upon the Government for aid whenever money is “tight.” So the question was asked, Why should not the Dominion treasury come to our relief? The banks, it should be noted, did not ask this question. They did not believe that government aid was necessary. Nor was it evident how government aid could be afforded, for the Dominion treasury, unlike that of the United States, keeps all of its cash at all times in the banks, and so has no reserve fund on hand on which to draw for the purpose of easing the money market. The Government, however, was impressed by the popular demand and came forward with an offer of relief which involved a suspension of the Dominion legal tender act, similar to the suspension of the Peel bank act whereby the Bank of England has been permitted to issue notes unsecured by coin.

The issue was made upon the authority of the governor in council dated November 12, 1907, on a memorandum from the minister of finance, in which he described the effect of the world-wide monetary stringency upon Canada and declared that there was much anxiety in the West among farmers, traders, and bankers over “the prospect of insufficient financial accommodation to move the crop.' He recommended that the minister be authorized to issue new Dominion notes and deposit them with the banks most largely interested in the grain business, and to accept from the banks high-class securities. In the second memorandum, dated November 26, he recommended that the advances be made through the Bank of Montreal, at such rates of interest, not less than 4 per cent per annum, as the Bank of Montreal might deem fair and reasonable. The advances were not to exceed $10,000,000 and were to

be protected by the deposit of securities satisfactory to the Bank of Montreal. These issues of Dominion notes were approved by act of Parliament July 20, 1908.a Events proved that the bankers were right in their claim that they were fully able to take care of the western situation, for there was a call for only $5,115,000 of this emergency issue of Dominion notes. The bankers understood the situation better than did the minister of finance, yet to a citizen of the United States who is used to seeing the Treasury come to the relief of the money market, it is not at all remarkable that the minister felt constrained to give heed to the western cry for more money. The situation was without precedence in Canadian finance. For the first time in their history the chartered banks were obliged to limit their operations, not because their cash resources were low, but because their note issues were practically up to the legal limit, and they feared that further expansion of their loans would cause an inroad upon their cash reserve.

The situation was complicated by the lateness of the wheat crop and still further by the fact that a large part of the crop had been injured by frost. Furthermore, the farmers of the West were dissatisfied with the price offered for their wheat and were holding much of it back from the market. These circumstances caused delay in the movement of the crop and hence tended to tie up bank funds for a longer period than usual. But these were not all the causes of difficulty and delay. Much Canadian wheat is shipped to the East via Port Arthur and Buffalo. This

a The memoranda and act of Parliament relating to this issue of Dominion notes are presented in Appendix A.

route in 1907 Canadian shippers did not like to use, for the New York checks or drafts which they got in payment were at a discount in gold. The bulk of the wheat had to be shipped, therefore, either by the Montreal water route or by the Canadian Pacific, and the transportation facilities were not adequate.

'It would seem, therefore, that the inability of the farmer to get a satisfactory price for his wheat, or to get it forward quickly to market, was due not to the failure of banks to do their part, but to the inferior quality of a large part of their crop and to the inadequacy of transportation facilities, aggravated by the panic in the United States.

EVENTS IN 1908.

During 1908 it was inevitable that Canada should suffer from the after effect of the panic in the United States. Immigrants from the United States continued to pour into the Dominion and they brought considerable capital with them. As a result the development of the western provinces, such as Alberta and Saskatchewan, continued without abatement, and the city of Winnipeg, which is the metropolis for the great western country, had a fairly prosperous and active year. In the eastern provinces, however, hard times prevailed. Practically no new capital came over the border from the United States, prices of commodities were low, and most business concerns were seeking to hold their own rather than to enlarge their operations. Canada's financial and commercial relations with the United States and England are so intimate that her economic activities were necessarily affected by the universal reaction.