During the Great Depression, governments and companies printed an estimated $1 billion in scrips (money substitutes) on things as varied as car tires and seashells. Today California is doing its best impression of those times and issuing IOUs to cover certain contractual obligations. The Wall Street Journal published an article taking a look back at some historic scrips from the Great Depression.
- So Money! From ceasol
Since the California IOU program began, 194,000 IOUs worth over $1 billion have been issued. California recently forced its budget problems down the road with a gimmicky budget compromise. Still, IOU issuance will soon come to an end. What will this do to the market for California IOUs?
Obviously, any redeemed registered warrants will pay the value of the contract. The real interest might be if enough IOUs are redeemed that there is a scarcity of IOUs still in existence. Counting on this would be foolhardy, but California registered warrants might be an interesting memory of our current tough times in the future. A memory is all you should count on your IOUs to be, but for a counterexample take a look at Crescent City, California. They issued a 10 cent IOU printed on a seashell back during the Great Depression. The article estimates it’s value at $500 today. That’s around 80 years at an 11.23% annualized return. Not too shabby! In my opinion, it’s unlikely California warrants would ever deliver that sort of return; they aren’t even printed on a seashell! What do you think?
For more information, see DepressionScrip, a resource on IOUs from the Great Depression.
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