Publications and Research

Summer 2002

Monetary Policy and Uncertainty by Paul Jenkins and David Longworth Information and Analysis for Monetary Policy: Coming to a Decision by Tiff Macklem Models in Policy-Making by Don Coletti and Stephen Murchison The Role of Simple Rules in the Conduct of Canadian Monetary Policy by Denise Côté, Jean-Paul Lam, Ying Liu, and Pierre St-Amant See also: Tables A1, A2, and Notes to the Tables

Cover: Welland Canal Note

Before the advent of railways in the mid-1800s, goods in North America were transported mainly by water. Where the route through lakes and rivers was long and circuitous or in some cases very dangerous, canals were the answer. The Erie Canal linking Lake Erie to the Hudson River and the Rideau Canal between the Ottawa River and Lake Ontario are two well-known examples. Canals were usually financed by private businessmen and governments through stock offerings or loans.

The Welland Canal Company resorted to issuing notes, such as the one pictured on the cover, to ensure its continued operation.

The Welland Canal was the brainchild of William H. Merritt of St. Catharines, and was designed to bypass the mighty Niagara Falls and directly link lakes Erie and Ontario. Construction began in 1825, and in 1829 the canal opened for business. Improvements and costly repairs were constantly needed, however, and by 1836 the company had little hope of raising enough to finance the coming season or to meet the payments on their growing debt. To make matters worse, the noted editor, rebel, rabble-rouser, and member of the legislative assembly, William Lyon Mackenzie, had accused the company's directorate of fraudulent activities. The accusation, although unfounded, increased the government's reluctance to offer any further aid.

On 4 August 1836, the company's directors therefore resorted to the unusual expedient of issuing interest-bearing notes in denominations of $1, $2, $5, and $10. The measure was greeted enthusiastically by the local community, and $33,463 of these instruments were circulated in the following weeks. The next year, the provincial government took control of the company, the note plate was destroyed, and the notes were so thoroughly redeemed that the note on the cover is the only known example from this interesting episode in our early history.

The note, signed by Merritt as company president, measures 184 mm by 82 mm and forms part of the National Currency Collection, Bank of Canada.

Photography by James Zagon, Ottawa.

On 12 May 2002, James Zagon died after a brief battle with cancer. Mr. Zagon was a consummate professional who used his critical eye and talent with the camera to develop a large body of work that has added beauty and interest to the covers of the Review for over twenty years. The Editorial Board, officers, and staff of the Bank wish to take this opportunity to acknowledge his efforts and to offer their sincere regret at his passing. We will miss you James. Vale!