Shillings from Heaven / Wörgl’s Miracle

Catherine has often pointed out that during the Great Depression, local currencies (“scrip”) flourished all over the U.S. According to one report, over 300 municipalities—and also “business associations, companies, banking organizations, barter and self-help cooperatives, and … the unemployed”—issued various forms of scrip that served functions such stimulating local businesses or energizing municipal finance.

As the 2018 movie Shillings from Heaven (also called Wörgl’s Miracle) shows, 1930s-era local currency experiments were not confined to the U.S. The film tells the story of how a small-town mayor in Wörgl, Austria, Michael Unterguggenberger, hit upon the idea of implementing a local currency after reading German entrepreneur Silvio Gesell’s “visionary” thoughts about currency reform.

Gesell believed that the two primary roles of money—as a store of wealth and a medium of exchange—were often in conflict. His suggestion was to create money that, unless periodically stamped (for a fee), would expire, forcing it to function as “an instrument of exchange and nothing else.”

In early 1930s Wörgl, 1500 inhabitants (out of a total population of 4300) had lost their jobs, factories had closed, and tax revenues were in arrears. Unterguggenberger persuaded local leaders to give Gesell’s idea a try—but in order to avoid accusations of criminality or counterfeiting, they called their stamp scrip “Woergl Certified Compensation Bills.” As a 1933 discussion of stamp scrip by Yale economist Irving Fisher reported, the experiment was a resounding success:

“[A]fter the scrip was issued, not only were current taxes paid (as well as other debts owing the town), but many arrears of taxes were also collected…. Accordingly, the city not only met its own obligations but … executed new public works…. Seven streets … were rebuilt and asphalted; twelve roads were improved; the sewer system was extended over two more streets; trees were planted and forests improved; and permanent jobs were given to from 30 to 50 of the 1500 unemployed; but probably a powerful influence has been exerted to prevent any increase of unemployment, by keeping business active.”

These successes prompted six neighboring villages to successfully copy the system, and 200 other Austrian townships expressed interest in following suit. Wörgl even received a visit from French Prime Minister Eduoard Dalladier.

Unfortunately, we can all guess what happened next in Austria:

“[T]he central bank panicked, and decided to assert its monopoly rights by banning complimentary currencies. The people unsuccessfully sued the bank, and later lost in the Austrian Supreme Court. It then became a criminal offence to issue ‘emergency currency.’ The town went back to 30% unemployment.”

Meanwhile, economist Fisher’s efforts to get the U.S. Congress to issue stamped money nationwide also hit a brick wall—FDR suspended the gold standard and implemented the New Deal instead.

Nowadays, Gesell’s ideas are being creatively repurposed and bastardized by central bankers and the proponents of an all-digital financial system, who excitedly suggest that what amounts to programmable money “could give central banks the power to impose negative interest rates.” This is why it’s time for everyone who cares about building thriving local economies to join the pushback against programmable money!

To understand the potential magic of local currency, watch the “hotel story” [timestamp 18:17–19:30] that so delights Catherine, which shows how a single “100” bill circulates from hotel patron to hotel proprietor to pharmacist to cafe owner to butcher to prostitute, and then back to the hotel proprietor and hotel patron, extinguishing debts all along the way.

Watch Shillings from Heaven (with subtitles) HERE.