The Newfoundland Treasury Notes of 1920.

Newfoundlanders had very little faith in paper money at the dawn of the 20 th Century. In December, 1894, both of their banks – the Union Bank of Newfoundland and the Commercial Bank of Newfoundland – crashed, to the near ruin of the province. The former bank, with notes in circulation totaling $722,000, was able to redeem them at 80-cents on the dollar but the Commercial Bank, with $659,000 outstanding, for only 20-cents per dollar. The loss, naturally, fell on the holders.

Immediately, the main Canadian chartered banks – Royal, Montreal, Nova Scotia and Commerce – set up shop and their notes became the paper currency of Newfoundland, but only after the “Newfoundland Dollar” (at 100/480 th of a pound sterling) was brought into line with that of Canada (a devaluation to 1000/4867 th of a pound sterling).

For the next couple of decades, these notes of the chartered banks formed most of the circulation of paper money, although it was supplemented on a virtually yearly basis by "Newfoundland Government Cash Notes” 1901-14. These were of denominations 40¢ to $5 (1901-9) and 25¢ to $5 (1910-14) and expressly paid out for wages at the Department of Public Works, although enlarged in later years to include welfare and marine works. Although readily accepted by merchants, practically all were soon redeemed by the Bank

Union Bank of Newfoundland, $10, Issue of 1889

Counterstamped with the guarantee of the Newfoundland government for $8. (1895)

of Montreal, holder of the government account, and retired. For the most part, the public preferred hard cash, even silver coin - of which there was plenty until the end of WW1.

In 1919, the price of bullion silver rose dramatically so that for a few heady weeks around New Year's, 1920, it was so high that $1 in Newfoundland silver coin contained $1.20 in bullion. As might be expected, such coin went into hiding, being hoarded and spent only when absolutely necessary. This created a “hole” in the currency since the chartered banks, by law decades old, could only issue notes in denominations of $5 and higher. The dearth was enough to nearly cripple the Newfoundland economy and something had to be done.

The “something” turned out to be the Newfoundland Treasury Notes, in $1 and $2 denominations, all carrying an issue date of January 2 nd , 1920 – but in fact issued over nearly 20 years.

The Newfoundland government could have brought in legislation giving legal tender status to Dominion of Canada $1 and $2 notes – after all, the notes of the chartered banks weren't really legal tender in Newfoundland, either, each bank being a sort of Canadian enclave on the Island's soil. But there were good reasons that this alternative was not pursued.

First of all, any such notes imported would cost Newfoundland full face – even a hair over when transportation and distribution costs were factored in. But as every banker was aware, a paper issue in circulation for any length of time can be expected to see some 6% on average (higher the longer it circulates) never returned for redemption, the result of

loss, destruction, misplacing &c. This represents a tidy sum on the profit column of the issuer – so it may as well be Newfoundland.

Then, under the authorization act for the 1920 notes, passed June 5, 1919, the issue was allowed to appear against only a 25% backing in gold and securities against face – up to the first $1,000,000; full backing after that. In fact, although 600,000 1-dollar notes and 300,000 2-dollar notes ( face: $1,200,000) were printed , at no time were more than a million dollars' worth in circulation, so the full-backing provision never came into play.

The notes were engraved and printed by the American Bank Note Company in Ottawa. The $1 face portrayed George V in an oval to the left (the same as used on the Canadian $1000 note at the time) with black printing over deep blue tint; the back was totally blue and the same as the $2 in general design, showing the arms of Newfoundland supported by a ship to the left and anchor to the right. All notes were Series “A”, the serial numbers running 000001-600000 (but only 407,000 were ever issued). There were two signatures below: to the right was that typed of H.J. Brownrigg, Minister of Finance and Customs. That to the left was a manuscript signature, being one of: G.W. Bursell, F.A. Hickey, J.S. Keating or C.F. Renouf (the Bursell signature is the scarcest).

The face of the $2 note was black engraving over a brown tint and featured a mining scene. The back was totally brown and similar to the $1 in design. The serial numbers for these notes run A000001-A300000 even though only 261,000 of them were ever released. The face signatures are the same as on the $1 (in scarcity, greatest to least, the combinations run: Bursell, Keating, Hickey, Renouf)

As a matter of information, the bill for printing these 900,000 notes was $25,972.90.

By the time the notes appeared, the pressing need for them – as a substitute for silver –

was largely past. Silver bullion prices dropped and the hoarded coins reappeared. But the notes remained as a convenience for those more confident in paper.

The Treasury notes were actually the only legal tender notes in Newfoundland at the time. Notes of the Canadian chartered banks were allowed circulation only because they were convertible to gold (a clause “temporarily” in suspension 1914-27). When Canada returned to the Gold Standard in 1927, it was more or less just on paper: unlike the U.S., gold coins were not in circulation and convertibility was only conducted on large sums. The upshot was, so-called Gold Standard or not, the Canadian dollar stood at a discount to the American. But there was a hemorrhage of Canada gold reserves – in Newfoundland. Newfoundlanders could – and did – demand gold for the chartered bank notes at the published rate and use this gold to pay for American imports. At times, this could effect a saving as high as 20%. Some Canadian firms also took advantage of this window of opportunity, setting up agencies in St. John's expressly for this “double shuffle”.

Canada immediately brought pressure to slam this window shut. In financial difficulties, Newfoundland could scarcely resist a Canadian demand that the chartered bank notes be declared legal tender in the Island, thus relieving the banks of the obligation to redeem their notes in gold. Such an Act went into effect as of January 1, 1932. As a sort of sidebar, the Treasury Notes continued to be legal tender – but only to a limit of $50, thus not cutting into the various banks' note circulation too deeply.

But things got worse. Per capita, none-too-rich Newfoundland had contributed more heavily in lives and treasure to the war effort of WW1 than nearly any other Commonwealth country. She came out of it with a massive debt – for which she was scarcely thanked and not reimbursed, even to the extent of being given a break on her financial affairs. On November 28, 1933, (with the price of fish away down) she was forced to revert to colonial status, “responsible government” being replaced by a governor acting at the direction of the Colonial Secretary in London.

For a matter of convenience, the Treasury Notes went. By the Newfoundland Notes Act of 15 April 1939, they were ordered redeemed, their place taken by Bank of Canada notes which were accorded full legal tender status at the same time. Of the authorized issue of $1,200,000, a total of $1,181,704 were declared “redeemed and destroyed”, including 193,000 $1 notes and 39,000 $2 that were still on hand and never issued. At the time, accountant's figures showed that outstanding notes amounted to $18,296 and this was soon reduced to something like $12,000 – some, perhaps many, of which were already lost or destroyed over the past 19 years.

In 1948, the Canadian Bank Note Company, Ottawa, ( the new name for the Canadian branch of the American Bank Note Company after 1923 or so) requested permission from the Finance Department for the destruction of the Treasury Notes' steel dies, rolls and plates, assuming that no more printing of them would ever be made. Permission was granted and a detailed “certificate of destruction”, dated 30 Sept. 1948, covering the 29 items in question shows that this was done.

So passed the Newfoundland Treasury Notes.