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Content: Stamp Scrip (by Irving Fisher, 1933)





AT my grandmother's country house, fifty and more years ago, you quenched your thirst at the spout of an oldfashioned wooden pump. To compel this huge creature to pour out its crystal treasure was no easy task for a small boy. It always involved a preliminary period of exercising the lofty handle, and sometimes quite without results, until an older person pointed out a bucket which stood near with a small side-supply of water. It was kept on hand for just such emergencies. Then the small boy would run to the side-supply scoop up a dipperful, climb upon any convenient object and empty the clipper into the open top of the pump. When he returned to his exertions they were no longer in vain. One scoop of side-supply had connected the big subterranean supply with the means of jerking it out of hiding. The strategy was called "priming the pump." This done, there was no further use for the side-supply.
Such is the office of Stamp Scrip - to prime the pump, which has thus far been unable to connect the great supply of credit currency with the thristy world. The small scoop of water is the customer walking with his stamp scrip. To affect not merely local production but the country's pricelevel however, Stamp Scrip must be applied all over the country. Then it will retire automatically - a result already provided for in its terms - it will retire by not being renewed.


Reflation and stabilization are worked on the same principles - chiefly credit control; but reflation is a more radical application. Sweden did not try to reflate, but her stabilization has kept her price level steady since September 1931, while America's price level, since that same date, has kept foundering worse and worse. Yet many of us (ignorant, I fear, of Sweden's case) are still denouncing all reflationary principles as too radical. Evidently we need some reflationary force more radical than Sweden applied. But not without safeguards.
Even Sweden has a safeguard. Indeed, the safeguard is an integral part of the whole reflation-stabilization method. The safeguard consists of the average price of all commodities, the index number of prices. This index number and the level to which we want to raise and maintain our American price level are duly provided for in Senator Bankhead's proposed legislation. His goal for the price level is four-fifths of the price level of 1926. This, in the Senator's opinion, will give to both debtors and creditors a practical average of justice, and will restore the rank and file of business debtors to a degree of activity. At that precise point (four-fifths of the price level of 1926) Stamp Scrip is to retire. Thus, instead of threatening us with uncontrolled inflation, Stamp Scrip would improve the control by enabling it to operate faster.
There are also some of us who believe Stamp Scrip to be more than a temporary auxiliary currency for the present emergency, believing that (if its volume and stampintervals were regulated according to varying conditions) it would be the best regulator of monetary speed, which is the most baffling factor in stabilizing the price level.

I close this little volume with a report of some of the goodnatured and open-minded give-and-take which occurred between Senator Bankhead and his colleagues when he introduced his and Congressman Pettengill's proposed stamp scrip legislation.(1) I quote here:

"MR. BANKHEAD. Mr. President, the Bible says, 'The love of money is the root of all evil.' I think that statement may safely be paraphrased at this time by saying that a lack of money is the cause of most of our present troubles. We hear at all times nowadays discussion of the money question. We know the very great and difficult problems that are confronting our country, growing out of our situation with reference to money. Bank credits since 1929 have contracted in the neighborhood of $13,000,000,000, and are daily growing smaller and smaller. Nearly every day information comes to us about the condition of banks in the various sections of the country. It is not my purpose, Mr. President, to make any statement here that will tend in any way to aggravate the situation or to increase the state of alarm that so widely exists throughout the country, but we do know, without going into detail, the money condition in this country.
"We have now a theoretical circulation of as much as or more money outstanding from the Treasury than we had in 1929; but Mr. President, we are confronted with the unfortunate situation that $300,000,000 of that circulation, as estimated by the Federal Reserve Board, is in foreign countries; that $100,000,000 of it has been lost; and that more than $2,000,000,000, in my opinion, is being hoarded; so that we are really without a sufficient circulating medium in actual use.
"So far as the hoarded money is concerned, it might as well be idle in the vaults of the Treasury and not be outstanding . . . . We shall either have to take some positive, affirmative action on that subject, or decide that we will go through the painful, distressing, heart-breaking process of complete liquidation in this country.
"If we are going to liquidate, why not let liquidation go on now and take its regular course? If we are going to let the farmers lose their farms, if we are going to let the town people lose their homes, if we are going to let bank after bank continue to fail, if liquidation is to be the ultimate result, why not abolish the Reconstruction Finance Corporation? Why not quit pouring money into various institutions like pouring water into a rat hole? Why further involve the credit of the nation and further burden the taxpayers of this country if it is merely to be used as a braking process to let the liquidation take place slower and slower?
"Mr. President, if there is to be liquidation, I want to point out to the gentlemen who are coming here and telling us to balance the Budget and to save the old standard - and I favor both if it is possible to do so - that if liquidation goes to its ultimate end, not only will the farmers and the small business men in this country be liquidated, but inevitably the cities, the States, the counties, and the Government itself will be liquidated; and the time will come when it will be impossible to collect enough taxes from the taxpayers of this country, after having lost their property, to pay the interest or the sinking fund upon the bonds of our cities, counties, States, and the United States.
"That is exactly what we are heading for, unless, through some intervention, through some plan or measure which might be devised by Congress or by some international action, there comes about a restoration of business, an increase in commodity prices, a renewal of the employment of those now upon the unemployed list . . . .
"Mr. SHIPSTEAD. The Senator, of course, is aware of the fact that what he is now saying is blasphemy to the worshippers of the golden calf.
"MR. BANKEAD. Yes, I think the Senator realizes that, from the way I have talked.
"It is not my purpose, however, to assail the gold standard. I hope it may be maintained. I hope that consistently with humanity it may be maintained; but, Mr. President, I am more concerned in saving our social fabric. I am more concerned in saving our representative form of government. I am more concerned in preserving respect for the law and obedience to the law. I am more concerned in avoiding resistance by force to our Government than I am in maintaining a standard which, since it first was used, has acted like a drunken man. It has staggered, it has stumbled, it has fallen from time to time, and has proven itself to be, instead of a measure of value, nothing but a . . . [measure] of weight. But . . . the gold standard is not involved here . . . .
"Mr. President, I have heard the statement made frequently that the trouble is not the lack of a sufficient circulating currency . . . . It is said that the trouble is a lack of velocity in circulation of the currency, and that is true. Nobody doubts that there is a paralysis in the matter of circulation. The velocity has almost disappeared. It is contended that that lack of velocity in the circulation of money is the main trouble. Then I point out to those interested in the subject that, if that is the sore spot in our present currency system, here is a plan which would absolutely remove and eliminate that objection and that difficulty.
"I am proposing the issuance of money which, when it gets into circulation, amounting to a billion dollars, will turn over two or three times every week, and pass from hand to hand in the purchase of goods, in the payment of debts, in the pay of taxes, in the payment of pay rolls, in the payment for public works . . . . It may turn over five or more times a week . . .
"MR. REYNOLDS,.. . . How are we to compel John Jones to accept, as Payment of a $500 debt, that which I have purchased for only $10?
"MR. BANKHEAD. The Senator will not have gotten it fur $10.
"MR. REYNOLDS. I paid 2 cents for each of the stamps.
"MR. BANKHEAD. But the Senator paid to get the money, besides the stamps.
"MR. RAYNOLDS. What, in addition?
"MR. BANKHEAD. How did the Senator get the money?
"MR. REYNOLDS. As I understand it, under the Senator's measure I secure these money certificates at the post office.
"MR. BANKHEAD. No. That is where the Senator is in error
"MR. REYNOLDS. I should like to have the Senator advise me.
"MR. BANKHEAD. The plan contemplates the use of half of this money and its distribution, for emergency unemployment relief, for giving employment in any form of public works that are available, in the purchase of goods, food, clothing, and other necessary supplies. In other words, half of it is to go out in distribution through exactly the same channels, for exactly the same purposes, through exactly the same agencies, as provided in the Costigan-La Follette bill for the distribution of the $500,000,000 provided in that measure.
"The other half is to be made available to the governors of the respective States on the basis of population, the allotment of a State to be turned over to the governor upon his application for use by him, either by allotment to counties or municipalities for public works construction, such as roads, sewerage, and matters of that kind, or for distribution otherwise as provided in the Costigan-La Follette bill, the object all the way through being, of course, that the money is to be used as far as possible to give employment, so that it can be earned as payment for services rendered.
"Therefore if my friend the Senator from North Carolina had 500 of these bills, it would have been necessary for him to have acquired them, as he is not upon the unemployment list - and I know he is employed (dealing with office hunters from his home). If he were on the unemployed list, he would not have as many as 500 dollar bills, and whatever number he did have, he would get them in a legitimate way, and not primarily as a gift. But when they pass on out through this unemployment relief program, when they get into the hands either of the merchants who sell supplies to the unemployed, or when they get into the hands of laborers who do work upon public-works programs which are contemplated here, into whosesoever hands they get, they will then go to the stores in the purchase of goods, they will go from the merchant to the jobber, from the jobber to the wholesaler, from the wholesaler to the manufacturer, and the manufacturer will buy raw materials . . . .
"The plan is intended solely to operate to check in some way the constant decline of prices and contraction of credit, to serve, if you please, as a temporary self-liquidating plan, and not as a permanent plan in our currency system. If it has any benefit, if it furnishes a medium of circulation for the purchase of the necessities of life and for the payment of debts, then I submit it is reasonable to assume that a new confidence will be established. If prices are stopped in their constant decline and perhaps started upward, people will main begin to buy with the money that they have, because we all know they postpone purchases so long as it looks like prices may continue to decline . . . .
"MR. VANDENBERG. I have studied most sympathetically the entire proposition for some time and I have come to the conclusion that it is thoroughly practical, for instance, within a municipal unit on the basis of municipal offices and dealing with municipal pay rolls, and so forth . . . .
"MR. REYNOLDS. Let us assume . . . that with . . . 500 certificates in my hand, 26 stamps being affixed to each one, I am not indebted to a single soul on earth; what am I going to do with those certificates?
"MR. BANKHEAD. I will say, in the first place, that if the Senator is so fortunate as that, he could well afford to lose them, but he would be in a lonesome company. [Laughter] However, the Senator could buy something with them.
"MR. REYNOLDS. But suppose I am not desirous of making any purchases?
"MR. BANKHEAD Well, does not the Senator eat?
"MR. REYNOLDS. Very seldom. [Laughter]
"MR. BANKHEAD. Well, if the Senator is that kind of an animal, I cannot place him. [Laughter]
"MR. REYNOLDS. Mr. President, I am interested in the Senator's proposal, and I am directing these inquiries to him because I want to be fully advised in regard to the matter. I think the suggestion has a great deal of merit, to be perfectly frank -
"MR. BAINKHEAD. In that spirit I will be glad to answer any question which the Senator may submit . . . .
"MR. REYNOLDS. I grant that the certificates would have served a very meritorious cause by reason of the fact that there would have been paid an indebtedness of $500 twenty-six different times. That is true, is it not?
"MR. BANKHEAD. Yes; and I am glad the Senator brought out that point . . . .
"MR. REYNOLDS. I wish to say that I think in the Senator's plan there is a great deal of merit, and I want to repeat that I am directing these inquiries to him because I am initially interested in his plan."
In the course of the foregoing discussion, Senator Bankhead made some kind allusions (here omitted) to the author of the present little book. I should like, therefore, to take the liberty of answering one of the difficulties which were raised by the Senator's colleagues: At any time before the expiration of the scrip, the holder who can think of nothing to buy with it is entirely free to seek the investment market or the bank. These have hundreds of ways for continuing the circulation of the stamp currency.

(1) Senator Bankhead's proposed legislation will be found in the Appendix, also Congressman Pettengill's speech in the House of Representatives.