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Inflation during War of 1812
Posted By KATHLEEN POWELL
In 1812, news of the outbreak of war brought business to a standstill. Those with ready cash resorted to hoarding, which led to a shortage for any business - war or otherwise.
The concept of paper currency in the period before and during the War of 1812 was relatively new to Canada. Settlers purchased goods and services with either coin or by trading.
The answer to this shortage was to print paper money. In Upper Canada, a group of influential merchants formed an alliance called the Niagara and Queenston Association which issued several thousand pounds worth of bank notes guaranteed by their association and by the government. This allowed General Isaac Brock to raise and outfit several companies of soldiers.
Paper currency was problematic - as it was not illegal to issue counterfeits, the notes had a reputation for unworthiness and many merchants would not accept them. In addition, some merchants printed their own currency and would accept no other.
Because of the difficulties with cash during the War of 1812, inflation was high and put the price of many essential goods out of reach. Prices for some goods rose by at least 300 per cent during the war.
By the end of the war, paper currency was the norm with more than 1.2 million pounds in circulation in Upper and Lower Canada.
Kathleen Powell is manager, City of Niagara Falls Museums
Article ID# 817527
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