Python - Local Variable Error

When I run this code in Pwershell:

def treasure_room():            
    print "There is a pot of gold as high as you are tall, surrounded by     pillars."
    print "There is a sack by your feet. What do you do?"

    sack = raw_input(prompt)
    if sack == "pick up the sack" or sack == "pick it up" or sack == "pick up":
        print "You pick up the sack."   
        nowsack()               
    else:
        print "How will you carry the gold?!"
        treasure_room()


    def nowsack():
        print "The pot is in front of you and you have the sack. Now what?"

        gopot = raw_input(prompt)
        if gopot == "walk to the pot" or gopot == "walk to it":
            print "Now you are next to the pot. The pillars surround it and you..."
        else: 
            "You continue to stand where you are, with the gold in front of you..."
             nowsack()


treasure_room()

I run it in Prompt, and input "pick it up" once the second print function asks me "What do you do?"

I then get the following error in Powershell:

Traceback (most recent call last):
    File "ex36game.py", line 58, in <module>
        treasure_room()
File "ex36game.py", line 38, in treasure_room
    nowsack()
        UnboundLocalError: local variable 'nowsack' referenced before assignment

Anyone know why? I was thinking maybe I should put define nowsack() function above the first print comment "There is a pot of gold..." and indent the function with 8 spaces, but I tried that and kept getting errors (of a different kind.)