In my opening post about Scottish banks’ suspension of specie payments, I explained that, although the suspension was technically illegal, it failed to provoke any lawsuits in part because it was no less in the interest of many Scottish citizens, and Scottish bank creditors especially, than it was in that of Scottish bankers themselves. Rather than sue their banks, large numbers of prominent Scotsmen resolved publicly to make and receive payments in notes issued either by the Bank of England or by the Scottish banks themselves.
But while many Scots may have been willing, at least grudgingly, to accept bank notes rather than specie in payments, it doesn’t follow that none were harmed by the suspension. In today’s post I’ll consider just what the costs were, and who bore them. I’ll then turn in my third and final post to considering whether these costs should be regarded as a black mark against the Scottish bankers, and as a reason for denying that the Scottish free banking episode serves as a good example of the advantages of unregulated banking.