How to Start Your Own Private Currency

It's not as complicated as it sounds. You can "back" it with gold, or mimic an I.O.U. for one hour's worth of work. All you need is a system other people can understand and, most importantly, trust.

Alternative currency Berkshares

Derek Thompson
The Atlantic

Here's a nightmare scenario shared by some mainstream investors, goldbugs and Ron Paul devotees: The year is 2013. Inflation has the U.S. economy in a stranglehold. International investors are fleeing to the far corners of the globe. The dollar is in a free fall, and Americans are scurrying to protect their wealth. What do you do?

Start your own currency.

It sounds complicated, but really it's as simple as three steps. First, amass a bank of stuff. Let's say gold. Second, decide on a sensible unit for your new currency. Let's say one "Derek Dollar" token is worth a gram of gold. Third, convince a critical mass of people to use it so that "Derek Dollars" are redeemable not just within my group of friends, but among shops and merchants around the world. Voila, we've got our own private currency.

No gold? No problem. The easiest way to start a currency is to draw up an I.O.U. system that allows your friends to trade hours of work. Hundreds of shops in Ithaca, NY, accept "Ithaca HOURs," a local currency backed, not by gold, but by man-hours. I spend an hour mowing an Ithaca lawn and receive a paper note for one HOUR. I walk to the barber's, hand him the piece of paper, and he cuts my hair. Now my neighbor's grass is shorter, my hair is kempt, and my barber is one HOUR richer. And it's all thanks to transactions that might not have happened were it not for a private currency.

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