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Tasmanian (Van Diemen's Land) Promissory Notes

By AG    |   Saturday, 27 November 2010

In Tasmania (then Van Diemen's Land), Lieutenant Governor Collins faced a similar problem to the one that Phillip had faced during the early days of settlement - a severe shortage of coins and banknotes. The result was a proliferation of private promissory note issues.

The government led the way when it issued its own notes, the first being payments to the masters of ships lying in the Derwent for the sale of goods. Small denomination currency notes (a minimum of one pound) were printed and passed into circulation.

Soon afterwards, the Commissariat began paying for Government stores in notes to be consolidated at a future date. The colonists quickly reacted and soon notes of all denominations were circulating in the colony. Henry Melville in his History of Van Diemen's Land, 1835, wrote:

The occasional scarcity of circulating medium, for the Commissariat did not bring into the colony British Coin, induced many individuals of known capital to issue promissory notes; this system spread like a contagious fever and before long men, almost strangers in the colony, followed the example. At first the notes were of four dollars (about a pound); some persons then reduced them to three - these sums were divided by others, and ultimately three penny and three half-penny notes became commonly current. The effect of all this was that improvements of all kinds were carried on with vigour, and high wages were given to workmen, for the masters paid them on the Saturday nights with coin of their own manufacture - it was one universal system of credit.

A difficulty in the colony was that the value of these notes depended on the ability and willingness of the person(s) who issued them to honour their notes on demand. While the notes were a successful substitute for coins in the conduct of trade, it was difficult to consolidate them into hard cash. Very few notes were rejected, as most colonists were aware that there was no other medium of exchange.

On 27 October, 1826, the Colonial Times advertised that booklets of 100 printed notes were available from its office -

They will be found useful to Inn Keepers, to receive their debts, instead of keeping accounts or giving credit; and carrying one of these little books will be found equally useful to the traveller.

Written on any handy scrap of paper, and accepted almost casually, private promissory notes provided a substitute for circulating currency where coins and banknotes (specie) were seriously lacking. Dirty notes were accepted readily, as were torn ones pasted together. Cases are documented of unscrupulous persons tearing up notes drawn by the same person, pasting them back together to make more than the original number and successfully passing them on. Once drawn, notes remained in circulation for great lengths of time. Many were never presented for redemption. This encouraged issuers, seeing a chance for profit, to use inks that faded after a few weeks, or to treat the paper, for example by baking it, so that it became brittle and quickly deteriorated.

The abundance of counterfeits became a major problem associated with the circulation of promissory notes in the colony. The contemporary press, especially the Hobart Town Gazette and the Colonial Times, repeatedly warned the public to beware of the 'alarming numbers of false notes circulating.

On 31 May, 1817, John Prestage in the Hobart Town Gazette notified the public that one of his servants, Thomas Berry, alias John Barry, presented 'false notes bearing the forged signature of his master, to several merchants in order to obtain goods'.

The Hobart Town Gazette reported on 1 March, 1817:

Geo. Fenwick Jackson, convict, was charged with forging and uttering, on or about the 1st of February, last, a promissory note, bearing date the 4th of February, 1816, purporting to be drawn by George Miller, amounting to $5, with an intent to defraud Richard Hazard of Hobart Town. From the evidence adduced, the court found the prisoner guilty, and sentenced him to receive 50 lashes, and work in the Gaol Gang in irons for 12 months.

The penalty for forgery was harsh. Forgeries, then and now, are extremely difficult to detect unless documentary evidence supporting the correctness of signatures is available.

During the early 1820's, notes were issued in 'sterling', 'currency' or 'dollars', although mostly in sterling and dollars. The notes issued for 'currency' were taken at a discount.

Currency, Sterling or Dollar ?

At the beginning of 1822, Tasmania's monetary system was based on a sterling exchange standard, operating through the sale by the Commissariat of bills of exchange on the British Treasury. Two scales of reckoning prevailed, 'sterling' and 'currency'. Sterling meant payment in British coin, bills on the British Treasury, store receipts or any other official note which was convertible into sterling at par, without any large discount. Currency was the term given to private promissory notes. The value state on these notes was often subject to a significant discount when converted to a sterling equivalence. This exchange rate or standard became known as the sterling exchange.

The dollar system was introduced into Van Diemen's Land in 1822. It meant the partial substitution of a dollar standard, involving the use of dollars in both private and Government transactions, and had the beneficial effect of increasing the numbers of notes in circulation. Dollar based promissory notes were issued to complement the use of Spanish Dollar coins. It was never intended that private finance would be conducted on a dollar basis. Many promissory notes were drawn specifically in dollars, many others stated the conversion rate to sterling, but a majority of the notes continued to show the value or denomination in sterling.

Transfer to Sterling - Circulating Medium Act, 1826

From 1 April, 1826, to comply with a Treasury instruction, all Government receipts and payments were reckoned in 'sterling' with Spanish Dollars being received and paid at 4/4 and the Calcutta or Sicca Rupee at 2/1.

The Hobart Town Gazette's previous practice of quoting market prices in currency ceased and the Bank of Van Diemen's Land announced that it would express all accounts in sterling after 1 July, 1826. Eight issuers of small notes called a meeting to consider the new conditions, and to devise methods of preventing the forgery of notes for a shilling and sixpence. It was resolved that, from a date to be fixed, all merchants should take the dollar at 4/4. Since small notes were deemed to be still 'unavoidably necessary' a committee was appointed to report on the subject and invited public suggestions. Nothing came from the committee as the news of the Government's intention to prohibit the issue of small notes became known.

Governor Arthur's Committee and the Sterling Money Act, 1826

Governor Arthur appointed another committee of three to consider 'the policy of allowing promissory notes for small sums to be issued by the Bank of Van Diemen's Land or by individuals'. The committee reported within a week (5 August, 1826), declaring that small notes had been -

productive of great injury and inconvenience to the lower classes, owing to the occasional insolvency of the issuers and the numerous forgeries. The issue of notes below 20s should be prohibited, although limited issues might be authorised temporarily since the available coin was inadequate.

The committee's recommendations for legislation were adopted. The Sterling Money Act of 22 September, 1826 recited the expediency of a 'sterling' circulation and reckoning, together with the need to forbid notes under one pound. All future negotiable instruments were to be drawn in sterling and those in terms of dollars were to be void.

Small notes in the colony were withdrawn very rapidly. The press reported that a local trader, John Briggs, called in his small notes and announced they would not be reissued. The change was so rapid that for a short while the depressed conditions of the colony were accentuated. The sudden withdrawal of the circulating paper 'money' was momentarily deflationary. However, with the opening of four new banks, namely the Tasmanian, the Derwent, Cornwall and Commercial, the new notes issued by these banks began to circulate and remedied most of the shortage of cash, except for small change.

Within a very short period of time, the reckoning of transactions in dollars disappeared. But, while the basic unit of account became the pound 'sterling', Spanish dollars and other coins continued to circulate.

By this time virtually all the small private promissory notes had disappeared.

Currency (Promissory) Note Issuers

Examples of promissory notes by a number of issuers, documented in the contemporary press, have not survived. It is possible that specimens of their notes exist, however until a specimen is verified, it cannot be considered as a known issue. The following lists show the known (verified) and recorded (unverified) issuers of currency promissory notes notes in Tasmania in the 1820's.

* Recorded to have issued 3d & 6d notes printed by the Colonial Times office.