This week I highlight the various forms of scrip issued during the Great Depression in Wisconsin. If you would like to read more about it, please see my new website: www.wisconsinscrip.com.
As the Great Depression wore on into the early 1930s various schemes were developed to try to move the economy forward. High unemployment, failing banks and the stock market collapse ground the economy to a halt and money had become scarce. Commerce virtually ceased nationwide when President Roosevelt ordered all banks closed on March 6, 1933.
Various forms of scrip were circulated at the local level to try to re-start the economy. The types of scrip can be divided into several different categories.
State Scrip. Only one statewide issue of scrip was issued and that was in Wisconsin. The State Banking Department had scrip printed and made it available to 172 Wisconsin state chartered banks. Over $3,000,000.00 in state scrip was issued and $4,710.00 remained unredeemed in September 1934.
Municipal Scrip. Local governments were squeezed by two factors. First, cash was tied up in closed banks. Second, tax collections dropped off as it became impossible for people and businesses to pay them. There were several types of municipal scrip including tax anticipation notes, certificates of indebtedness, payment orders and relief orders. Low denomination municipal bonds also were circulated.
Clearing House Certificates. Clearing houses had been established in most communities in the late 1800s to aid in the clearing of checks among banks. During the panics of 1893 and 1907 clearing houses operated in a manner similar to the Federal Reserve by issuing circulating certificates backed by deposits held by the clearing house or the banks. Similar scrip was issued in many communities in 1933 as a result of the Bank Holiday.
Stamp Scrip. Silvio Gesell, a Swiss economist, developed the concept of a circulating medium that would lose it value as time went on. The goal was to keep it moving from hand to hand in an economic version of the kids game “hot potato”. The full value could be restored by buying a stamp and affixing it to the certificate either at fixed intervals or when used. This type of scrip was self-liquidating in that the scrip would be retired once the equivalent of its face value had been purchased in stamps.
Barter and Exchange Scrip. Barter exchanges were established in many cities as a means for the unemployed to trade labor and time for necessities. Members traded services for labor or goods, or goods for services or other goods. The exchanges kept schedules of the value of goods and services so there was no dispute as to the value of items.
Payroll and Business Scrip. Many businesses were caught off guard by the Bank Holiday and did not have sufficient cash on hand to make payroll or pay bills. If they had sufficient economic muscle they were able to issue scrip, often in the form of small denomination checks, that was accepted in the local community.
Private Scrip. There are a few instances of individuals issuing scrip. Some of these were opportunists, some were altruistic dreamers and others were local business leaders.
The success of the various types of scrip varied from place to place. It was most successful in areas where there were existing economic drivers that only needed assistance.