Dear steemit community,

there are lots of doomsayers on the internet, who keep telling us horror stories about what will happen, when some day the banking system fails and people can't get their money out.

They keep telling us, there will be a big economic crisis, mass unemployment, people will lose everything, there will be riots and looting and in the end millions of people will die.

In order to survive such a kind of crisis scenario, you need to stack up on food, gold and ammunition, right?

Well, what if there will be no crisis, despite banks closure?
Unbelievable?

Let's have a look into history books.

The Irish Banking Strike of 1970

Before I will tell you about the Irish Banking Strike of 1970, let me tell you a little story, which will help understanding what happened in Ireland back in the 70's.

Last Friday I bought some smoked herring at my local fish market.
The bill was 13.20 €.
I gave the shopkeeper a 20 cents coin and a 100€ bill.
He didn't have enough change and I only had this 100€ bill.

Making my own Private Money

I needed 13 € in order to settle the transaction, so I took a paper napkin from the counter, wrote the number 13 on it, the Euro sign and and then I signed the napkin with my name and the actual date.

Voilà, I just raised the quantity of money in circulation by 13€.

A day later, when I came by the shop, I paid the owner the 13€ and he gave me back the napkin, which I torn up and threw it in a trash can.
The 13€ I just created a day before, just got destroyed again.

There is an important lesson in this story:

Money is created, when somebody gets into debt.
Money gets destroyed, when somebody repays his debt.

Back to the Irish Banking Strike of 1970

On Monday May, 4th 1970, in all Irish Newspapers there was the same headline:

Closure of banks

Because of a nation wide banking strike all banks were closed from May, 4th 1970 until November 17th 1970.

During this time there was no way to withdraw money from the bank or to transfer money.
Apple Pay wasn't invented at this time, neither was online banking and credit card payment also wasn't widely available in the early 70's.

So what did happen back then?
Have there been riots, looting, mass unemployment, basically doomsday?

No, the Irish kept calm and wrote each other checks.
When they were out of check forms, they just wrote each other private IOU's.

Pubs and local Shops became Banks

Before people accept your private IOU'S, you have to be trusted.
Or so to speak, you have to have credit.
Let's me quote Henry Hazlitt, who wrote in his famous book - Economics in one Lesson:

“There is a strange idea abroad, held by all monetary cranks, that credit is something a banker gives to a man. Credit, on the contrary, is something a man already has. He has it, perhaps, because he already has marketable assets of a greater cash value than the loan for which he is asking. Or he has it because his character and past record have earned it. He brings it into the bank with him. That is why the banker makes him the loan. The banker is not giving something for nothing.”

In normal times, it is the job of a banker, to asses the creditworthiness of a customer (his potential for debt repayment). This is what gives the money, which comes into existence when somebody takes out a loan, its value.
The money we are using today is backed by the ability to produce goods and services in the future.
When a debtor produces goods and/or services, which he can sell in the marketplace (for money), he can repay his loan.

But all the bankers were on strike in Ireland.
So who could have been an even better source to assess the creditworthiness of a customer?

There where 11,000 pubs and 12,000 shops at the time in Ireland, which knew their customers pretty well.
They even knew more about the creditworthiness of their customers, than a banker would have known.

So the pubs and shops became substitutes for the banks.
Somebody wrote an IOU to clear his tab at his local pub or to pay at the cash register in his local butcher shop. The pub owner or the shop keeper then paid his employees or his suppliers with the IOU's.
The IOU's circulated and the economy kept going.

The shopkeepers and pub owners did such a good job, that when the strike ended, very few of the IOU's bounced.

So the next time a doomsayer is telling you, that the whole world comes to an end, when the banks are closed, just tell him the story of the Irish Banking Strike of 1970.

Stephan Haller
Author of If You Can Order A Pizza You Can Trade - A Mechanical Approach To Options Trading and If You Can Order A Pizza You Can Trade - The Bonus Chapters