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But why print the money on wood? Why not just give residents $300 worth of federal dollars?
The answer is simple: By creating its own local currency, Tenino keeps the money in the community. As Fournier puts it, “Amazon will not be accepting wooden dollars.”
“The money stays in the city. It doesn’t go out to Walmart and Costco and all those places,” says Joyce Worrell, who has run the antique shop Iron Works Boutiques for the past decade. Worrell sells clothes, jewelry, and — in an outdoor garden that adjoins her shop — an assortment of furniture. These days, she’s added masks and disinfectants.
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The legend of the wooden currency started in December 1931, when Tenino’s only bank closed shop. The Great Depression was ripping through the country and countless townspeople lost their savings. Most had to stretch the little money they had to pay for groceries, rent, and other essentials.
A local newspaper publisher named Don Major pitched a solution: With the bank gone, Tenino could invent its own currency. The officials agreed, and Major printed a series of notes — 25 cents, $1, $5, $10 — on rolled Sitka spruce. He and two local doctors agreed to back all of the currency themselves. By January 1933, the town had printed $6.5k worth of wooden money.
Tenino wasn’t alone in this experiment. During the Great Depression, local currencies saw a golden age. Hundreds of municipalities, business associations, and worker co-ops started issuing scrips. One estimate suggests as much as $1B worth of scrip circulated in the US in the 1930s.
Cash-strapped businesses soon relied on local currencies to pay their employee salaries. One exemplary story came from the publisher of the Springfield Union in Massachusetts, who started paying employees in his own scrip in the 1930s.
The idea: Employees could spend that scrip at businesses that advertised in the newspaper who sent it back to the Union in exchange for ad space, closing the economic loop.
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Tenino’s currency, in particular, captured the zeitgeist. News of the wooden currency spread first across the country, then the world.
Banks in Chicago started accepting Tenino’s wooden money. Washington Senator C.C. Dill bragged about it to Congress. The Los Angeles Times declared, “Money Now Grows on Trees.” Tourists from as far as India came to Tenino to grab a piece of their own wooden currency. Demand grew so high that collectors started paying $2.50 for a single wooden quarter — a 10x markup.
As Fournier puts it, “It went 1930s viral.”
On January 1, 1933, when businesses in Tenino stopped accepting the wooden currency, US newspapers proclaimed that the town had gone “off the wood and back to the gold standard.”
Can local currencies really save the economy?
Take a look around the globe, and you’ll find local currencies everywhere. Amid the economic fallout from COVID-19, small-town leaders have struck on the same idea as Fournier:
In the US, the local currency movement is more fractured. Plenty of currencies — like Ithaca HOURS (Ithaca, New York) or Bay Bucks (Traverse City, Michigan) — made a splash for a decade or so before petering out.
- The town of Castellino del Biferno, Italy — population 550 — started printing a local paper currency nicknamed the “Ducati” in late April to stimulate commerce.
- Mexico’s Santa María Jajalpa sent out about $2k worth of a local currency, called jajalpesos, to help poor residents buy vegetables, chicken, and tortillas locally.
- The Brazilian city of Maricá is making extra money off of a digital local currency known as the mumbuca. Mumbucas are so omnipresent — even city officials receive their salaries in mumbucas — that businesses pay the local government a 2% fee to accept them. That money is funneled into no-interest loans that are offered out to members of the community.
One of the most successful ongoing experiments is called BerkShares, a paper currency founded in 2006 through the nonprofit Schumacher Center for New Economics. Over 400 businesses in Great Barrington, Massachusetts accept BerkShares, and the money is backed through a network of community banks.
Susan Witt, who heads the Schumacher Center, says that this current economic collapse has only highlighted the value of a currency like BerkShares.
Her organization has received a number of requests from municipalities across the country hoping to set up their own currency systems on the BerkShares model; two of them are considering possible next steps.
“It is a very grim time for small businesses. Many won’t survive,” says Witt. “A currency, managed locally, is an elegant tool to address local needs.”
But can local currencies really boost a local economy? The past holds a few clues.
Take the Austrian town of Wörgl, which launched its own schilling in 1932. To keep residents spending, Wörgl appended a 1% monthly fine when residents held onto the notes. By 1933, each Wörgl schilling had circulated 463 times — more than double the circulation rate of Austria’s national currency. Wörgl’s unemployment dropped by 25%, even while unemployment continued to balloon throughout the rest of the country.
Anecdotes like this point to the potential of community currencies — but teasing out a definitive relationship between community currencies and economic resilience is complicated, according to Marek Hudon, a professor of economics at the Free University of Brussels (Belgium).
“There are many shops saying that they have new clients thanks to community currency,” Hudon says, but “it’s extremely difficult to make a causal relationship to this local currency and a real macro-economic impact.”
Hudon co-authored a 2015 review of community currency research and found that about half of “community currencies” (an umbrella term that includes local currencies like BerkShares or Tenino’s wooden dollars) had no measurable macro-economic impact.
But the study also found that in a subset of cases, local currencies could “act as cushions against external economic shocks.” And while their impact may not be widely felt, local currencies are “significant for a small but substantial part of the population”: the economically marginalized.