Most of us would be horrified by the lack of consumer choice in the old Soviet Union. We love walking into a large grocery store and seeing the many options to choose from. But is more choice always better?

Suppose we had many systems of weights and measures in our daily life. You drive down the street and choose between gas stations that sell gas by the gallon and gas stations that use quarts or pints. A few even use liters. That would be quite confusing. Because of “network effects”, we usually prefer a unit of measure.

Similarly, a unit of account is a means of measuring value. One can imagine that some gas stations price their products in terms of Citibank dollars, while others use JP Morgan dollars or Wells Fargo dollars. But if the exchange rate between these different currencies fluctuates from day to day, the account will have multiple units, which will be quite confusing.

On the other hand, that sort of thing Currency competition If the economy has a single account, and all competing personal currencies are backed by a common medium of account (something like gold or Federal Reserve notes.) In that case, gas stations can accept any of the respected competing currencies, just as they accept multiple credit cards.

When discussing the prospect of financial reform with liberals, I often get frustrated that people have multiple media of exchange (the free banking debate) and multiple units of account (the financial standards debate.) There is no problem with competing media of exchange. In contrast, competing units of account seem so unlikely as to not be worth considering. (Countries with hyperinflation are a different story; they often have competing units of account. But that’s not a good sign!)

To be clear, I believe people should be free to account for competing media offers. Let 1000 Bitcoin bloom. Because of network effects, however, I see it as highly unlikely that a single medium of account will win the race to be the unit of account in the US. Life is short, and I don’t plan to waste a lot of time thinking about hypothetical economics with multiple units of account.

If I’m right, we need to think about what kind of media accounts are best. Throughout its history, the United States has had one official unit of account (the US dollar) and two media of account (early commodities such as gold and silver, and more recently fiat base money.) Returning to gold as a medium. Account is an option, although not a wise option in my view. Silver might be a little less bad. (BTW, the US will go back to gold no restore the classical gold standard.)

An alternative to laissez-faire? Not immediately. Trillions of US dollars base money in circulation-Some decisions have to be made. You could legitimize the fake. It’s a decision. You can freeze the monetary base and allow private banknotes – that’s a decision. You can go back to the gold standard at 1/2000 oz. Every dollar – it’s a decision. But it is pure fantasy to think that from this point in history we can simply move to laissez faire, abolish the Fed, and let the market determine a new medium of account. People who talk about “ripping off the Band-Aid” have no idea how much blood will flow. You may not care about the value of the US dollar, but those whose lives are saved in that currency have a lot at stake. And this is equally true even if the initial decision to move from gold to fiat money was wrong.

Smaller countries like Canada have more options. If the Bank of Canada decides to close up shop, it may agree to exchange all Canadian principal for foreign currency. In that case, Canadians would probably accept US dollars. But this does not eliminate the need for thoughtful monetary policy; It simply outsources the decision on how to manage the account medium in the US.

As a practical matter, the future status of America’s medium of account is a decision that the US government will make. There is no reasonable alternative. My preference is for a NGDP targeting system, where market forces determine the money supply and interest rates. But even in that case the NGDP target will be set by the government. If we turn to gold, that is a decision that the government will take.

Commentators have offered plenty of counterarguments, but none of them amount to this: Imagine a libertarian paradise in which a freely chosen fiscal regime magically appears.

If only things were that simple.

Rest assured. Ironically, America once had the Morgan Dollar. Here’s what it looked like:

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