system, were it not
for the excessive emissions. After 1690, the card emission had become annual. Around 1706
the exchange of cards against coins was already random, the King being less generous with
this colony that brought him so little. Several years of arrears grew, and cards exchanged
at a third of their nominal value, when merchants accepted them altogether ! Emissions
multiplied, leading to a 400% inflation in 1713. After several unsuccessful attempts to
convert the outstanding cards in real values, the governor almost stopped the emissions of
new cards. French Canada began to suffocate by lack of money (as a mean of exchange, not
as standing for resources). People tried to cope with credit, bills of exchange and other
IOU's. In fact money was so badly needed that in 1729 merchants sent a petition to the
king to reintroduce the playing card money. He accepted and the cycle began again, leading
to strong inflation and ultimately loss of trust in paper money, especially in 1755 during
the 7 years war against the English. Inflation and fear of repudiation of any form of
paper money became chronic. Peasants refused to sell their goods for anything other than
metallic coins, shopkeepers raised their prices every week. Metallic coins still
disappeared, as people hoarded them to protect them from requisition from the government
who needed them to buy grain.The playing card money was over.
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