Scrip Issued during the Great Depression of the 1930s
Types of Scrip Issued during the Great Depression
During the 1930s, hundreds of different issuers put out some form of currency that was meant to do something about the hard times that had descended upon the country. These types of Depression scrip varied according to their purpose, and the circumstances of their issue and use.
Work Relief and Barter/Self-Help Scrip
At the beginning of the 1930s, the United States had no comprehensive safety net for people who lost their jobs. Unemployment relief, when it was available, tended to be a responsibility of local governments or private charities. Before the magnitude of the downturn had become apparent, communities tried to help their jobless by hiring them for work projects. Local governments operated commissaries as a means of distributing in-kind relief to these workers. Scrip was issued that enabled the unemployed to purchase the necessities of life. Of limited negotiability, such scrip resembled the issues of company stores in coal mining towns. Work relief was also provided through store orders, which allowed recipients to purchase goods at selected retail establishments.
As the economic downturn ground on, desperate workers established barter exchange and self-help cooperatives. In these arrangements, the unemployed joined together either to swap their labor with willing employers or to produce their own goods, which they then traded for other necessities. Scrip issued by these groups made barter transactions easier. Some of these barter and self-help groups achieved high levels of organization and operated over an extensive geographical area.
The number of these groups, and the amount of scrip they issued, diminished rapidly once the federal government pre-empted their efforts by creating its own employment relief and work programs as part of the New Deal.
Municipal Scrip
Encouraging local economies was also on the minds of public officials and businessmen in communities around the country, who thought that recovery had to start at home. This meant keeping trade within the community. One way to do that was to use local money that wouldn’t leak out to the benefit of faraway corporations in big cities. Small-town chambers of commerce and other business boosters looked at scrip as a way of expressing civic pride, and incorporated local designs and themes into their issues of local money, which were abundant during the mounting wave of bank closures and state-level 'holidays' between late 1932 and early 1933. Business groups and local governments cooperated to issue scrip backed by their frozen bank accounts, enabling employers to meet their payrolls with the understanding that these issues would be redeemed and retired once the banks reopened. Scrip was issued for these purposes by single businesses like newspapers or restaurants and, in some instances, even on the credit of private individuals.
Bank Scrip and Clearinghouse Certificates
The same bank closures that motivated much municipal scrip also lay behind a third kind of emergency money, bank scrip and clearinghouse certificates. With the spread of state banking closures bankers began issuing their own form of currency backed by their loan portfolios, enabling banks to meet at least some of their depositors’ demand for currency. When local associations of banks did this against pools of their portfolios, their notes were essentially an updated version of the clearinghouse certificates issued during earlier panics. Almost all of this scrip was either proposed or issued during the first three months of 1933.
Since this bank-issued money was meant to address the problem of frozen accounts, most of it remained in circulation only as long as the banking crisis lasted. By early March of 1933, banks and clearing houses around the country were poised to flood the channels of commerce with their scrip. At the last moment, Roosevelt announced a sweeping rescue plan that would make most forms of bank scrip unnecessary. As a result, hardly any of the clearinghouse certificates ever entered circulation, and their supplies were simply destroyed.
Tax Anticipation Scrip
The economic downturn not only destroyed jobs and output but also crippled the financing of state and local governments. Governments faced the growing problem of tax arrears. When taxpayers couldn’t pay their obligations, governments tightened their own belts, missed payrolls, and defaulted on their debts. Lacking money, cash-strapped counties and cities across the country resorted to tax anticipation scrip, or local money backed by prospective tax receipts. People accepted it because they could pay their taxes with it. This wiped out back taxes, and cleared the way for new scrip issues backed by future tax receipts.
Tax anticipation issues remained in circulation far longer, and in far greater amounts, than other forms of Depression Scrip. In more populated, urban states like New Jersey, Michigan, and Ohio, their legislatures passed laws authorizing local governments to issue tens of millions of dollars’ worth of such local money, which remained in use well into the late 1930s.
Stamp Scrip
The most unusual form of local money issued during the Great Depression was called stamp scrip. Between 1932 and 1934, communities around the country hit upon the idea of creating money that required applying a stamp to the currency each time it was used. These stamps cost one, two, or three cents apiece, paid for in real money, depending upon the denomination of the scrip. Each time the scrip was spent, either the spender or recipient had to stick one of the proper stamps on the back. As the scrip circulated, and stamps were applied again and again, the back of the note accumulated stamps up to the face value of the scrip note. At that point, the note would be redeemed for its face value, using the funds accumulated by the stamp sales.
The inspiration for this kind of scrip came from a German monetary reformer, Silvio Gesell, who argued that money ought to decay in value (“rust” was his preferred verb) like all other goods, and that economies otherwise suffered when people could hoard money, rather than spend it in useful ways. Gesell proposed charging a periodic fee for the possession of currency notes, which would require stamps to be applied to them as a condition for retaining their face value. In the United States, Gesell’s scheme was popularized by the famous Yale economist, Irving Fisher, who was concerned more with simply speeding up the circulation of money. Money moving more quickly meant people spending more, and this, Fisher thought, would help pull the country out of the depression.
Whatever the merits of these ideas, the execution of stamp scrip plans was largely disappointing. By and large, communities viewed stamp scrip as an experiment in self-financing unemployment relief, and chose to have their scrip stamped per transaction, rather than per time period, thus removing the incentive to use it quickly. In any event, it took considerable planning and effort to buy the stamps and use them each time a piece of scrip was spent. It was an inconvenient process, and vulnerable to cheating (by people not applying the stamps). As a result, most of these experiments failed, especially when they were tried on a big scale. Most were undertaken beginning in mid-1932 and wound up by 1934 at the latest.
Novelty Scrip
Most of the scrip circulating during the Depression years fell into one of the categories above, although some examples shared attributes with more than one type. Into a separate category it is useful to place certain scrip issues that seemed intended less for actual circulation, and more for the publicity (and seigniorage) they generated. Prominent among such novelty scrip was the well-known Wooden Money of Tenino Washington—scrip, backed by frozen bank accounts, printed on rectangular pieces of spruce wood (later, cedar). A good number of these pieces ended up, unredeemed, in the hands of collectors, to the profit of the town. Other forms of wooden money were produced elsewhere, more as tourist curiosities than as practical additions to the local money supply. The town of Heppner, Oregon gained publicity for its Sheepskin Scrip. Likewise, the Clamshell Money of Pismo Beach and Crescent City, California had mainly a novelty value.
Some communities made use of so-called Prosperity Checks and Anti-Hoarding Checks which were simply round denomination checks that circulated through the simple device of multiple endorsements. Such instruments were launched into circulation as expressions of community solidarity. In order to accommodate large numbers of endorsements, such checks were designed to be far bigger than the typical check. Watsonville, California circulated a prosperity check that was nearly 15 inches long to accommodate spaces on the back for seventy endorsements. Pacific Grove, California, put out a one-dollar anti-hoarding check that was even longer.
Selected Sources for Further Reading About the Great Depression
Great Depression, with further links to accounts of the major banking and financial events of the period (Federal Reserve History).