Perhaps in the future we need to consider free market money, allowing consumers to decide about their money the way they decide about everything else. Hans Sennholz and Friedrich von Hayek argue for this system. And it existed at one time in our country.
In California, during the 1840s and 1850s, many privately minted gold coins circulated. The practice was outlawed in 1864, “but as late as 1914,” points out Antony Sutton, “the U.S. Treasury was still trying to halt circulation of private gold pieces in San Francisco.” Why were such coins still circulating? Because the private mints maintained higher standards than the government mint. Often, points out Dr. Sutton, they were one percent heavier than Federal issues, “to protect the user from metal loss by abrasion while the coin was in circulation.” Private mints held to a higher standard because they were protected only by their reputation. They could not force consumers to take substandard money by the force of law, as government can.
The North financed the Civil War with hundreds of millions of dollars of irredeemable Greenback notes, and as a result, prices more than doubled from 1861 to 1865 During the Greenback inflation, people in California continued to use gold as their money. “In California, as in other states,” points out Frank Taussig, “paper was legal tender. . .” that is, people could be forced to accept it. Although there was no antipathy towards the Federal government, people believed strongly in gold. “Every debtor had the legal right to pay off his debts in depreciated paper. But if he did so, he was a marked man (the creditor was likely to post him publicly in the newspapers) and he was virtually boycotted. Throughout the period, paper was not used in California.”
