I believe recent comments about ‘scrip’ in earlier posts make the subject worth looking at. There was considerable discussion on here one time before regarding a long lasting ‘official’ kind of ‘scrip’
called the Guernsey ‘‘State’s
Notes”. And whether they were
really what they purported to be. That
is, (at least initially), a type of ‘interest-free’
money issued by that island’s ‘Government’
to finance certain needed public works.
I believe it was illustrated back then by Tim Knight, and confirmed by
Bill Ryan, that these ‘Notes’ were probably ‘discounted’
when accepted. Making them not exactly
what the long held ‘interest-free’ mythology holds them to be. I’ve no desire to go back into that
argument, since I’ve no way of ‘proving’ whether those who
hold to the ‘interest-free’ story, or its debunkers, are correct.
But there have been many other places where ‘scrip’
has been used. Including the recently
discussed ‘stamp-scrip’ variety comprising the Province of Alberta’s
“funny money” Prosperity Certificates, And the even more hilarious “Wooden
Nickels” that substituted for ‘cash’
after some of the 1930’s Bank failures in the US Pacific Northwest. My own
experience with the subject is limited to some of the recollections I have from
reading the histories of various timber Companies which used ‘scrip’
as a ‘cash’ substitute for paying their employees. Which generally, but not always, limited it
to redemption for merchandise at the “Company store’’. That often infamous, stand-alone ‘profit
centre’ the workers of yesteryear often “owed their soul to” as they
dug their equivalent to the popular song’s “16 Tons”, (of
coal), while getting, “another day older, and deeper in debt.”
Some Companies would exchange their ‘scrip’ for ‘cash
on demand’ at their own stores or offices, but generally ‘discounted’
it for the privilege. Which
was often a sore point between Employer and Employed. Others, located well away from any urban
banking centres, would only allow their ‘scrip’ to be paid in more fungible ‘Banknotes’ at the
Bank in those larger centres where they kept their accounts. Again, often at a ‘discount’
from its face value.
In the final years of the 19th Century an
interesting episode involving an issuer’s unintended use of ‘scrip’ took place
in the coastal ‘redwood’ region of northern California. It involved two long-time competing logging
and lumber operations, the Union Lumber Company of Fort Bragg, and the Caspar Lumber Company of Caspar,
a company owned hamlet a half dozen miles to the south.
Union Lumber issued their own ‘scrip’ and had their traditional ‘Company store’
in Fort Bragg where it
could be spent. This ‘scrip’
was also redeemable for ‘cash on demand’ at their San
Francisco banker’s .
Caspar Lumber was the older company of the two, well financed, but
was rapidly exhausting its own timberlands. Union had lots of
timber. Including some timber tracts closer,
and more convenient to the Caspar mill than its own.
Caspar offered to buy this land, but Union refused to
sell.
Facing an early curtailment of their operations unless more
timber could be had, the Caspar management hit on an
ingenious plan. They announced that
Union Lumber Company ‘scrip’ would be accepted at the Caspar Lumber Company store. And then arranged the prices of merchandise
sold there to be just lower enough to ensure they’d have lots of
Union Lumber employees as customers. Gradually they
accumulated a considerable quantity of Union Lumber ‘scrip’. And at an appropriate moment, when they were
sure Union Lumber’s ongoing operations would result in that company’s
‘credit lines’ being near fully extended, they presented it ‘en
masse’ to Union for redemption in ‘cash’. Union couldn’t
pay in ‘cash’, and Caspar got the
timberland it wanted.
One of the greatest problems with ‘scrip’ is its
‘fungibility’. To be ‘accepted’ elsewhere other than for
‘merchandise’ at the issuer’s ‘Company store’; or
in places other than those like Raymond, Alberta, and other similar towns in the ‘cash-strapped’ days of the
Depression, where a ‘community’ currency might circulate within
that community as a necessity alternative to having no currency at all, such ‘money’
must have some incentive attached to it. Either it bears ‘interest’ payable
in addition to its face value on exchange for more generally acceptable ‘banknotes’,
or it has to have some feature allowing some advantage to be derived to the
bearer for accepting it. Something that gives him a ‘premium’ of some kind when
he uses it for purchases. To many
‘monetary reformers’ this seems a heresy. But why would anyone want to hold ‘scrip’
that pays one ‘nothing’ while waiting to be spent, instead of the easily accessed ‘Bank
notes’ that pay one something when held in a deposit account there?
Scrip
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