Ever since the 1954 issue, there has been this phenomena in Canadian Paper money known as the replacement note. Marked by an asterisk in the early series and later by an "X" as the third letter in the prefix, the replacement note has always been one of the key factors in determining if some anonymous note is more than just a spender. But what purpose does this variety have in our currency, I'm often asked? Do they signify some sort of break in the numbering or are they only put out to make collecting a little more interesting?

The replacement note serves a purpose just as the name suggests. They are issued to replace mistakes made in the printing process. The revelation of the replacement note came about at the beginning of the 1954 series. Prior to this, when a mistake was made while printing a sheet of paper money, the misfit sheet was discarded and the stack of sheets put aside to wait for an exact replacement to be made. After the sheet was made and placed back into sequence, the stack of sheets would be cut and shipped. This method worked for many years without complaint; however in the late forties and early fifties, the post-war economy demanded a more efficient method of fixing printing errors. Demand for currency kept rising and therefore so did production. The method of pre-war printing required room to store the stacks of money that were on stand-by and greater man-hours to correct the mistakes. With mass production of paper money for a booming economy, this method just wasn't cost effective. It was obvious that something had to be done.

And So, starting in the 1954 issue, the replacement note as we know it came into existence. In this new method, instead of reprinting the individual sheets as needed, runs of sheets were made ahead of time. This way in the occurrence of a printing mistake, a new sheet could replace the mistake within minutes, without the need to hold the stack aside or the inconvenience of setting the printer to reprint the exact same sheet that was destroyed. This saved room and increased production for the Bank of Canada. The sheets in reserve were printed with no particular prefix or set of serial numbers in mind. As a result, bundles of notes may have a replacement in the middle, which has no correlation with the prefix or serial number of the bundle. The replacement notes throughout the 1954 issue and the 1967 issue were marked with asterisks. During the 1970's multi-colour issues, however, the Bank of Canada ran into a problem; they ran out of two letter prefixes.

The simple and obvious solution: make a three letter prefix.

And that is just what they did in 1981, right in the middle of the Lawson-Bouey signature. This posed a little bit of a problem for the bank, however, since the stamp that printed the serial numbers on the notes only had ten characters on it, the third prefix letter took up the spot previously reserved for the asterisk. To solve this problem, a replacement note was now designated by an "X" as the third letter of the prefix.

There are other theories as to why the switch from asterisk to "X". One is that the general public was hoarding the replacement notes because they looked fundamentally different from the regular issued notes. I've had many people comment to me when I'm appraising their notes that they put these ones aside because they had a 'little star' next to the serial number and that was out of the ordinary. The switch to the "X" replacement notes could have been to ensure that the notes served a greater life in the general circulation. Collectors caught on rather soon, however. Imagine flipping through a fresh bundle of 1973 one-dollar notes and finding an AAX note in the middle of an AAD prefix; something has got to be going on. To the general public however, an "X" replacement note is rather indistinguishable.

With regards to the five and twenty dollar issues of 1979, the serial number was set to the back of the note and was eleven characters long, all numbers. In this short-lived series, replacement notes are determined by the second digit being a "1".

There haven't been any reported replacement notes found since 1996, suggesting that the Bank of Canada has stopped production. The Bank itself released no official reason as to why they stopped production of the replacement note, or that they've even stopped for that matter. The sudden stop in production has generally been attributed to business reasons. The printing of Canadian Paper Money is contracted out to different banks, namely the Bank of Canada and the British North American Bank Note Company. The existence of replacement notes is, in essence, proof of how many mistakes were made in the printing process, and in extension a blemish on the printers reputation. It would only make sense not to produce these replacements, or at least not mark them with an asterisk or an "X". Another idea is that keeping track of two separate stacks of notes adds to the accounting costs producing the notes.

Either way, it doesn't seem likely that we will be seeing any more "X" notes put out into circulation. As a result, the replacement note series is a finite collection, barring any new discoveries being made. Perhaps this sets a challenge for any committed Canadian Paper Money collector.

A special thank you to Steve Bell of Colonial Acres Coins the author this article.