Bank of Canada notes do not
claim to be dollars. They instead just have the word “DOLLARS” written on them
without claiming to be dollars.
RCM coins do not claim to be
cents. They instead just have the word “CENTS” written on them without claiming
to be cents.
Bank of Canada notes and RCM
coins are claimed to be legal tender. Legal tender is not the same as dollars
and cents. Financial transactions, that do not involve any legal tender, are
claimed to be conducted in dollars and cents.
Bank of Canada
notes used to be promissory notes. Before 1969, they contained the phrase “WILL
PAY TO THE BEARER ON DEMAND” and then some number (“ONE”, “TWO”, “FIVE”, “TEN”,
“TWENTY”, “FIFTY”, or “ONE HUNDRED”) and then the word “DOLLAR” or “DOLLARS”.
The dollar always referred to something real. For example, the dollar in North
America used to refer to the Spanish dollar, a coin made mainly of silver. In
1969, the phrase “WILL PAY TO THE BEARER ON DEMAND” was simply omitted from new
Bank of Canada notes but the word “DOLLAR”, or “DOLLARS”, was conveniently left
on. Merely removing the phrase “WILL PAY TO THE BEARER ON DEMAND” from Bank of
Canada notes did not change them into dollars.
According to the Bank of
Canada publication A
History of the Canadian Dollar by James Powell, in the section titled The
Canadian Dollar under the Gold Standard (1854-1914) (pdf document) :
“From 1 August 1854 when the Currency Act was proclaimed, until the outbreak of
World War I in 1914, the Province of Canada, and subsequently the Dominion of
Canada, was continuously on a gold standard. Under this standard, the value of
the Canadian dollar was fixed in terms of gold and was convertible upon demand.
It was also valued at par with the U.S. dollar, ...”; and, “Deflation after the
Civil War enabled the United States to return to the gold standard on 1 January
1879, with the greenback convertible into gold at the old pre-war rate of 23.22
grains of gold (Yeager 1976). Once again, the Canadian dollar traded at par
with its U.S. counterpart. This exchange rate held until the outbreak of World
War I.”
One troy ounce of gold
equals 480 grains of gold. 23.22 grains of gold equals 0.048375 troy ounces of
gold.
So, on January 22, 1901, the day that Victoria of the United Kingdom died, the Canadian dollar was fixed and valued at par with 0.048375 troy ounces of gold.
A “Federal”
Reserve Note is not a U.S.A. dollar. “Most
people associate the noun ‘dollar’ with the Federal Reserve Note (‘FRN’) ‘dollar bill’,
engraved with the portrait of President George Washington. This association is
mistaken. No statute defines - or ever has defined - the ‘one dollar’ FRN
as the ‘dollar’, or even as a species of ‘dollar’”, wrote
Edwin Vieira, Jr. in What Is A
“Dollar”?.
The Coinage Act of 1792 defined the U.S.A. dollar as containing 371.25 grains
(24.06 grams) of pure silver. After 1792, U.S.A. laws, that redefined the
U.S.A. dollar as no longer consisting of fixed mass of silver but rather
consisting of a fixed mass of gold, include the Gold Standard Act in 1900. In
the past, Congress has considered defining and redefining the U.S.A. dollar to
be “Acts and Things which Independent
States may of right do”.
I am unaware of any U.S.A. law, since 1900, redefining the U.S.A. dollar as no
longer having the value of a fixed mass of gold. The last time, that I know of,
that the official U.S.A. price for gold was fixed was in 1973 at 42.2222
dollars per ounce. Public Law 93-110 defined the U.S.A. dollar as having the
value of 1/42.2222 fine troy ounces of gold.
The U.S.A. Department of the
Treasury values gold at 42.2222 U.S.A. dollars per fine troy ounce. “Gold and silver reserves are reported at the
statutory rates of $42.2222 per fine troy ounce (FTO) for gold and $1.292929292
per FTO for silver for the entire custodial reserves, which are in the custody
of the U.S. Mint and the Federal Reserve Bank of New York”, as
stated in the Department of the Treasury’s Annual
Financial Report (pdf document).
The action, of no longer redeeming “Federal”
Reserve Notes for gold for various people, is not the same thing as the action
of defining or redefining what the U.S.A. dollar actually is.
“No State shall ... make any Thing but gold and silver
Coin a Tender in Payment of Debts; ...”, according to Article I, Section 10,
Clause 1 of the U.S.A. Constitution. Wiktionary's first definition for the noun “tender” states “A
means of payment such as a check or cheque, cash or credit card” and the second
definition states “(law) A formal offer to buy or sell something”.
States in the U.S.A. have been making “Federal” Reserve notes a “means of payment” in payment of debts. States in the U.S.A. have been making “Federal” Reserve notes a “formal offer” in payment of debts. States in the U.S.A. have been making “Federal” Reserve notes a tender in payment of debts. “No State shall ... make any Thing but gold and silver Coin a Tender in Payment of Debts; ...”, according to Article I, Section 10, Clause 1 of the U.S.A. Constitution.
Email concerning this web page may be sent to David Wozney at dpwozney@ocii.com.
Copyright © 2009 David P. Wozney