Sign of the times

Another bit of Depression nostalgia makes its way back into the real economy:  apparently, a few neighborhoods are starting to flirt with scrip, aka local currency.

I've blogged before about the tendency for groups to manufacture money out of whatever happens to be closest to hand.  Considering how long the human animal evolved, even in tribal groups, without money, this apparently universal tendency among those who have been exposed to money is kind of an inspiring testament.

Scrip was not uncommon in the early 20th century in company towns, where unscrupulous owners used scrip to force people to buy from their stores, rather than the new competition from Montgomery Ward.  Or so it was always explained to me.  But during the depression, quite a bit of it sprang up during the bank holiday, when no one could get their hands on US currency.  The various scrips made a fascinating study in monetary policy, and free banking; some of them had classic hyperinflations, others ran into institutional reputational problems.  Many of them had interesting features designed to vastly accelerate the velocity of the money.  There are some accounts of miraculous turnarounds in depressed areas based on successful scrip.  (Unfortunately, many of those accounts come via the purveyors of the scrip).

But scrip certainly seems to back the notion that the Great Depression was rooted in monetary contraction; money has to be pretty short before people start trying to mint their own.  If more scrip plans get going, that will tell us something about the success of Bernanke's attempts at monetary expansion.  When you push on a string, you produce scrip.