How did colonial scrip help make the colonies prosperous?

Answer 1

Unlike the British Bank Notes which were issued by private Bankers, Colonial Scrip was an alternative form of paper money which was issued by the Colonial governments through direct spending on public projects (roads and bridges) and through lending for private projects. The Scrip was issued as a credit instead of a debt and thus the colonies were able to avoid issuing bonds to private bankers to purchase a gold reserve. By avoiding the gold and the debt, taxes remained low and by issuing just enough Scrip to match the volume of trading activity, the value of Scrip remained stable. Ben Franklin's Pennsylvania Scrip was the most successful of the Colonial Scrip issues. When the Scrip is issued to put people to work, goods and services are created by the work. The workers paid with Scrip can then redeem the scrip for the goods and services available in the local markets. And thus the circle is completed. As long as the Scrip is issued to create work which produces goods and services for redeeming the Scrip, there will never be any inflation or recession. But if Scrip were issued in a careless manner without generating work, or even worse, if counterfeit Scrip enters the market without a matching volume of goods and services to redeem it, the Scrip loses value. This is the cause of inflation. The beauty of Scrip is that it can be created as long as you have persons ready to do work. Consequently, there is never any unemployment under a Scrip system. The money has to wait on the availability of workers. But under the British Bank Note system the opposite is true. Because they issue money as a debt to the taxpayer, the workers have to wait on money to become available.