It’s hard to imagine now, but this is a time when the U.S.A. literally ran out of money. In his first week in office in 1933, FDR passed legislation to enforce bank holidays, end the convertability of gold and to force the population of to sell their gold to the Federal government. It’s surprising, I think, to Europeans to realise just how much passion these events still stir today: there are no end of books, magazines, pamphlets and web sites that still refer to FDR’s actions then as if they were yesterday, and not all of them come from guys living on the top of mountains in West Virginia (ie, the guys who think that the Federal Reserve is a Jewish conspiracy).
Anyway, the point is this. Because there was no cash — no Federal Reserve notes — available, people began to print their own money. This is known as “scrip” and it is by no means limited to this single historical case: it’s a common phenomenon. An often-used example closer to home comes from the Irish bank strike in 1966, when people in Ireland wrote personal cheques to each and these were then passed on to form a cash substitute. British Postal Orders circulate on the Indian subcontinent performing a similar function.
The “depression scrip” issued around America took many forms (there is a vibrant collectors’ market for this: just search on eBay) and was issued by communities, companies and individuals.
As Forum friend Bernard Lietaer points out in this 1990 article, Dean Acheson, then Assistant Secretary of the Treasury, had been approached by Professor Irving Fisher with the idea of scrip with a high “negative interest” rate (2% per week) and was calculated so that the face value would be amortised over one year, and the currency withdrawn at that point. Acheson decided to have it checked by his economic advisor, Professor Russell Sprague at Harvard. The answer was that it would work, but that it had some implications for decentralised decision making which Acheson should verify in Washington. By this time, the “stamp scrip movement” as it became known, had created interest by no less than 450 cities around the United States. For example the City of St. Louis, Missouri, had decided to issue $100,000 worth of stamp money. Similarly, Oregon was planning to launch a $75 million stamp scrip issue. A federal law had been introduced in Congress by Congressman Pettengil, Indiana, to issue $ l billion of stamped currency. Fisher published a little handbook entitled “Stamp Scrip” for practical management of this currency by communities, and described the actual experience of 75 American communities with it. It looked as if the U.S. might adopt a decentralised money system, but on 4th March 1933 Roosevelt announced the New Deal and, in addition to closing the banks, prohibited the issue of “emergency currencies”. The experiment was over.
What’s the point of this post? Well, I happened to be reading “Monopoly: The World’s Most Famous Game and How It Got That Way” by Philip Orbanes and it mentions in passing that in 1933, Parker Brothers used their printing presses to print scrip that was accepted in their home town of Salem, Mass. Games to the rescue! I wonder if next time the banks fail, it will be World of Warcraft gold, not Monopoly money, that stands in for fiat currency!
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]