California's IOUs and their Depression-Era Predecessors

The Wall Street Journal has an excellent background story today (Saturday/Sunday July 25-26, 2009) on the wide variety of scrips and improvised currencies in the Depression years, with a comparison to the IOUs issued over the last three weeks by the state of California. The bottom line of the story is the California IOUs are not really scrip in the Depression-era sense (and the bottom of the post, hidden, looks a little bit at the legal status of the California IOUs) but it is still a fascinating historical read.

During the Great Depression, hundreds of communities as strapped for cash as California is today circulated their own temporary currencies. An estimated $1 billion in this scrip was issued by towns and counties, not to mention corporations, school boards, newspapers and a few wealthy individuals. Most promissory notes looked like paper currency, but scrip was also printed on leather, metal, fish-skin parchment and, in Tenino, Wash., on slabs of two-ply Sitka Spruce. Two towns in California -- Crescent City and Pismo beach -- circulated scrip printed on clamshells .... In Hood River, Ore., Hal's Tire Service printed $1 bills on scraps of old tires, briefly giving the rubber check a good name.

The improvised currencies in the Depression were largely a reaction to the physical scarcity of currency. Bank holidays decreed by the Federal government, the lack of currency on account of unemployment resulting in fewer workers getting paid in currency, the unwillingness of people either to spend or put the money in banks, and other causes all resulted in a physical shortage of currency. (Argentina has recently gone through a round of scarcity of small change particularly; I don't recall why and am not sure anyone knows.) Various entities, private and public, issued their own - they typically did not last very long but the Journal article, as noted above, goes through the wide range of forms they took, from paper to leather, metal, fishskin parchment, and lots of other things.

The aim of most Depression era scrip was to provide circulating money - and issuers used different theories to ensure circulation. At the one extreme, some places printed up beautiful, money looking notes, on the theory that they looked like money and so would be better regarded. Whereas other places deliberately issued scrip on pieces of wood or other bulky materials on the theory that the stuff was so unwieldy that holders would want to get them in someone else's hands as quickly as possible.

California's scrip is different - it has issued, according to the article, some 194,000 IOUs with a face amount of about $1.03 billion, redeemable on October 2, or sooner if the state comes up with the money. I haven't laid eyes on one, although various of my California resident family have been issued them. The article says that, unlike the Depression era scrip, they are made out to particular individuals for particular amounts - they physically resemble checks, except that instead of saying "pay to the order of" they say "registered warrant."