The Wörgl Experiment

The Wörgl experiment, conducted in Austria during the early 1930s, demonstrated the potential of local currencies to stimulate economic activity during periods of economic downturn. Faced with high unemployment and economic stagnation during the Great Depression, the town of Wörgl introduced its own local currency, known as stamp scrip or Freigeld, based on the theories of economist Silvio Gesell.

This currency was designed with a demurrage fee, meaning it lost 1% of its value each month. This feature encouraged rapid circulation, as holders were incentivized to spend the money quickly rather than hoarding it. The increased velocity of money led to a surge in local economic activity, enabling the completion of various public works projects, reducing unemployment, and revitalizing the town's economy.

The success of the Wörgl experiment attracted attention from other municipalities and international observers. However, the Austrian central bank viewed the local currency as a threat to its monetary monopoly and, in 1933, prohibited its further use. Following the ban, Wörgl's economic situation deteriorated, with unemployment rates rising once again.