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FINANCIAL MEASURES   119

public confidence than they did, the effect of such an action might have been disastrous; but the public instantly realized that the whole power of the banking system of Canada would be behind this currency, that the notes were as good money as any Canadian could desire, and that the chief effect of the new legislation would be to check the dangerous tendency of ill-informed or excitable people to hoard gold. The situation was much less difficult than in England, because the Canadian public was thoroughly accustomed to the use of paper money, and for years had regarded the notes of the Dominion as better than gold, and those of any chartered bank as hardly less safe and desirable than the notes of the Dominion Treasury itself. Prior to August 4th, 1914, any person had the right to refuse the notes of any chartered bank,—and as between individuals still has that right; but it was many years since such notes had been subject to question, and the great majority of Canadians were probably unconscious of any intrinsic difference between bank-notes and the national currency.

As a result of this prompt and acceptable action, there was hardly any sign of gold-hoarding in the Dominion of Canada. Nor was the circulation of bank-notes increased to any perilous extent, either in the case of the banks as a body or in that of any individual bank; for while under the new regulation the power of a bank to issue notes was limited only by the restriction of "excess" issue to a percentage of its combined capital and rest account (plus the amount of gold or Dominion notes which it might have on deposit in the Central Gold Reserve), while the public had no option but to accept these notes in payment from the banks, and could not return them to the bank and demand gold or Dominion notes in exchange, yet in practice this extreme freedom of note issue was restrained by the operation of the Clearing Houses. For the Clearing House continued to return to each member bank its own notes when turned in by other banks, and the


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