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Saturday, August 27, 2011

Money Creation

From the NY Fed's Liberty Street Economics blog:

These “Clams” Really Were Money, New York Fed Research Library: While money has taken all forms—precious commodities, beads, wampum, the large stones of Yap—we tend to think of those forms of money as archaic. Yet shells were used as money in California as late as 1933!
Here is what happened. In 1933, during the Depression, the nation experienced a banking panic as people scrambled to withdraw their savings before their bank failed. In March of that year, President Roosevelt ordered a four-day bank holiday to curtail the run on banks. The closing of the banks prompted many people to hoard their money. With less cash in circulation, communities created emergency money, or “scrip,” so that they could continue doing business. For example, Leiter’s Pharmacy in Pismo Beach, California, issued this clamshell as emergency money. As the clamshell went from person to person, it was signed, and when cash became available again, the clamshell could finally be redeemed. Other forms of emergency money were also fashioned.

    Posted by on Saturday, August 27, 2011 at 01:17 AM in Economics | Permalink  Comments (6)


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