Complementary Currencies/BoK EN - Stamp Scrip

General Description

Stamp Scrip was emergency currency issued by cooperatives, associations, municipalities, companies and ordinary citizens during the financial and economic crisis of the 1930’s. They re inspired by the ideas of the economist Silvio Gesell. The unique aspect of stamp scrip is that it is free of interest. Instead most stamp scrip is characterized by a demurrage; a fee for hoarding money. Usually it means that, with predetermined intervals, a stamp should be bought and attached to the scrip in order for the scrip to remain valid. In some cases stamp scrip looses its entire value after a predetermined period of time. Stamp scrip usually circulated within small communities of households and businesses, complementary to the national currency. Especially the United States, Germany and Austria witnessed the emergence of stamp scrip such as the ‘Wära’, ‘Arbeitswertscheinen’ and the Chicago Recovery Certificates.

Purpose

The purpose of stamp scrip was to revitalize economic activity by providing an alternative means of payment during the Great Depression. Because of the crisis people tended to hoard their money with the result that money was short in supply. In addition the purpose of stamp scrip was to speed up economic activity by introducing a demurrage on this alternative means of payment. Contrary to conventional money, stamp scrip is imbued with this mechanism that discourages the hoarding of money and speeds up its circulation. After all no interest is received on savings, and demurrage actually encourages spending.

Design Criteria

Support Medium

Just as ordinary currency, stamp scrip was physical money in the form of banknotes. In case of the Wära, stamp scrip existed in nominal values of ½, 1, 2, 5 and 10 Wära. In case of the Wörgler schillings (Arbeitswertscheinen) the nominal values included 1, 2 and 5. In all cases coins were not in circulation.

Function (medium of exchange, store of value, standard of value)

The ultimate function of stamp scrip was exchange rather than saving. The absence of interest made saving pointless and an expiration date or demurrage stimulated spending stamp scrip. For Wära paper money to remain a valid means of payment, one had to affix a stamp at the cost of 1% of the face value in ordinary currency monthly. With a fee for holding the money, the Wära consequently inhibited an incentive to be spent rather than to be hoarded, as was the case with conventional currency. It should be noted that many stamp scrip in the US differed from the German-Austrian stamp scrip. In many systems, stamps were affixed on a transaction basis, rather than a time basis. This unintentionally stimulated hoarding rather than discouraging it (Gatch 2006: 10; 28; 29). The Gesellian idea behind stamps is off course to implement a ‘tax’ on hoarding money speeding up circulation, and not to increase the tax burden with additional sales or procurement of goods and services (Fisher & Cohrssen 1933, Ch III). Moreover, because both parties in a transaction do not have an interest in affixing a stamp to the scrip, they might have omitted it altogether. Hence, these American stamp scrip suffered a design flaw.

With regard to the standard of value, stamp scrip was usually denominated in national currency. One Wörgler schilling represented one national Schilling for example. Larkin Merchandise bonds at a nominal value could be exchanged at Larkin outlets for products worth 1 dollar. Wära seems to be the exception to the rule as it was denominated in physical units of coal. The amount of coal every Wära represents unfortunately remains unclear.

Issuing procedure

The majority of stamp scrip was either issued on the basis of conventional currency (Wörgl) or the products private companies produced (e.g. Larkin Merchandise Bond, Wära). In Wörgl, a loan amounting to 40.000 Schillings at the Raifeissenbank served as a collateral for the Wörgler Schilling brought into circulation. In case of Schwanenkirchen Wära was redeemable for coal from Max Hebecker’s coalmine. Caslow’s Recovery Certificates are the exception as they turned out not to be backed at all when Caslow’s promise to accept them for advertisement appeared to be false. In most cases the money was brought into circulation by paying worker’s salaries. In case of Schwanenkirchen, in total 60 employees received loans of which two-thirds in Wära and one-third in Deutschmark (INWO). With Wära backed by coal, Wära was inflation-free money as opposed to the previously inflation-plagued Reichsmark. In Wörgl, employees of the municipality were paid half in stamp scrip and half in official currency (Greco 2001; 66). Also Larkin Merchandise Bonds were issued in the form of salary. The exact proportion of Bonds in total salary is unfortunately unknown.

Cost recuperation

The costs of operating and managing stamp scrip are negligible. No tracking of transactions is involved. The costs of printing stamp scrip are low as well; because of high velocity of stamp scrip there’s no need for large numbers of banknotes. The costs for running stamp scrip is unfortunately unknown, and even an educated guess would be risky as most stamp scrip existed for barely a year. Costs however were recuperated internally by means of the demurrage paid for the use of stamp scrip. At predefined dates, the bearer of a note had to buy stamps at the organization of issuance to keep the scrip valid. The scrip contained for example 52 squares; each representing one week carrying a specific date on which a stamp needs to be attached. The scrip was an invalid means of payment without the stamps attached on the dates that expired. Receivers of notes verify if the notes are attached. If they don’t, they have to pay for the stamp themselves in order to pass on the notes.

Once again there exists a remarkable difference between US and European stamp scrip. US stamp scrip was designed to be self-liquidating whereas European scrip was designed to circulate indefinitely. Most American scrip could be exchanged for ordinary currency once an a-priori determined amount of stamps were acquired. For example: in order for a Recovery Certificate to be redeemed for 1 dollar, 54 stamps had to be affixed on the scrip at a cost of 2 cents per stamp (Greco 2001: 59). It means that in total one pays 1.08 dollar; 1 dollar to back the scrip and 8 cents to pay for the organization. Self-liquidating scrip can actually be perceived as a community loan that needs to be paid for in 54 installments. The European ‘Gesellian-style’ demurrage stamp scrip on the contrary, was not designed in a way to be redeemed for ordinary cash after a specific period of time (Greco 2001: 68-69). One was obliged to pay 2 cents stamp tax a month on every Wära in possession. Once all stamps were attached to the scrip, one simply exchanges the scrip for a new empty one with new dates on it. Hence, one Gesellian-style demurrage scrip infinitely delivers income for the issuing organization and to a far larger extent than most American scrip does. The income by far exceeded the costs for running the organization. The additional income was therefore often perceived as a tax income, subsequently spend on the provision of public services.