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Content: Stamp Scrip (by Irving Fisher, 1933)




STAMP SCRIP is, as hitherto used, a temporary substitute for a part of the regular currency which has deserted. It is small in amount and short in duration.
The two points about Stamp Scrip are:
First: It is like money, because it can be banked OR invested OR spent.
Second: It is unlike money, because IT CAN NOT BE HOARDED.
For the stamps, as we shall see, compel Stamp Scrip to "step lively."
A piece of typical Stamp Scrip is shaped more or less like a dollar bill; but it can not be mistaken for conventional money, because the color and the design are distinctive. Usually it bears on its face the name of an exchange or of a business men's association or of a town, according to which of these is the source of issue in the particular case. But though the appearance is distinctive, scrip bears prominently a statement of its denomination, to equalize its purchasing power (by agreement) with the purchasing power of conventional money. In fact, it is a part of the agreement that, after a year of circulation, it is to be redeemed in money.
Before turning the scrip over to examine the stamps on the reverse side, let us consider the circumstances of its issue and how it becomes injected into the circulation. A typical case is that of a municipality which issues $1000 in scrip as a sheer addition to the circulating medium of the town. Its circulation will be entirely local, and the initial use of it will be to hire a new group of workmen on a new municipal job. Naturally the town must first get the agreement of the workmen and also that of a reasonable number of the local merchants from whom the workmen buy their family supplies - an agreement to the effect that all will accept the scrip according to its face. It is by no means necessary to get everybody's agreement. If some of the business houses accept it, the rest will be forced by competition to do the same; and if a number of people begin to accept it, the others will accept it because everybody else accepts it.
But this agreement will not readily be forthcoming without a guaranty from the town that, after a certain period of circulation (usually one year), the scrip will be redeemed in cold cash. So the town agrees to this, and sets to work to gather the $1000 of cold cash before the expiration of the scrip. The town has a year to work in; and it works by means of what might be called a sort of "ambulatory tax" on the circulation of the scrip itself.
We now look at the reverse side of the scrip, and there we find a row of 52 spaces, all dated to indicate the successive Wednesdays of the year. Each of these spaces provides room for a small adhesive stamp somewhat resembling a postage stamp. The stamps are sold by the city for 2 cents each; and it is a part of the plan initially agreed to by all, that no one can pass the scrip on a Wednesday unless it has, attached to it, the stamp for that day on the appropriate dated space. Neither can you pass it if it is in arrears for past Wednesdays - you have to make up the arrears; for if you try to pass it unstamped, the next recipient will laugh in your face. He does not propose to be "stuck" by the neglect of previous holders. Either you have all the stamps on up to date or he is free to refuse the scrip. Therefore, you not only have the stamps on, but, being as shrewd as the next man, you have already been as hard on your predecessor as your successor is prepared to be hard on you. There simply are no arrears.
But if the scrip is duly stamped up to date including the last Wednesday it will pass freely without any new stamp until next Wednesday.
At the end of the 52 weeks of the allotted year, when a dollar of scrip returns to the city treasury for redemption, it finds there the $1.04 which paid for the 52 stamps now carried on the back of the certificate. In short, when the 1000 dollar issue of scrip thus comes in, it finds $1040 there ahead of it; and the extra $40 defray the expense of printing the stamps and of administering the plan.
Thus the scrip is self-liquidating.
Lest, however, the workmen and the trades people may not agree to the plan unless the town puts up security, the town may do this by a simple bookkeeping transaction at the bank; that is, it borrows $1000 from the bank and leaves it in the bank on deposit, to guarantee the scrip-using public. When, at the end of the allotted year, the scrip is redeemed to the satisfaction of the bank, the loan is cancelled, and the city is out nothing. Neither has $1000 of permanent legal tender been withdrawn from circulation in order to be replaced by the $1000 of temporary Stamp Scrip - because the bank made it a mere bookkeeping transaction. It did not lock up the $1000.
There are cases, however, when the legal tender money is actually bundled up and kept as a guarantee in a safety deposit box in the bank, until the year is over and the scrip redeemed. But the $1000 of legal tender thus tied up is a slow-moving currency which everybody has been hoarding, while the $1000 of scrip which temporarily supplants it is a fleet-footed currency which nobody can hoard.
Why not? What is the secret of this extra speed on the part of Stamp Scrip? The secret resides in each stamp due on a Wednesday. You learn to watch Wednesday coming; and, realizing that Wednesday is tax day, you buy what you want before that day, on Thursday or Friday or Saturday or Sunday or Monday or Tuesday - and so does the next recipient, unless you "stick" him late on Tuesday night. That is, you do your buying, so far as possible, in the intervals between stamping days (Wednesdays) in order to escape the 2 cent stamp tax which you would otherwise have to pay.
Of course, if there is nothing which you ought to buy, you can invest the scrip in any enterprise, or deposit it in any bank, which is a party to the initial agreement to use the scrip.
Meanwhile the extra speed is of the utmost benefit in a depression when everyone is afraid to spend real money.
I have spoken of the stamp as constituting a sort of ambulatory tax. Please note that even the best people always dodge a tax if they honestly can. Sometimes the effort to dodge has been fatal. In France, for instance, many years ago, there was a window tax. It led people to build houses with few windows or even windowless houses, and in consequence, to die of tuberculosis. They dodged the tax and they did it without dishonesty, but nevertheless they brought on their own doom. This tax was not only painful but destructive.
In Stamp Scrip we have, for perhaps the first time in history, a tax which the taxing authority wants to see avoided - by the maximum number of people. For, by passing the tax on to the next fellow you speed the scrip, and that is the chief purpose. Moreover, the more you speed it, the more you divide the burden per capita without in the least diminishing the return to the city. Suppose, for instance, that a grocer during a certain week (of six business days) receives and pays out sixty dollars of scrip. Fifty of these dollars may have come and gone on the five business days intervening between Wednesdays. Thus he is taxed, not 2 cents per dollar of sales but perhaps 1/6 of a cents, which amounts, to a sales-tax of one-third of one per cent on the sales put through with the help of the scrip. And most of these sales are extra. The grocer is taxed for new business which only the scrip could bring him. This tax is not only painless but helpful.
The efficiency of money is its volume multiplied by its speed. What is the speed of scrip? At the very least, the average scrip certificate will be unloaded twice a week - a speed that is four times the speed of an average dollar in normal times. In depression times, the average dollar circulates only about a third as fast as usual so that a turnover of twice a week becomes twelve times the depression average for conventional money.
This, of course, does not mean that actually 12 times the business will be done; for Stamp Scrip never becomes a large proportion of the total circulation. Moreover, a fraction of the conventional currency will withdraw from circulation in favor of the Scrip.
Thus, the stamp is more like a tax on hoarding than a sales tax. Hoard, and the tax is heavy; spend (or invest or deposit), and the tax is light.
If the stamp is thus to be likened to a tax, the scrip itself may well be likened to money. But it were more appropriate, I think, to liken the scrip to a pre-dated check, issued by the town. It has even been proposed that the scrip, in small amounts, be given away to needy folk, or to everybody, in which case, though it would be a gift to the first recipients, it would really be a loan to the public as a whole -a loan to the public by the public. In any view, the scrip goes out and comes back and is cancelled like a check, except that it passes through more hands and without endorsement.
Nor is it a case of something for nothing. It is a case of a restored transfer belt, transferring not something for nothing, but goods for goods, goods for services, services for goods.
Charles Zylstra, the enterprising man who first introduced Stamp Scrip to America (in a small western town) tells this story. A travelling salesman stopped at a hotel and handed the clerk a hundred dollar bill to be put in the safe, saying he would call for it in twenty-four hours. The clerk, whose name was A, owed $100 to B and clandestinely he used this bill for the liquidation of his debt, thinking that before the expiration of 24 hours he could collect $100 from his own debtor, whose name was Z. So this 100 dollar bill went to B, who, greatly surprised, used it to pay his own 100 dollar debt to one C, who (equally surprised) . . . and so on, and so on, all the way down to Z, who, with much pleasure, returned the bill to A, the clerk, who, in the morning, restored it to the salesman. And then did A, the clerk, stand petrified with horror to see the salesman light a cigar with it.
"Counterfeit," said the salesman, "a fake gift from a crazy friend, Abner; but he didn't put it over, did he?"
Let us now look at the collective result. At the end of the year, the town has a new street, paid for with scrip which (through the stamps) was paid for by the citizens who used the scrip - and will use the street too.
The scrip cost the citizens perhaps 1/3 of 1 per cent on mostly new business, while the street cost the city (in the sense of the city treasury) nothing at all. But, of course, the city is the citizens; so that these various statements boil down to this: The citizens have bought a new street out of a self imposed tax on mostly new business, and it was a tax less heavy and more spread out than any other tax they ever paid.
The chief objection to Stamp Scrip which I have thus far encountered is that it will not work because people will refuse it - it will not catch hold. But the man who said this, said later, "I guess I must be like the Englishman a hundred years ago, who said that the steam-locomotive couldn't work because smooth wheels could not catch on to smooth rails. While he was saying this in London, Stephenson was successfully running his locomotive in Scotland." Very often people are saying of a certain thing, "it can't be done" at the very moment that somebody else is doing it.
Let us look now at the existing evidence that Stamp Scrip has caught on and has worked per schedule.