What happens when a country's banking system shuts down? Ben Norman and Peter Zimmerman at Bank Underground (a blog written by Bank of England staff) answer this question by looking at the industrial dispute which hit the Irish banking system in May 1970 and lasted for about six months - click here to read their post. The closure of the banking system meant that cheques could not be cleared. So what happened? Irish people still wrote cheques and retailers (and publicans!) accepted cheques, playing a very important role in keeping the Irish economy going. There is little evidence that the strike had a detrimental effect on retail sales or the economy. However, when the strike ended, some cheques did bounce and retailers and publicans did suffer some losses. Subsequently, when there was a strike in 1976, retailers etc were more cautious about accepting cheques. One publican said that "when the banks start serving booze, we will start cashing cheques"! Maybe the publicans would have done a better job than the bankers in the run-up to 2008!
