Canadian Financial System Analysis

Since colonialism the function of wealth has transitioned from the barter economy to the gold standard to the use of currency. Throughout history the development of currency and the progression of the financial system has made Canada a more efficient financial power that is recognized worldwide. The Canadian financial system had improved throughout history in many ways, such as the development of chartered banks, the creation of the Bank of Canada, the development of the call back rate, and the use of paper currency which added onto coins. I will be covering the development of the Canadian financial system from the late 18th century to the early 20th century. The traditional approach to the beginning of banking in Canada is a competitive …show more content…
The British believed the reason for this was a demand for imports that was so high that it could not possibly be satisfied. As fast as coins were put into the economy, they were all used to buy products that could not be produced in Canada. This impossible demand for imports was what most monetary historians agree led to the beginning of the commercial banking sector. To explain further, during the late 18th century the British had huge comparative advantages over Canada and were the main trading partner of the Canada. The Canadian provinces exported furs, timber, wheat… etc. Canada ended up spending the majority of currency on British products which created the need for the first Canadian called labelled the bank of Montreal. The function of these banks “were to issue notes, to lend on “real bills”, to purchase government bonds, and to deal in bills of exchange on London”. In the late 18 century the people were getting frustrated by a lack of knowledge about Canadian currency and why there was such a low quantity of the specie. People wanted legislature to be created to disclose more information about the monetary system. Also, people were discouraged about the progression of the commerce and agriculture industry in Canada due to a lack of specie, “discouragements from the quantity of specie in circulation being greatly inadequate to its necessities and increasing population”. Furthermore, actual paper currency did not exist in Canada until the 1800s. Thus far, I only explained one reason for the lack of supply of specie in Canada during the colonial period but there is an additional explanation. The problem created by a lack of specie in an economy is that it creates a large trade deficit and discourages foreign investment. A country must have a stable currency in order to attract investment from other