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Content: Stamp Scrip (by Irving Fisher, 1933)




Oh the whole the American experience with Stamp Scrip is so young that Schwanenkirchen and Woergl are still the leading cases; but some lessons may even now be learned from our own experience. Twenty or more towns are embarked on the plan in one form or another, and many more appear to be in line, including several large cities.
I shall glance over the high lights of this brief experience.


The originator of Stamp Scrip in America was Charles Zylstra of Hawarden, Iowa. This is a town of 3000 inhabitants. Its finances were in good shape, but there were plenty of workless men and the usual number of boarders. So, in October 1932, upon petition, the town decided to issue $300 in Stamp Scrip of $1.00 denomination. The sum was to be used principally for a town road to be built by otherwise workless men.
The scrip is redeemable, but there is no advance redemption fund. The stamps alone are the guaranty, and they are sold by the town at 3 cents per dollar of scrip, which is redeemable whenever 36 stamps (aggregating $1.08) have been affixed. There is no set period, however, for affixing the stamps. The agreement is merely that one stamp is to be affixed with each transfer of the scrip, so that the redemption date is indeterminate.
The plan was backed by most of the merchants and by one bank and of course by the otherwise workless men. These agreed to take $1.00 of scrip to 6o cents of cash in their pay envelopes.
At first, the machinery creaked a little, some people refused the scrip. But now, I understand, all is working smoothly, and a new issue of $1000 has been authorized.
But the omission from the Hawarden plan of the set dates for stamping was, I think, ill-advised. It would naturally weaken the speed motive and might even reverse it, since it costs 3 cents to transfer the scrip instead of costing 3 cents not to transfer it! Also the indeterminateness of the date affords a loophole for collusion at the time of transfer, since both parties to a given transaction may agree to omit the stamp altogether. Neither party has any motive for checking the other. And Hawarden has become the precedent, in this respect, for other American towns which are taking up the Stamp Scrip idea.


In Evanston, Illinois, it was a merchants' association that inaugurated the Stamp Scrip. They inscribed it with a new word: "Eirma." This is composed of the initials of the organization name: "Evanston Independent Retail Merchants Association."
In this long title, the word "Independent" expresses the motive for the scrip; for what the merchants meant to be independent of was the shopping in Chicago instead of Evanston and at the chain stores which had invaded their territory. They thought they could, by an appeal to town loyalty, prevent the scrip from circulating among their rivals. Accordingly, after getting a sufficient number of consents, they printed $5000 worth of "Eirma" and "sold" it to the members according to their respective requirements - for paying their employees and dealing with one another. In other words, the local members put up a guaranty fund of $5000 which was held in escrow by a bank. Fifty stamps, at 2 cents, retired the scrip, which was to he redeemed by the "Eirma" organization.
In this instance the banks in general did not cooperate. The bankers' motive of loyalty to a municipal enterprise was lacking. Neither did the town offer to receive the scrip for tax payments. Nevertheless the town lent its moral support, as the result of a very ingenious bid which was made by the Eirma organization. It so happened that the town's own finances were in such poor shape that it had been obliged to defray some of its expenses by means of "tax anticipation warrants," later redeemable by the town in cash. So the Eirma organization agreed to buy these warrants with the cash proceeds of the stamps as fast as these should be sold.(1) Thus, when the redemption date should arrive, for the Eirma the redemption would have to be effected with the initial guarantee fund, not with the proceeds of the stamps. This would leave the tax anticipation warrants still in the Eirma treasury for distribution to the members according to their purchases of stamps. The net result, therefore, of the Eirma dollars amounted to a purchase on the instalment plan of tax-anticipation-warrants, by the members of the Eirma Association.
But in Evanston there crops out the first unfortunate result of copying the Hawarden precedent (of making the stamps affixable, not at set intervals, but with each transaction). Evanston is a larger place than Hawarden, so that it is not so easy in Evanston to detect the small disloyalties of the citizens. Accordingly the chain stores made a flank attack on the local merchants by agreeing with their patrons to receive the scrip, without stamps, provided the patrons would receive them back without stamps. Therefore, at last advices, the stamps were not selling as they should.
The Eirma organization now concedes the superiority of dated scrip, and would like to pass the whole enterprise over to the municipality.


Russell, Kansas, has a population of 2000. On December 21, 1932, the municipality issued (3) $300 in scrip, exclusively in a 50-cent denomination. The stamps are 1 cent each; and in spite of the fact that they are attachable only with each transaction, a check-up seems to show an average turnover of once every three days. The plan has helped in the clearing up of debts among the local merchants; but the observers regard it as only partially successful, so far as concerns the use of the scrip in buying produce from farmers and in hiring extra labor. It is suggested that not enough care was taken in pledging the cooperation of the community beforehand.
This town (Russell) supplies some interesting figures as to the purchase of stamps:

51 per cent are bought by labor and general population
18 1/3 per cent by grocers
17 1/3 per cent by utilities (gas, water, light, telephone)
6 2/3 per cent by auto supply dealers (gas, oil, repairs)
5 2/3 per cent by dealers in clothing and housefurnishings


The town issued $250 of scrip in exclusively 50-cent denominations, redeemable with 54 stamps, costing 1 cent each. The purpose is to help the unemployed. People are reluctant to take the scrip from the merchants, but the turnover seems to be once every four days.
This scrip is foldable, and the stamps are attached inside.


The town issued $401.50 in a 50-cent denomination, redeemable by 54 stamps, 1 cent each, affixed with each transaction. The entire group of business and professional men are back of the plan, and there are no difficulties. It is said that useful work has been done for the city which would have been impossible without the scrip.


Here there are 1800 inhabitants. The first issue of scrip was $1000; and $500 more are, at this writing, soon to be issued. The denominations are 25 cents, 50 cents and $1.00, and the stamps 1 cent, 2 cents and 4 cents respectively, attachable with each transaction. In the first one and a half months (the last information), no scrip had come in for redemption. The scrip has been used to help 30 families by giving work to the men at 30 cents an hour. The work is the removing of rocks from the streets.


This town issued $300 of the Hawarden type of scrip including the 3 cent stamp. The plan has worked well, and a second issue is, at this writing, being considered. One new feature here is that the city clerk acts as a clearing house: he takes scrip from merchants who cannot use it and passes it on to others who can.


There are 3600 inhabitants. The scrip issue was by the Chamber of Commerce and was $500, - Hawarden type. The city handled one half of the issue and the Chamber, the other half. Some unemployed received work on projects which could not otherwise have been accomplished. The scrip is said, however, not to help the unemployed more than once. Nor has it stimulated business. The business men complain, too, that they bear all the burden of stamping, and that the general public refuses to receive the scrip in change over the counter. For the sake of the unemployed this town would like to issue more, but it hesitates, largely because the circulation seems to be limited to the business men and seems to clog their tills.


The town, in January 1933;, issued $500 in a $1.00 denomination, to bear fifty 2-cent stamps. It is used for labor on city projects at $2.00 a day, not more than two days per week per man. The scrip has thus far proved satisfactory.


The town issued $300 of the Hawarden type of scrip. It circulates slowly and as a business stimulator is not considered of "much if any value," and may he called successful only in so far as it have $300 of immediate relief to the unemployed.


This is a village of 900 inhabitants. It issued $150 of scrip in 25-cent, 50-cent and $1.00 denominations. Redemption of the $1.00 scrip takes thirty-six 3-cent stamps ($1.08). Its purpose is to dive work to the unemployed at 25 cents an hour, 6 hours per day and not more than two days per week per man.


In these towns scrip was issued in the $1.00 denomination, with 4-cent stamps affixable at each transaction. In both places the plan had to be abandoned: in Merced, for lack of enthusiasm; in Anaheim, because of a substantial loss.


The town has prepared $500 of the Hawarden, or dateless, type of scrip in a $1.00 denomination, of which $325 was issued (about January 15). In a month, only $35 worth of stamps had been sold. There is, perhaps, insufficient diversity of occupation, and the scrip (after hiring labor) tends to clog in the hands of three or four merchants. "The value, after the initial transactions" seems "quite problematical."


On January 16, 1933, the Merchants Association issued 1700 one-dollar "Trade Checks" with dateless stamps. After one month, the Association reports: "We regard the plan as successful thus far, as the unemployed are eager to work for this kind of money, and our business men are cooperating almost 100 per cent . . . . We do find it necessary to stress the necessity for each business man to distribute the checks he receives widely by paying a few on local bills, giving his employees a few on their salary, and using them himself for personal expenditures, rather than unloading them all on one concern at once.
"We have had no trouble in getting the merchants to affix the stamps.
"We find that the checks circulate not only among the merchants, but individuals accept them, buy stamps from the merchants and pass them on; they have been used to pay insurance premiums to local agents, rents, etc.
"One of our banks subscribed $50 toward the guaranty fund which we have behind the checks, another accepted ten of the checks in part payment for a month's rent by a tenant of an office in their building, and the other bank has expressed no opposition."


Tax anticipation warrants are themselves a sort of scrip; and the experience of Knoxville in the use of such warrants is instructive. The city, being unable to find cash for both pay roll and bond payments, began, on June 14, 1932, to use these tax warrants for the pay roll.
To circulate fast, any medium requires a receiving motive on the part of the recipient, and a transmitting motive, on the part of the user, to hurry it along. The motive to receive the Knoxville tax warrants is supplied in part by the relative scarcity of conventional money, and in part by the 6 per cent interest carried by these warrants. The motive to hurry them along seems to be supplied by the fact that the warrants cannot be deposited in banks.
Also the tax warrants are themselves usable to pay taxes (60 days after issue), and on taxes thus paid in advance, the citizen gets a 5 per cent discount, in addition to a credit for the 6 per cent interest already due on the warrant, making sometimes a saving of 11 per cent on the tax. The assistant finance director, Mr. Herbert Cox, says that "during the last two months warrants have been coming back to the city in taxes faster than the new ones are issued."
But the warrants circulate for all other purposes. A motor company even sold the city six automobiles for $3000 in city warrants as part payment, the balance being old cars "traded in." And nearly all the local merchants and other interests receive the warrants, in whole or part-payment, for goods and accounts due, and make change, either in money or in credit on the next transaction (the credit being evidenced by the due bills of the merchants). To facilitate making change, the city is considering the issuance of 25- and 50-cent denominations.
"What about velocity? Aside from the financial embarrassments of the city government, business in general had been handicapped by the closing of two large national banks. Yet the merchants of Knoxville have noticed that the tax warrants offset these handicaps by circulating faster than money; and they testify that the extra speed has furnished a stimulus to business.


Four other variants of the Stamp Scrip idea have come to my attention:

(I) A piece of unexpected but profitable comedy occurred in Tenino, Washington. A bank had failed; and the local Chamber of Commerce bought up a part of the distributive shares of the depositors, paying for these not with scrip, but with redeemable wooden coins in small denominations. These coins were regarded as curiosities, and soon became eagerly sought after as souvenirs. So the Chamber was soon able to negotiate them at $2.50 a piece! The upshot was that with $6500 of profit, it was able to buy the building of the defunct bank and invite another banking corporation to become the tenant and restore a banking service to the town.

(II) The second variant is called the "Baby Bond" plan such as that of J. Rice Scott of Miami, Fla. The bonds are in covers resembling those of a small check book. The denominations run from $5 to $100. The bonds are supposed to circulate like money and be stamped with each transfer at 2 per cent of the face, until there have been fifty or more turnovers, when the bonds are redeemed by the issuing organization. There is no particular logic in calling these booklets "bonds." The idea is the same as the Hawarden idea, the only difference being the larger denominations.

(III) A third variant is a plan which makes no use of stamps at all, but in order to bring about the extra stimulus to turnover, provides that a certain percentage of the buying power of the scrip shall drop off or evaporate at stated intervals. This plan has recently been tried in both Germany (14) and America, but is very inconvenient. It requires a special computation for each transfer, it complicates bookkeeping and is apt to repel the next recipient with the unpleasant idea of progressive depreciation. I doubt if any bank would be bothered with such scrip. The American experiment along this line was that of the "Threefold Corporation" of New York," which has now abandoned it in favor of Stamp Scrip.
Another rather original application of the principle of "compulsory" circulation is the "Speed Money" which the zealous adherents of the German-Wära movement started, after the Government had interfered with their issuance of Stamp Scrip. A Dr. Nordwall, of Norden in Germany advertised in the local paper one day that he would give to Reichsmark to the first man to come to his office owing someone else that amount. The money was not to be given away but could only be used to cancel the debt. Inseparable from the 10-Reichsmark bill was a messenger boy on a bicycle. All that A, the lucky recipient of Dr. Nordwall's 10 RM. had to do was to send the boy to his creditor, B; but B did not get the cash either. He had to tell the boy to whom he owed money, and thus the 10 RM came to C, who sent it to D, and so on, down the line. In the late afternoon the boy had to trust his last "customer" with the bill, after he received the promise to have it handed back to him the next morning. He then got a receipt stating that he had actually left the money. With this receipt he could go to the last but one, proving that his debt was paid, getting this man's receipt for the previous customer. Thus he finally returned to the first, having cancelled, perhaps 120.-Reichsmarks of debt, getting a small commission from each debtor for this debt-cancelling service. Instead of a pen penalty for hoarding, the hungry stomach of the messenger boy sped up the circulation of this money. The scheme was actually operating, and perhaps it still is, although I do not know how successfully.


From a correspondence with four or five hundred communities in every state of the Union, and from other sources of information,(16) I gather that there is now a definite turn toward the Woergl or dated type of Stamp Scrip.
Dothan, Alabama, a town of 16,000 inhabitants, has issued Stamp Scrip of the dated type.
St. Paul, a city of over a quarter of a million inhabitants, has decided (as soon as it can get the authority required by law from the Minnesota legislature), to issue $100,000 of Stamp Scrip of the dated type.
Over a hundred other municipalities (17) including a fair proportion of large cities, are seriously considering the issue of Stamp Scrip of the dated type.
In Kansas, a bill is pending in the State Legislature which, if passed, will authorize localities to use scrip and will insure uniformity in the issues (although not of the dated type, unless an amendment can be secured).
In the state of Iowa, a bill has been passed authorizing the State itself to issue the scrip and to distribute it among cities and counties. (Here, too, the scrip will be the undated type unless the proposed law be amended.)
Seven or more other state governments are seriously considering scrip projects.
On February 17, 1933, Senator John H. Bankhead of Alabama introduced a bill into Congress for the purpose of authorizing the Federal Government to issue a dated Stamp Scrip that shall operate as legal tender during the limited period of the issue.(18) Senator Bankhead's plan is that this emergency issue be injected into the national circulation, partly through the regular expenditures of the Federal Government, partly through the expenditures of the state governments among which certain shares of the scrip issue would be apportioned, and partly through localities among which the states would further sub-divide the issue.
Before considering the national aspect, which this proposal opens up, let us see further how the local application must still be achieved, whether the Federal Government shall spread the scrip or whether the full responsibility shall continue to rest on the localities.

(1) The city was to pay no interest on these warrants.
(2) Informant, Mr. E. B. Danielson, President of the Russell Chamber of Commerce.
(3) December 21, 1932.
(4) Informant: Mr. W. F. Gingrich, Superintendent of Municipal Public Utilities. (5) Informant: Mr. Roy Wilkinson, City Clerk.
(6) Informant, Mr. O. P. Berg, City Clerk.
(7) Informant, Mr. C. F. Wilson, Mayor.
(8) Informant, Mr. Hugo Kuyper, Secretary of the Chamber of Commerce.
(9) Informant, Mr. H. T. Lawrence, City Manager.
(10) Informant, Mr. James L. Cameron, Mayor.
(11) Informant, Mr. J. L. Olson, Town Clerk.
(12) Informant, O. E. Zink, Secretary of the Retail Merchants Association.
(13) New York Times, Feb. 27, 1933. Knoxville operates under a city management form of Government.
(14) The Allgemeiner Deutscher Tauschverband in 1931 is sued such scrip and called it ..."Tauscher," in 1 Mark denomination. The evaporation was at the rate of 1 Pfennig per week.
(15) Sponsored by the "Threefold Commonwealth League," 318 W. 56 St., New York City. The scrip (1931 - 1932) was usable by members of this organization at the League Farm, Workshop, Laundry, Restaurant and Rooming and Apartment Houses.
(16) I should be grateful for any further information from the reader.
(17) Or influential elements within them.
(18) See appendix for copy of this bill.