Unlock Editor’s Digest for free
FT editor Roula Khalaf has chosen her favorite stories in this weekly newsletter.
In the winter of 1932, the town of Hawarden, Iowa, USA, began printing and distributing Scrip Dollars. A scrip dollar is a piece of paper printed in the shape of a Federal Reserve dollar bill, controlled and guaranteed by the town. The script did not save Hawarden from the Great Depression. But it made Christmas a little easier.
During the war, everyone was a general, and in the winter of 1932, eccentrics and executives wrote pamphlets on how to solve what they called the “money problem.” When banks closed, both cash and deposits went out of circulation, spurring rapid and devastating deflation. We are now conditioned to think that the only thing wrong with money is inflation, but historically deflation has been just as devastating.
One of Hawarden’s banks had already gone out of business in 1927, after world prices for corn and hogs collapsed in the late 1920s. By the time new bank failures began to hit the Midwest in the fall of 1932, towns were ready. Try something unconventional. By December, Pathé’s film staff had added an article about Hawarden’s script to the newsreels. Irving Fisher, America’s first famous economist, visited Hawarden and praised the project in a national column.
Charles Zylstra, a Dutch-born Maytag salesman, was the designer of the Hawarden dollar bill. He didn’t invent the idea. American cities have been printing “destitute money” since the Panic of 1837, which Zylstra said he discovered after reading a book by self-taught German economist Silvio Gesell. By December, other nearby towns began to adopt Hawarden’s plan when Santa Claus announced in the Hawarden Independent newspaper that Santa Claus was still coming to town.
The winter of 1932 caused a lot of bad publicity in many places. Zylstra was successful for a time because he recognized that money depended on government. As historian Rebecca Spann has argued, money not only has a quantity, but also a quality. To say that money is created is to assign a kind of magic to it, ignoring the labor required to keep it moving from hand to hand.
The city of Hawarden, for example, provided stimulus subsidies to men who graveled the road leading from Central Avenue to the cemetery. After that, every time someone handed a scrip bill to the counter as payment, a new three-cent stamp had to be affixed to the back of the bill. The city sold the stamps, and after 36 purchases, the city had $1.08 left in its account to redeem the stamps and pay expenses. In December of the same year, the Des Moines Register reported that each note changed hands an average of 10 times.
Historian Claude Million has argued that scrip can serve social goals and fill funding gaps in times of crisis. By this standard, Hawarden’s script was a success. Money continued to move within the city until the United States realized the need for a truly national and stable currency. In 1933, the federal government passed the Deposit Insurance Program, opened banks, and began raking in Federal Reserve notes, especially to farmers.
The American Chamber of Commerce still issues dollar bills called “Boo Starbucks,” “Chamber Bucks,” or “Christmas Cash.” These programs serve another purpose of Scrip, which is to let people spend their money in town instead of on Amazon. Hawarden still retains the cultural memory of the town’s Depression-era experiments. And the Hawarden Chamber of Commerce is calling its program “Christmas Scrip,” a name that’s been around for more than 90 years.
On November 4 this year, Chamber President Julie Coyle began recruiting companies to join the Scrips program. People buy certificates from the chamber for $1.85. The local company pays the rest and agrees to accept the script as payment. Coyle will sell the manuscript from her office at the Hawarden Public Library for $10 checks drawn on the Chamber’s account at River’s Edge Bank. This year, she sold $25,000 of Christmas scrip in three days.
Coyle still does much of what Zylstra recommended in 1932. She works with businesses every year to ensure the program remains relevant. She must deposit cash at River’s Edge on the day she starts selling, because the goods sold in the morning are consumed by the afternoon. She tracks redemptions in her chamber of commerce account at the bank, so she knows what’s still left. Hawarden Christmas Scrips are more than just pieces of paper. This is a financial product that has been incorporated into local customs for almost a century. It works just like all successful money. Through habitual and reliable management, it gives you a familiar feeling of security until you become dependent on your money without thinking.
