They could prefer the IOUs simply by charging more.
Or they could consider an IOU system, like Ripple or LETS, a convenient medium of exchange. So depending on your definition of money they could be looking for a "better money".
Mutual credit has some advantages over regular money. For example, most LETS comunities operate at zero interest and there's always enough liquidity to trade.
I said barter and credit transactions, but this should be also applicable to mutual credit systems and other complementary currencies.
I still think that the situations you describe indicate that there is something hampering free market. For example, banking regulations, minimum wage laws, hyperinflation, confusing tax system and so on.
I'm confused. Do you believe a free monetary market with different options can exist?
Do you think that nobody would be using bitcoin if there wasn't an economic crises or if we were under a global gold standard?
Do you think money is a natural monopoly?
Charging more? Neglects the risk/liquidity and indicates a problem with the loan market.
If I value more $20 than an IOU for $20. Isn't it logic that I demand, for example, an IOU for $21 instead?
If we set a deadline for the settlement of the debt, the difference is the interest. The IOU would work just like a bond.
Local currencies? This means that people voluntarily restrict their ability to trade. It makes no sense, since it runs contrary to the alleged goal.
They also restrict where the value can go. This way they know the value will stay within the community and also this makes the community less dependent on transport and oil, thus more sustainable.
Anyway, it seems that you're assuming they will only accept the local currencies, but that's just not the case, they circulate in parallel.
Thanks to the local currencies they actually perform MORE trade than only with the national currency, because there's no absolute limitation on liquidity.
When we use bitcoins or when people use gold dinars instead of rupiahs in indonesia they're also restricting the people who will accept the money.
Are we (and them) acting irrationally?
No interest? This eliminates the ability for intertemporal plan coordination.
This is usual in LETS systems, but it's not mandatory. Ripple allows you to set the interest rate in each credit connection, but I believe the market forces would make it drop close to zero.
Barter? Same as local currencies.
You're not going to be using barter in most cases, but if you're lucky enough to find someone who wants something from you and can give you something you want, What's the drawback?
If the "official" economy is screwed up, I can imagine that a LETS system might be an improvement, because the proximity and familiarity of the participants allows for better assessments than by someone in Washington. It might also work for groups that are intentionally isolated, such as the Amish. But I'm skeptical about the widespread viability of such systems on a free market.
This again leads me to think that you believe money is a natural monopoly. Or all the currencies in a free market must target global usage to succeed?
I think that, for example, bitcoin and ripple have advantages over state fiats even if there's no crises or hyperinflation.
But why do you expect the velocity of regular money to slow down in response to competition?
I think that what you described is a symptom and has some deeper causes. So I think that we're not under a ceteris paribus assumption. Unless we understand the causes, we can't make the ceteris paribus assumption. That does not necessarily mean your conclusion is wrong, rather that there is step missing in the argument.
I get your point. You assume that if alternative currencies are being used, is only because the main monetary system is having problems. And I'm not explaining what the problem is.
But I don't think problems are needed, at least not the ones that you describe. Like Gesell, I think gold-money is flawed and also leads to economic cycles (although doesn't postpone and make worse the liquidation phase through printing, like state fiats do).