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Panic scrip

Posted By Kurt Schuler On July 14, 2014 @ 9:54 pm In Commodity Money,Recommended Reading | 6 Comments

I have only just become aware of the 2013 book Panic Scrip of 1893, 1907 and 1914: An Illustrated Catalog of Emergency Monetary Issues. The title refers to the U.S. financial panics of those years. The book is available in paper from the usual sources, and Google has a considerably cheaper e-book edition. Here is a review of the book.

Scrip is a circulating IOU issued by a person or corporation, often redeemable in kind, typically accepted widely within a limited area, and, in the context of panic issues, tolerated by the authorities although perhaps of dubious legality. During the U.S. panics listed in the title of the book, large local employers such as steel mills, companies that offered widely used goods or services such as tram lines, and in smaller towns well known local merchants such as those who owned general stores issued scrip as a substitute for banknotes that became quite scarce. The issuance of scrip can be seen as a kind of free banking: with the most trusted issuers restricted from further issuance of notes by certain provisions of federal law, other issuers stepped into the gap. The service that issuers of scrip performed was large, the losses from failures by issuers were small, and the episodes illustrated that there was no necessity to limit note issue to banks.

Among the economists to have written about the place of scrip in the U.S monetary system are Richard Timberlake, "The Significance of Unaccounted Currencies" (JSTOR, gated); William Roberds, "Lenders of the Next-to-Last Resort: Scrip Issue in Georgia during the Great Depression" (free, article starts on page 16); and Price Fishback, "Did Coal Miners 'Owe Their Soul to the Company Store'?" (JSTOR, gated; an article about the routine use of scrip in company towns; the title is a reference to this hit song of the 1950s).

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