In my copious spare time, I am a notaphilist (i.e., a collector of bank notes). In the not too distant past, individual banks issued their own notes. However, today, apart from in N. Ireland and Scotland, central banks around the world have a monopoly of the note issue in most economies. At Feb. 2011, Northern Irish and Scottish banks had a staggering £1,900m and £3,500m of notes in circulation respectively. As regular travellers across the Irish Sea realise, these notes are not legal tender. What is special about banks in N. Ireland and Scotland that they can issue their own notes? Simply, it is an accident of history. As legislation was passed which centralised the note issue in England in the Bank of England, Scottish and Irish banks were given certain exemptions. The result today is that these banks can issue their own notes. N. Irish and Scottish Banks, however, have to hold backing assets (i.e., Bank of England reserve...
