Funding the War of 1812
When the United States declared war of Britain and its colonies on June 18 1812, Canada was faced with the burden of supplying troops to defend its borders. Given the shortage of specie (gold and silver coins) in the province, the Governor of Lower Canada, who was also Commander of the British Forces, Sir Georges Prévost requested that a law be passed in the Provincial Legislature for the issue of army bills to pay for supplies required to feed, clothe and arm both regular and militia soldiers. The Army Bills Office was immediately opened in Québec City and army bills both in high, interest-bearing, denominations and low, cash on demand, denominations were printed and put into circulation. The notes were a success and subsequent issues increased the amount of army bills in circulation to £3.44 million at the height of the conflict. After the war, orders were given to withdraw the notes from circulation and by the end of 1820 almost all the notes were redeemed. Although the army bills were successful at filling the gap left by the lack of a circulating medium, their immediate redemption left the provinces in the same predicament as before with a dearth of money to pay for things.