Silver nuisance
From Wikipedia, the free encyclopedia
The silver nuisance was an economic issue in mid-19th century Canada, specifically in Ontario and Quebec. American fractional silver coins were exported to Canada in great quantities, where they were used for day-to-day transactions due to a shortage of small coins. However, their bullion value was lower than their face value in gold, and they were not accepted by banks and some merchants, or only at a discount.
The silver nuisance was solved by the government's exportation of American silver coins from 1868 to ~1870.
US silver fractional coins circulated in Canada during the mid-19th century.[1] They started being exported to Canada some years before the American Civil War.[2] The circulation of US coins increased greatly during the American Civil War as silver was used by Union army agents to buy Canadian grain and cattle. A substantial volume of US silver coins was also imported by Canadian brokers,[1] and a common scheme involved exporting American silver coins to Canada and buying gold.[2] Many silver coins were also imported in Canada after specie payments was suspended in 1862 in the US[3] to be replaced by greenbacks.[4]
US coins were initially well-received due to a scarcity of small coins for day-to-day transactions, which generally amounted to less than one dollars. They were preferred to the 1858 Canadian 20-cent coin due to familiarity.[1] They overtook British silver in popularity during the 1860s.[4]
While merchants and individuals accepted American silver coins at par, the silver that made fractional coins was worth ~2,5% less than the coins' face value[1][4] in gold after the American revaluations of 1853.[4] Banks thus only accepted these coins at a discount in mid-1862,[5] and then refused to accept them at all.[i][1][4][5] This was problematic for merchants who continued using American silver coins because of competitive pressure, lack of alternatives and customary acceptance of US coins at par.[1]
Many merchants, especially in Western Canada, eventually also started refusing American fractional coins or only accepting them at a discount to protect themselves. In 1863, the Post Office started to only accept American silver coins at a discount.[4]
This was mainly a problem in Ontario and Quebec, as the Atlantic colonies discounted US coins at 80% of their face value by law.[1]
