We think about money as a law of nature, as a kind of constant, but the way that money works today is not only just one of many ways in which it could work, it’s a relatively recent invention in the great scheme of things. It wasn’t that long ago that the developed world was on a commodity standard (ie, gold) and there was no national fiat currency. Seventy five years ago, in America, there wasn’t even a circulating medium of exchange. At the height of the Great Depression, 1932 and 1933, when the interest rate on U.S. Treasury bills was negative, unemployment was 25 percent and bank runs and closings were common, Americans reverted to barter.
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rate (2% per week) and was calculated so that the face value would be amortised over one year, and the currency withdrawn at that point.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.
One particularly fascinating aspect of this story that I came across when reading “Monopoly: The World’s Most Famous Game and How It Got That Way” by Philip Orbanes. 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! After all, even Monopoly is doing away with paper money. Remember when Hasbro first released their electronic money version of the game?
Here’s an excerpt from a review at the time: “What would Monopoly be like if it were invented today…? The world has changed amazingly over the last 70 years. This special anniversary edition celebrates 70 years of the world’s most popular board game with a modern day equivalent to the traditional game. Choose from a range of new movers including a mobile phone, roller blade or even a cheeseburger! The rent has skyrocketed sky high in a much more recognisable London. You can build property in Covent Garden, visit the London Eye or make millions in The City! Wheel and deal in the fast lane – millions of pounds, not just hundreds! This Electronic Special Edition features an Electronic Banker Unit and “Debit” Cards that replace the money. Just swipe and you’re away! “
In the interests of research I got a copy of the UK Monopoly Electronic Banking Edition and turned to an enthusiastic Monopoly player for a more detailed evaluation, which I cannot resist reprinting here:
[Aaron Birch, aged 9] I think that apart from being a good game, it actually teaches little children banking so that when they get older they’ll understand it. It really imitates the 21st century but on a board game. The idea of using credit cards is much more creative than using paper money because you never run out of money, you could go up to 500 million if you wanted to on electronic Monopoly whereas there’s a limit to the money you have in old-fashioned Monopoly. The Community Chest and Chance cards are really modern when some say ‘Your internet company has succeeded, collect 2 million’ which is a modern-day experience. The counters are also modern because there’s one roller blade, one skateboard, one burger, one airplane, one race car and one mobile phone, which are modern-day items. It raises the Monopoly level to a whole new standard because more people would buy the game when they know how much more fun banking is with an electronic device and having a modern-day item as a counter.
Monopoly tells us so much more about money that you might think!
Snippings 