City in Austria Printed Local Currency
Worgl, like many other European towns and cities, was hit hard by the Great Depression. There was mass unemployment; four of the five local factories had closed, and the people were starving in the streets. Nobody had any money to buy anything. One of the features of an economic depression is that there is not enough money in circulation to ensure that people can meet their basic needs, and in the 1930s, the shortage of currency in many countries of the world became catastrophic.
The mayor of Worgl, together with local businessmen, decided to try to break this economic impasse by creating their own local currency. They printed and issued 60,000 Austrian shillings worth of local currency. These shillings could only be spent in Worgl, so they remained in the local community and were exchanged over and over again.
The positive impact was immediate and surprising to everyone. In only six weeks, unemployment disappeared, all the factories had reopened and everyone had food. For the inhabitants of Worgl, the economic depression was gone. This dramatic transformation became known as the miracle of Worgl. Surrounding towns, inspired by the success of Worgl, immediately started printing their own local currencies.
Sadly, the miracle did not last long. When the Austrian Central Bank heard about Worgls local currency, they initiated legal proceedings against the mayor and local businessmen. According to Austrian banking law, it was illegal for anyone except the Austrian Central Bank to issue money. The bank won the court case, and the mayor was ordered to shut down the local currency, which he did, under threat of imprisonment. The town then returned to the devastating economic depression of the 1930s, with all the human pain and suffering associated with this catastrophe. Factories closed, and once again, the people starved.
Alternative Currency in the U.S.
Irving Fisher, an American professor of economics at Yale University, visited Worgl before the local currency was suppressed and witnessed the miracle firsthand. When he returned to the United States, Fisher spread the word by traveling and lecturing across the country, advocating the use of the Worgl scrip everywhere. Inspired by his vision, hundreds of communities began issuing their own currency, and by 1934 there were over 1,000 local communities using scrip throughout the U.S.
Every one of these communities experienced a tremendous rejuvenation of their local economies. They thrived while others suffered. Fisher then met with President Franklin D. Roosevelt, proposing the implementation of government-sanctioned local scrip in every community in America. When FDR consulted with his top financial advisors and bankers, however, he was advised to shut all the scrip systems down, which he did. Instead, he borrowed large amounts of money from bankers, at interest, and used it to pay for the Reconstruction Finance Corporation and the other work-creation projects, which collectively came to be known as the New Deal. So ended the last widespread use of a local currency within the U.S.
