Following up a few months later on one of the very first articles I ever posted to The Basement Geographer, I bring you another tale from the realm of off-beat currency. This one comes from all the way back in 17th century Canada, known then as New France. In the early years of the French colonial presence in North America, the barter system was used. Previous to 1664, one was more likely to trade using beaver pelts than use paper or minted currency. As the colony grew and its economics became more complex, legal tender became more of a necessity. Upon achieving full royal colonial status in 1664, the first official currency in New France was naturally the French livre. While paper money was easy to ship to France, the perils of transporting gold and silver across the Atlantic in those days was considered too great to do it in large volumes, meaning the there was a general shortage of coins in the colony, as well as a shortage of gold and silver in the treasury. The valued coins were at a premium in New France, being initially valued one-eighth higher than coins in France, but rapidly inflating in value to one-third higher than in France by 1680.
While the amount of gold and silver that could be transported per trip to New France was small, it was initially enough to keep the economy flowing properly. By 1685, however, battles against insurgent Iroquois allied to France’s English rivals, as well as declining tax revenues caused by fur traders taking their products to the black market led to a shortage of government funds. The colonial authorities could face a revolt from their military soldiers if the soldiers were not paid on time. Not willing to take on outside financing or borrow from local merchants, New France’s Intendant of Justice, Police, and Finance, Jacques de Muelles, came up with a rather unique solution that was intended to be a stop-gap measure, but ultimately lasted in one form or another for the rest of the colony’s rule under France. De Muelles simply wrote notes on the back of playing cards authorising their use as a temporary form of currency until a new shipment of coins arrived, at which point they could be redeemed for the real thing. Depending upon the value of the card, it would often be cut in halves or in quarters, or perhaps a corner would be removed to easily identify it. A whole card was worth 24 livres; a card with the corners cut off was worth 12, and so on depending upon the size of the fraction.
The scheme actually worked for the first couple of issues (about three months apart), as merchants and the public picked up the custom of using the new impromptu currency rather quickly. Eventually, though, word got back to France about the card money, and authorities there were not pleased at all: 1) the colonial government did not have the authorisation to independently issue currency, as this represented a loss of national budget control and an artificial increase in the amount of money in circulation; 2) the colonial government certainly didn’t have the authorisation to issue it on something as easy to counterfeit as playing cards.
This didn’t stop the use of card money; the constant revenue shortfalls of the New France colony thanks to the Intercolonial (French and Indian) Wars meant that every few years, a new issue of card money would be released by one of de Muelles’ successors. France actually benefitted in a way at first, since it was no longer obligated to send gold and silver coins across the sea. The downfall, however, came as the colonial government kept issuing more and more card money with nothing to back it, sending inflation through the roof as the colony became flooded with card money. Since the card money was still being redeemed for coinage at face value whenever new coins made the voyage across the Atlantic, this simply served to drive up the prices of goods in New France. In 1717, the decision was made to remove the card money from circulation at half-value and switch completely to the French numismatic system of coins and paper money. By having their money redeemed at half-value, residents of New France suddenly found themselves with only half of the savings they had previously. This meant residents weren’t spending as much, which meant the colonial coffers were not taking in as much tax revenues, which meant that the government once again had to resort to – you guessed it – issuing card money. This time around (1729), it wasn’t issued on the back of actual playing cards but in the form of promissory notes printed on playing card stock.
Over time, people just began hoarding their gold and silver as they lost faith in the card money. France simply began issuing treasury notes across the Atlantic rather than gold and silver; eventually treasury notes and card money morphed into being one and the same. By 1759, there were 41 million livres circulating in a population of just under 70 000, with approximately the same amount of money existing in the forms of unpaid Bills of Exchange back in France. The card money and (increasingly) treasury paper continued to circulate right until the takeover of New France in 1763 by Great Britain, after which the colony was reborn as the Province of Quebec. Negotiations with a nearly bankrupt French government over the fate of the notes resulted in the final conversion of the money into interest-free debentures at a 50-to-80 percent discount. Of course, the French government had no money to back up the debentures, and by 1771 they were all worthless. The colony by this point had switched to the British pound.
Some libertarians enjoy throwing this example around as a warning against the dangers of employing floating currency over the use of a gold standard (which says nothing about the dangers of employing a monetary standard based on the artificially derived value of a single metal produced in finite numbers, which would inherently limit the supply of money in the economy, which forces people to hoard money and gradually lessens the amount of money in the system over time, causing deflation – in other words, it’s not the system, it’s how you manage it). It is certainly one of the classic examples of a government mismanaging a financial system by attempting to use quick-fix measures to solve long-term economic problems.
You can find a gallery of images of New French card money at Numismondo.
Historica-Dominion (2010). Playing-Card Money. The Canadian Encyclopedia. Available at http://www.thecanadianencyclopedia.com/index.cfm?PgNm=TCE&Params=A1ARTA0006342. Accessed 26 December 2010.
Powell, J. (2005) New France (ca. 1600-1770). In A History of the Canadian Dollar, 3-10. Ottawa: Bank of Canada. Available at http://www.bankofcanada.ca/en/dollar_book/1600-1770.pdf. Accessed 26 December 2010.
Saint, G. (2006). New France Paper Money – Playing/Card Money, Ca. 1685-1857. Numismondo. Available at http://numismondo.com/pm/can/col/. Accessed 26 December 2010
Simpson, N. (2003). Colonial Cash: A New Meaning for ‘Cash Cards’. Canadiana, 11 April 2003. Available at http://www3.sympatico.ca/goweezer/canada/cashcard.htm. Accessed 26 December 2010