(OK: my 5th and final thread on past, private currency systems. The series starts here: .) I've talked a lot about Canada's experience because it makes for such a ready comparison w/ that of the U.S.
Besides having the same gold dollar, Canada was a very large country geographically, albeit about 1/10th the size economically, more heavily agricultural and less diversified. By rights it should have had more bank failures and more difficulty keeping banknotes at par everywhere.
But as I've pointed out, the opposite was the case. But Canada was far from being unique. It's was one of several instances of a private banking and currency system that was relatively "free," not in the U.S. sense, but in the sense of not being mucked-up by stupid regulations.
Except in the U.S., "free banking" ("bankfreiheit," "la liberté des banques," etc.) actually meant something more like "unregulated" banking. Larry White surveys some other REAL free banking systems in this Alt-M essay: alt-m.org/2015/04/28/wha….
Of all of them the Scottish system has been the most carefully studies, especially by White once again. Luckily his book on it is available online: iea.org.uk/sites/default/…
The English-vs.-Scottish banking story is, BTW, remarkable similar to the Canada-vs.-U.S. story I summarized in my last string. Basically: the English system faced crisis after crisis, while the Scottish system, based on the same pound sterling unit, was famously more stable.
Like they say, a picture paints a 1000 words. So here's a contemporary cartoon illustrating the state of things during the severe Panic of 1825. Severe ENGLISH panic, that is! 
Not that the Scottish system had an unblemished record. In 1797, when a French invasion scare led the British gov't to permit the Bank of England to suspend payments, the Scottish banks suspended as well, on their own accord. From then until 1821 the "paper pound" prevailed.
Actually, I don't believe this episode much of a black mark against the Scottish banks as some assume it to have been. But for my reasons you'll have to read a three-part Alt-M post I've written all about it: alt-m.org/2018/10/09/sco…
In any event, the English system was clearly less stable than the Scottish one. Why was that? Well, for starters its worth remembering (or learning, if you haven't) that the Bank of England's monopoly privileges--it was first the only English "joint stock" bank, ...
...and later the only one allowed to issued notes in and around London--originated with the "Tunnage Act of 1694" by which the Bank was established. A "Tunnage Act" is like our Revenue Acts: it was about funding the gov't. No one was thinking about improving England's money.
Over the years, the Bank's privileges were reinforced in return for its supplying further fiscal aid to Parliament. Again, this was about revenue, revenue, and revenue. There was no such thing as "central banking" as we understand it.
So should it really be so surprising that the resulting system wasn't especially stable? If you want of pretty simple account of just why it was unstable, here you go: independent.org/pdf/tir/tir_14…
Now, here's the sad part. All that instability got people arguing about how to fix things. And some jerks (sorry: this gets me annoyed) argued that the way to do it was...to consolidate the Bank of England's monopoly powers! Not that no-one argued the opposite view.
Just as the U.S. saw an "asset currency" movement pleading for Canadian-style reforms, so did England have its "free banking school" extolling the virtues of the Scottish banking, who argued against both the "Currency School" and the Banking School," who mostly favored monopoly.
On that debate the best source is this Anna Schwartz essay (subscription required--Sorry!!): link.springer.com/referenceworke… But don't feel too bad, because there's a fantastic book that covers not just the English debate but the free-vs-central banking debates that took place elsewhere.
It's Vera Smith's wonderful book, _The Rationale of Central Banking_, and its online! link.springer.com/referenceworke… Any serious student of monetary history should read it for an eye-opening account of one of the great historical "might have beens."
Well, I'm just about done, but I can't resist ending with some more general reflections. I have always thought the approach taken to studying monetary systems in economics to be very bad. In most other fields--take trade and I.O.--students start with a free-market baseline, e.g.
..."free trade" or "perfect competition." After learning how things work out in those cases, they go on to consider possible interventions and their implications, including whether some might enhance welfare. But the free market or "laissez faire" case forms a crucial foundation.
Indeed, without that foundation, it would be sheer nonsense to speak of the "consequences" of this tariff or that cartel. Consequences compared to what alternative?
But monetary economics? Here students start w/ a given fiat-money issuing central bank pursuing some assumed targets, with scientific precision. The merits of alternative targets are assessed by asking which yields the lowest "loss" according to a presumed social "loss function."
Since alternative monetary arrangements are never considered, while the (blackboard) central bank is assumed to be able to reliably target whatever any economist thinks it ought to target, economists trained this way naturally consider central banks "optimal,"
...and take no interest in alternative arrangements. Yet we known that in practice central banks are far from perfect. But we have nothing to compare them with, except our notions of how they OUGHT do things.
I don't mean to suppose that, if everyone took an interest in non-central bank or decentralized currency systems, they conclude as I have that they have many virtues central banking systems lack.
But I do know that their beliefs, whatever they ended up being, would be more firmly founded than before.
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