What Currency Would Americans Choose?

In which our columnist questions his readers.

Published in The New York Sun.

In the spirit of the Declaration of Independence, let us ask whether the rights to “life, liberty and the pursuit of happiness” should include the right to use the money of your and your counterparties’ own choice. Or should you be forced to use the paper dollars which the Federal Reserve prints?

Under present circumstances one is forced to use what we call Federal Reserve Notes, because the government grants a complete monopoly in money to the Fed. We are so accustomed to this situation that we are likely to take it for granted. Yet it is not necessary that the Fed have the power to print as much money as it wants to print.

Or to lend as much as it wants to the government to spend. Or to create perpetual inflation, impose a constant inflation tax on the people without any approval by the Congress, and constantly depreciate the money, savings, and wages to finance the government’s deficits.

The philosopher-economist, Friedrich Hayek, put the question in his “Choice in Currency: A Way to Stop Inflation.” That was issued in 1976, two years after Hayek won the Nobel Prize in Economics. “Why,” Hayek asked, “should we not let people choose freely what money they want to use?” He understood that the Treasury and the Fed would hate this question, but a free people ought to take it up.

Hayek suggested that the key problem is not that the Federal Reserve gets to issue money, but that it gets a monopoly in doing so. He proposed that this monopoly be taken away, so that the Fed could still issue money, but the money it creates would have to compete with other money for the public’s confidence.

In Hayek’s proposed world, central banks would be disciplined by this competition in currency. “There could be no more effective check against the abuse of money by the government than if people were free to refuse any money they distrusted and to prefer money in which they had confidence.” Have governments abused their money power? Without doubt.

Hayek warned that nearly all governments “used their exclusive power to issue money in order to defraud and plunder the people.” His thoughts are congenial to those who want cryptocurrencies to compete with Federal Reserve notes. In 2025, Congress enacted with bipartisan majorities the “Genius Act,” favorable to the cryptocurrency called stablecoins.

It would be newsworthy if stablecoins were an example of Hayekian choice in currency, but unfortunately, they are not. Because stablecoins are tied one-for-one by definition and now by law to Federal Reserve dollars, when the Fed is depreciating your paper dollars, it is equally depreciating your stablecoins.

However, there have been historical examples of true parallel currencies in America. The most pertinent case was during the Civil War, when as described by Joseph Salerno of the Mises Institute, pure paper Treasury greenbacks “swiftly became the domestic currency… but gold continued as a parallel currency in the East, because of its use in foreign trade.”

This precedent is consistent with Hayek’s proposal to create competition for central bank paper currencies, because Hayek was really thinking about gold. That the best monetary competition would come from gold is something about Hayek’s essay often not understood.

When the essay was published in 1976, it had been only two years since the United States government had at long last rescinded its oppressive 1933 law making it a criminal offense to own any gold to protect yourself against government monetary depreciation. This is a good example of the warning of Psalm 146: “Do not put your trust in princes” — or, Hayek would add, central banks.

Wrote Hayek, “Where I’m not sure is whether in such a competition for reliability any government-issued currency would prevail, or whether the preference would not be in favor of some such units as ounces of gold. It seems not unlikely that gold would ultimately re-assert its place… if people were given complete freedom to decide what to use as their standard.”

So I turn to my readers. Had they the freedom to choose the money they really wanted, what would it be? Would it be gold, or the Fed’s inflationist paper currency, or a cryptocurrency, or something else? Do they, like Hayek, think gold would win in a free competition?