Thanks to Stephen for telling me about the Guernsey Experiment.
The Guernsey Experiment was a financial experiment done by the States of Guernsey in the early 1800s to raise fund for improving the public market and reducing the debt of Guernsey. Instead of borrowing money from private banks, the Committee proposed that the States of Guernsey issued their own paper money to finance government projects. After a few years of implementing the Guernsey Experiment, the economy of Guernsey improved significantly, allowing the people to live in prosperity.
Here is an introduction about the Guernsey Experiment from MONNETA.org:
After the Napoleonic Wars, Guernsey was in dire straits. Roads being washed away by the sea desperately needed repairing. Unemployment and poverty were high. The main town of St. Peter Port desperately needed a building for its market traders who had to stand outside in all weathers.
Private banks were charging high interest rates for loans to the island’s government. The far-sighted Governor of the island decided to bypass the banks and issue interest-free currency to pay workers to do the necessary public works. The islanders keenly accepted the notes, which circulated freely. Once the new market hall was built, the market traders paid rent in the new currency which went back to the government to pay off the debt created by issuing the original notes. By 1837, States Notes to the value of £55,000 were in circulation on the island. Many public works were accomplished, including building a new college and new schools. No interest had to be repaid and the debt was always retired when notes came back to the government and were destroyed.
This historical case study shows that any local government theoretically has the power to issue its own currency without incurring interest or debt or being made dependent on Private Finance Initiatives that burden future generations.
The Guernsey Experiment is not the best financial solution for freeing the people from debt slavery. However, it is much better than the current fractional reserve banking system, because it allows states to create their own notes and is against private central banks.
Below is a pamphlet written by Olive and Jan Grubiak about the Guernsey Experiment. If you have problem viewing the pamphlet, click on this link to go directly to the PDF file.
The Guernsey Experiment