In the winter of 1932 the town of Hawarden in the US state of Iowa began printing and distributing scrip dollars — pieces of paper, shaped and printed like dollar notes from the Federal Reserve, managed and guaranteed by the town. The scrip did not save Hawarden from the Great Depression. But it did make Christmas a little easier.
In wartime everyone becomes a general, and in the winter of 1932 cranks and executives wrote pamphlets on how to solve what they called “the money problem” — as banks closed, both cash and deposits dropped out of circulation, prompting rapid and crippling deflation. We are conditioned now to think of inflation as the only mistake with money, but historically deflation has been just as devastating.
After the global prices of corn and hogs collapsed in the late 1920s, one of Hawarden’s banks had already closed its doors in 1927. By the time a new round of bank failures began to hit the Midwest in the fall of 1932, the town was ready to try something unorthodox. By December, a Pathé film crew had added a story about the Hawarden scrip to its newsreel. Irving Fisher, America’s first famous economist, visited Hawarden and praised the project in his national column.