WHAT HAPPENS WHEN ALL OF A COUNTRY’S BANKS CLOSE?
WHAT HAPPENS WHEN ALL OF A COUNTRY’S BANKS CLOSE? This review in the Economist (May 18) of Felix Martin’s MONEY:THE UNAUTHORISED BIOGRAPHY tells what happened when all of Ireland’s clearing banks closed for a 6 month period in 1970 because of labor conflicts: “The country’s bank system ground to a complete stop, with branches closed, the clearing system suspended and customers unable to withdraw or deposit money.” And yet, a monetary system developed, based on the extension of credit by individuals. A good example of how money and credit can develop with a sovereign backing the money. And even when there are government-regulated banks or government-issued currency, private credit creation continues to play a role.