No. 67, Financial
14 November 1861
Much inconvenience and loss, have, ever since the formation of these Colonies, been occasioned by the want of a circulating medium of fixed and recognized valueequalManuscript image equal to the business demands of the Country. The scarcity of Coin has been so great, and Gold Dust not being received for duties, that importers of goods have found it difficult at all times to make their Custom House payments, and, as is well known, are frequently compelled to borrow money for that purpose at exorbitant rates of interest, varying from two per cent per month and upwards. Almost all the business of the CountryisManuscript image is transacted in Gold Dust of uncertain value, and it is easy to conceive the difficulty and inconvenience of adjusting payments by such means, when the holder and receiver are both alike subject to loss, and fearful of imposition.
2. The effects of an over restricted monetary circulation are now however operating so fatally in both Colonies, that it is indispensable to devise a remedy for an evil that is sapping theveryManuscript image very foundations of our prosperity. To illustrate this fact, I would inform Your Grace that at this moment there is an amount of Gold Dust in the hands of Miners from Caribou, residing at Victoria, exceeding one quarter of a million sterling, and so great is the present dearth of Coin, that it brings a premium of five per cent and over, when procurable, which is not generally the case, as men may be seen hawking Bars of Gold about the streetsofManuscript image of Victoria, who cannot raise coin enough, even at the high rates of discount just mentioned, to defray their current expenses. The Miners and other holders of Gold Dust are naturally incensed, and refuse to submit to this depreciation on the value of their property, when they know it can be converted into Coin for the moderate charge of one half of one per cent, at the United States Branch Mint in San Francisco; making an important saving tothemManuscript image them of 4 1/2 per cent. They are consequently leaving Victoria by every opportunity, and it is most painful to witness a state of things which is rapidly driving population and capital from the Country.
3. It has been suggested that an issue of Notes of varying values, guaranteed by the Government, and payable on demand at the Public Treasury, would, by providing a cheap and simple medium of exchange, meet the evil; but independently of thegeneralManuscript image general objections to a paper currency, its effect in banishing the precious metals, in producing unhealthy inflation and rash speculation, and the fluctuation in the value of the circulating medium, it appears to me that the ramifications of business are not extensive enough to retain the notes in circulation, they would therefore simply return to the Treasury, and soon exceed our means of payment.
4. This I conceive would be the inevitable resultofManuscript image of an issue of paper in the present condition of the Colony, unless the notes were made a legal tender, a measure which I am not prepared to recommend.
5. As a safer remedy, and one more suitable to the actual circumstances of the Colonies, I propose to take immediate steps for the manufacture of Gold Pieces, equal in value to the 10 and 20 dollar American Coins, and to bring them into general use as a circulating medium in both Colonies. This plan does not contemplaterefiningManuscript image refining the Gold, as the expense would be greatly increased by that process: it is merely proposed to bring it to a uniform standard of fineness, without separating the natural alloy of silver, which to some extent exists in all the Gold of British Columbia. The pieces will be prepared at the Government Assay Office, and will bear the stamp of unquestionable character, and I am of opinion that by making the gold contained in them of the full current value of the piece, withouttakingManuscript image taking the silver into account, which I propose should go as a bonus, they will not only answer as a cheap and convenient currency within the Colonies, but also have the same exchange value when exported to other countries.
6. It appears from experiments made by Mr Davidson, a gentleman of large business experience, and Agent for the Rothschilds at San Francisco, that the average fineness of California Gold in its natural state, ranges between 880andManuscript image and 885, that is to say in valuing the samples brought to him for sale his calculations have been always based on those figures, and have never proved defective. This shows that some simple process for roughly determining the value of Fraser River Gold may also be arrived at, and that knowledge will facilitate its reduction, within 10 or 20 thousandths, to a uniform degree of fineness; in order thattheManuscript image the pieces representing the same value may not vary in weight.
7. All the machinery required for this purpose may be procured at San Francisco for the moderate sum of Five Hundred Pounds, and without materially adding to the expense of the present Assay Establishment, Mr Claudet thinks it will be in his power to manufacture all the pieces wanted for the circulation of the Country.
8. I have submittedthisManuscript image this plan for the consideration of the principal Banking and Commercial houses of Victoria, with the object of obtaining their views as to the probable effects of the proposed currency on the general business of the Country; and more especially as to its exchange value when exported to pay for supplies: the single point which I think admits of any question, for in that case it would probably be treated as simple bullion.
9. It was clearlyprovedManuscript image proved, by the statements of those gentlemen, that the actual cost of importing Coin from other countries is rather over 5 per cent, which they believe to be the actual cost of our present metallic currency. Not having had sufficient time for consideration, they were not, however, prepared to give a decided opinion on the general measure, but they admitted that it would establish the value of the gold produced in British Columbia in the cheapest manner, and provide a metallic currency for thecountryManuscript image country at a cost of 4 per cent less than is paid for imported coin, and offered no objections, either to the plan, or the basis of the proposed currency.
10. If the principal Banking and Mercantile houses agree among themselves to receive this currency as a legal tender, no difficulty will be experienced in carrying the measure into effect, and no reason exists why it should not receive their hearty support, as it will surely tend to their advantage,notManuscript image not only by the saving, as before shewn, of 4 per cent on the cost of importing coin, and the complete removal of the cause which is draining the Country of wealth and population, but also in the numberless other ways by which the investment of capital serves to promote the general prosperity.
11. I will only further remark that considering the great importance of the object in view, and the advantages expected from the operation ofthisManuscript image this simple and inexpensive plan of providing a metallic currency of character unsuspected, and intrinsically equivalent to its stamped value, and therefore not subject to depreciation, nor open to the objections which may be urged against a paper currency, I can hardly doubt that Her Majesty's Government will, in these circumstances withhold their approval, or object to my declaring it a legal tender, and causing it to be received at all the PublicOfficesManuscript image Offices within the Colonies, in payment of duties and taxes, especially as there is no prospect of this currency being replaced by any preferable circulating medium until the produce of Gold, by its abundance, renders the establishment of a Branch of the Royal Mint in British Columbia, a public necessity.
I have the honor to be
My Lord Duke,
Your Graces most obedient
and humble Servant
James Douglas
Minutes by CO staff
Manuscript image
Mr Elliot
As a means of remedying the evils arising from the want of a circulating medium the Govr proposes in this Desp. to manufacture Gold pieces—equal in value to the 10 & 20 dollar American Coins, and to declare them a legal tender. The Treasury should no doubt be consulted?
VJ 14 Jan
TFE 15 Jany
N 17
Other documents included in the file
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Draft, Elliot to G.A. Hamilton, Treasury, 24 January 1862, forwarding copy of the despatch for consideration.
Douglas, James to Pelham-Clinton, Henry Pelham Fiennes 14 November 1861, CO 60:11, no. 403, 126. The Colonial Despatches of Vancouver Island and British Columbia 1846-1871, Edition 2.2, ed. James Hendrickson and the Colonial Despatches project. Victoria, B.C.: University of Victoria.

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