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.”
