During the Great Depression, the burgomaster of the Austrian town of Wergl, in order to somehow fight inflation, lack of funds and unemployment, decided to conduct an economic experiment described in the book of the famous economist of the time Silvio Gesell "Natural Economic Order". Michel Unterguggenberger decided to issue a “local currency” that would not be issued, that is, would not be depreciated.
On July 31, 1932, the city magistrate issued 5, 000 "free schillings" (ie, interest-free schillings), which were covered by the same amount of ordinary Austrian schillings in the bank.
This money was used to pay wages and materials, merchants and entrepreneurs accepted them as payment. The payment for using this money was 1% monthly, that is, 12% per year. It was to be entered by those who had the banknote at the end of the month. The fee was paid in the form of a stamp with a denomination of 1% of the value of the banknote, which was glued on the back of the banknote. Without such a mark, the banknote was invalid. This type of taxation meant that any person receiving free shillings as payment would try to spend them as quickly as possible before moving on to pay with their regular money. The residents of Wörgl even paid their taxes in advance to avoid paying fees for using the money. During the year 5, 000 free shillings were in circulation 463 times, and goods and services were produced in the amount of about 2, 300, 000 shillings (5, 000 x 463). The ordinary shilling during this time was in circulation only 213 times. The fee received by the magistrate, which ensured the rapid transfer of money from one hand to another, amounted to only 12% of 5, 000 free shillings = 600 free shillings.
Despite the success, the experience of one city is not enough to assert the effectiveness of Gesell's ideas on a national scale. The economic recovery at Wörgl during the experiment could have been determined by other factors that have not been investigated. For example, an increase in turnover during a period of general crisis and recession does not at all mean that such measures will have a positive effect in conditions of a fairly stable turnover.
However, when more than 300 communities in Austria became interested in this model, the Austrian National Bank saw this as a threat to the stability of the monetary system. Despite the great interest in this experiment and his support from the French Prime Minister Daladier and the famous economist Irving Fischer, the Austrian central bank intervened in the affairs of the magistrate and prohibited the printing of local money. The bans concerned the direct emission of money by local authorities, and not the principles of the Gesell system. Despite the fact that the dispute lasted a very long time and was considered even in the highest courts of Austria, neither Wörgl nor other European communities were able to repeat this experiment.