Will Americans ever use alternative currency in numbers to challenge the regular currency? News flash: the Greeks turned to alternative currency last fall, and the Greek government won’t stop them. And some say that Americans might have to use alternative currency, whether the government likes it or not.

What is alternative currency?

An alternative currency is anything that anyone uses for money, other than the official currency of the country he lives or trades in. It can be something one digs out of the ground, something one makes, or a bank credit or other credit. To work well, alternative currency must be scarce and transferable. “Frequent flyer miles” work like an alternative currency for “The Jet Set,” but only between customers on one hand, and airlines and banks on the other. During the Second World War, cigarettes became an alternative currency when they became scarce.

Until recently, the best-known fiat alternative currency was the Ithaca Hour, now the dominant currency in Ithaca, NY, home of Cornell University. The Ithaca Hour is just that: one hour of work. Residents and businessmen have traded in Ithaca Hours since 1991 and never went away from it. This alternative currency is strictly local, but it is lawful, and residents pay local taxes on it and in it.

Time reported back in 2008 that more and more communities are turning to alternative currency today. But in 2009, Kevin Alfred Strom observed that alternative currency was almost a crime in the USA. He wasn’t talking about Ithaca Hours or other alternative currencies that governments helped develop. He was talking about gold- and silver-based currencies that several activists developed, in protest against the Federal Reserve.

Recently I learned that the creators of some of the most interesting and successful alternative currencies — the Hawaiian Dala, the California Bear, the Chambersburg Dollar, the Evansville Dollar, the Liberty Dollar, the Peace Dollar, and the Ron Paul Dollar, among others — have been arrested by the FBI (for totally bogus charges under statutes intended to stop counterfeiting). They are Kevin Innes, Bernard von NotHaus, Sarah Bledsoe, and Rachelle Moseley.

Strom also quoted von Nothaus, who sought legal opinions from the Treasury Department for every step he took. He minted gold and silver coin, and issued receipts for gold and silver bullion that he stored in a warehouse. Thus he created a full-reserve, gold- and silver-standard bank. His arrest makes no sense, except in this context: the government does not want anyone to compete with its fiat currency monopoly. Especially when someone creates an alternative currency and tries to grow its circulation to supplant the dominant currency nationwide, not merely locally.

But the government might not be able to defend that posture much longer.

Necessity as the mother of concession

The Greek Republic has been in trouble since 2008. Many observers fear that America’s economy might collapse completely. To them, Greece is a metaphor for that collapse. But Greece might also be a model for an economy that remakes itself.

Last fall, local residents and businessmen in the town of Volos invented Greece’s first alternative currency. They almost had to rebuild their whole economy, because the euro, to them, was worthless. So they began with barter. Barter always limits trade (for how do you know that anyone, who has anything you want, will want what you have to offer?). So they invented their first τοπικη εναλλασσωμενη μοναδα (Topiki enallassomeni monada, or TEM), which means “Local Alternative Unit” in English.

By all accounts, the TEM does what its inventors wanted it to do: help people keep trading when the dominant currency could not. Thankfully, the government now encourages this sort of thing. What started in Volos spread rapidly throughout Greece.

When The New York Times first broke this story, no one paid attention. Now they are. The Guardian (UK) revisited the TEM system last week. Three days ago, New American did the same. They noticed something darker: Greek officials support moves toward alternative currency, probably because they know that the euro won’t work anymore. But officials of the European Union are trying to stop the movement. In February Greek equivalent of the US Patrolmen’s Benevolent Association threatened to tell its members to arrest any international official who dares come to Greece to make trouble.

And in the United States, three States already mint their own gold and silver coin, and legislators in 13 other States want their State governments to do the same.

Republican Presidential candidate Ron Paul has always called for abandoning the Federal Reserve and returning to a hard-commodity standard, typically gold and silver. Newt Gingrich promises to study the idea, if he becomes President. Furthermore, Dr. Paul proposed to allow States to create their own alternative currencies. He might have to amend the Constitution to do that. Article I, Section 10 reads in relevant part:

No State shall coin Money; emit Bills of Credit; [or] make any Thing but gold and silver Coin a Tender in Payment of Debts.

The prepper movement

All this takes place in the context of another movement that has existed since the Clinton administration and is today more popular than ever: the “prepper” movement. Preppers stockpile food, water, motor fuel, and even guns and ammunition to prepare for a total social collapse. The more serious preppers are even recruiting one another to found farming villages that will be the new outposts of civilization. (Readers of Atlas Shrugged will recognize at once the sort of outposts that spring up nationwide after John Galt tells people to “stop supporting your own destroyers.”)

Judi McLeod, writing in Canada Free Press, saluted the preppers last Monday and heaped scorn on the Obama administration and its latest Executive Order.

Short of a nuke, Obama’s mentors and minions cannot possibly get to every American household…Ominous as they look, Obama’s team is not up to snuff. The unelected czars in his Shadow Party like to sit around talking as they ‘foment’ for a revolution that never comes.  While the czars are toking up and talking, you are installing new shelving for your non-perishables.

In other words: the members and supporters of this administration have no idea of any collapse that might come, or how to manage it if it happens. McLeod could as well be describing the villains in Atlas Shrugged, as she asks ordinary folks to act like its minor heroes.

If and when such villages spring up, they will need an alternative currency. No fiat currency can stand forever. Alternative currency might be one way to prevent a total social collapse, or at least limit it.

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