1933 is an interesting year in the monetary history of America. The presidency of Herbert Hoover (1929 – 1933) was ending and you can surely bet he was very happy to be getting the heck out of the Whitehouse. During his single four-year term in office the United States went from the lofty optimism and prosperity of the late 1920’s to the grinding depths of the great depression. And one can only wonder what was going through the mind of Franklin Delano Roosevelt as he assumed the presidency, probably things like “holy crap” and “what have I gotten myself into”!?
Earlier we looked at the business of the Goldsmiths, the taking of deposits and the making of loans, and that’s still pretty much how banking works today.
By the fall of 1932 the banks were in big trouble. They’d loaned out a lot of money in the 1920’s and those loans were never going to be paid back. Essentially, the boom of the mid to late 1920’s was a speculative bubble fueled by easy credit and when the speculations of the borrowers failed they had not the means to repay the loans.
The combination of no money returning to the banks in the form of loan repayments and constant depositor withdrawals eventually left the banks unable to meet their depositors demands for cash, particularly their demands for gold. With the vaults empty and the line outside growing ever larger, it’s a BANK RUN! every banker’s nightmare.
By March 5th 1933 things had become so bad president Roosevelt was forced to declare a “banking holiday”. They needed time to patch up the system and the country needed an explanation. FDR was a great speaker and in this speech he gives an unusually candid look behind the curtain of banking and money creation, it’s well worth the listen. The parts about the new money they were printing, “sound money, backed by good assets”, that would soon be available to satisfy the public’s demands for cash are especially enlightening. That “sound money” is federal reserve notes and the “good assets” backing the federal reserve notes are the loans owed to the banks. It’s money backed by debt.
Now, with this as the backdrop, imagine yourself a leader in your community. The town’s banks are closed indefinitely and you need to make payroll. There’s uncertainty, a restlessness in the air. The people need to eat and the local economy needs money for commerce but without the banks there is no money. That’s a real problem! What to do, what to do.
This is the essence of depression scrip.
In towns and communities across the nation various kinds of local currencies sprang forth to fill the void. To someone with complete faith in Washington DC to solve all of our economic problems the idea of communities taking monetary matters into their own hands might be hard to believe but there it is. Our grandfathers and grandmothers certainly knew a lot about self-sufficiency and the importance of banding together as a community.
The character of the scrip also provides an interesting look inside the communities that issued them. Like the lumber mill town that issued scrip printed on wood veneer, or the tannery town that issued scrip printed on leather. The leather scrip is interesting in that both bill size and coin size versions were issued. Quite practical when you stop and think about it.
Link to other examples of Oregon scrip here.
For Silverton the banking crisis passed relatively quickly and not much of the scrip was issued into circulation. There was however a lot of it printed and a large amount was released years later, as a curiosity, and today good examples of Silverton Scrip can sometimes still be found at local flea markets and swap meets.