When the banks collapsed in the 1930s, 450 American towns printed their own money. It worked. Then FDR banned it.
When the Great Depression hit and banks across America began failing, the fundamental problem wasn't just unemployment or poverty — it was that money had stopped moving. People hoarded cash, businesses couldn't pay suppliers, workers couldn't be paid. In towns across the country, local governments and businesses hit on the same radical idea: if regular money won't circulate, we'll make our own. By 1932 and 1933, at least 450 American cities and towns had issued some form of local scrip — alternative currency that functioned as a medium of exchange when federal dollars were unavailable or hoarded.
The most innovative version was 'stamp scrip,' developed by German-Argentine economist Silvio Gesell and popularized during the Depression by Yale economist Irving Fisher. Stamp scrip was designed to lose value over time unless the holder kept it current by purchasing a small stamp each month. A dollar of stamp scrip might require a two-cent stamp every 30 days to remain valid. This built-in 'expiration date' made hoarding economically irrational — you had to spend or lend the money to avoid watching it decay. The effect was to force the currency to keep circulating.
The experiment in Wörgl, Austria became the most documented case. In the summer of 1932, the town of 4,500 people was in crisis — 30% unemployment, unpaid taxes, crumbling infrastructure. The mayor issued 5,000 schillings' worth of 'work certificates' with monthly stamp fees. Within months, the town had paved roads, built a ski jump, renewed street lighting, and reduced unemployment by 25%. Word spread. Over 200 other Austrian towns applied to run similar programs. Austria's central bank immediately moved to shut it all down, ruling that currency issuance was a federal monopoly.
The same dynamic played out in America. Irving Fisher analyzed the Depression-era scrip experiments and became convinced that a nationwide program — he proposed $1 billion worth of federally issued stamp scrip — could break the deflationary spiral. He lobbied Roosevelt aggressively. FDR was intrigued enough to hold a serious meeting about it. But in March 1933, Roosevelt issued an executive order banning all further stamp scrip issuance by local governments. He opted instead for the New Deal's conventional fiscal approach. Some economists later argued the ban prolonged the Depression.
The scrip experiments have been largely forgotten, but they revealed something enduring about money: its value is fundamentally a matter of collective agreement, not intrinsic worth. When the official system collapsed, communities created their own — and it worked, at least locally, at least for a while. The German economist's insight, that money designed to rot forces circulation while money designed to store invites hoarding, continues to attract interest from economists studying monetary reform, cryptocurrency designers, and anyone trying to understand why the Great Depression was so hard to escape.