The Pre-War "Black" Market for Foreign Bank Notes

Abstract

The restrictive legislation made necessary by war conditions has facilitated the growth of black markets, and although their characteristics are now fairly well known, the part they played in the economic life of pre-war days is less familiar. In many respects black market is a harsh label as applied to the pre-war dealings in restricted bank notes of the London dealers, for although this market sometimes dealt in smuggled currencies it was no less legal and official than the market for foreign exchange proper. The black market for foreign bank notes was born as a direct consequence of the legislation imposing restrictions on their free movement since 193i. These restrictions were but a part of a larger scheme of currency control, but with each new currency law the restriction on the movement of notes became more stringent. Perhaps before reviewing the results of this legislation it will be convenient to explain briefly how the foreign bank note market worked in times of free movement. The foreign bank note market for Great Britain is centred in London, and normally the principal dealers are the branches in London of the foreign banks, the foreign branches of the big joint stock banks, a few English banks specialising in foreign trade, certain specialised money dealers and some of the larger tourist agencies. The money dealers in this market make the purchase and sale of foreign bank notes their chief business if it is not already their sole occupation. They are specialists in bank notes. Most of their business consists in buying and selling bank notes of all kinds, and dealing in bank notes is in many ways different from ordinary foreign exchange dealing; it requires expert knowledge of notes, the regulations regarding note