The phrase alternative currency generally refers to units of currency (either physical or electronic) issued by an organization not designated as the issuer of a region's official currency.
In today's society, most currencies are issued either by countries or by multinational organizations (e.g. the European Union issues the Euro, which is officially used by most countries within the EU).
The existence of an alternative currency enables healthy economic activity to continue when supplies of the official currency are reduced due to causes other than reduced production capacity (due to disasters or destruction of some sort), or when the official currency's value is decreasing rapidly (i.e. inflation, typically due to devaluation by over-issuance).
Alternative currencies are also free to experiment with alternative monetary systems which may have significant advantages over the official monetary system. In particular, if the international banking conspiracy theory is correct, nearly every official monetary system in the world is designed with the primary goal of enriching a small group of people; alternative systems would be free of this "hidden tax", and thus would be of greater benefit to their users than the official system.
The main disadvantage to alternative currencies appears to be the existence of legal restrictions on the issuance of currency in most countries, and the threat of sanctions (including jail time) for violating those restrictions. The laws surrounding currency issuance in many countries are complex and open to interpretation, making it very risky to create a currency that is truly useful; the "safer" path is to significantly restrict the currency's utility so as to be more clearly within the law.
A second obvious disadvantage relates to the network effect: a currency has no use until it is widely accepted, and this requires a significant investment in publicity in order to overcome the common (and understandable) tendency to see alternative currency as worth significantly less than face value, or possibly even as valueless play-money.
Certain types of alternative currencies, such as local currency, have built-in limitations that make them more difficult to use in some circumstances; these limitations are presumably a trade-off for some intended advantage enabled by the limitation.
Nicholas Läufer, a professor of economics at the University of Konstanz, theorizes that local currencies are only beneficial over relatively short spans of time. (Wikipedia links here as a source for this, but that is largely a page of links to other articles -- all of which are in German, and many of which are PDFs, making them more difficult to translate automatically; further investigation is needed. One question that needs answering: is this theory based on a model, or on examples of actual local currencies becoming less beneficial over time? If the latter, is it arguable that the local currency was ultimately harmful, or did it only become less beneficial because it was no longer needed as much, e.g. as the main economy recovered?)
There is historical evidence of an international banking cartel that has thrived for many centuries largely on its control of the money supply to individual nations. A long-standing pattern of crackdowns and restrictions on any form of alternative currency which becomes too successful is a significant part of this body of evidence.
There is further evidence in the history of money in the United States.
- community currency: this may be essentially the same as local currency
- complementary currency: a type of alternative currency whose value is pegged to that of the official currency
- local currency: an alternative currency limited to use within a certain region
- Local Exchange Trading System (LETS): trading "points" for items, where points are typically equated to man-hours
- private currency: currency issued by a private organization
Conservapedia: no article as of 2011-04-08
dKosopedia: no article as of 2011-04-08
SourceWatch: no article as of 2011-04-08
- Community Exchange System (web site, Wikipedia): global, community-based, complementary currency network
- Complementary Currency Resource Center
- OpenMoney: software in development; includes a simulation-game
- Open Source Currency