I also believe that legalizing the competition is the best course to take today. Allowing even just gold and silver to circulate as money would force The Fed to maintain a tight money policy or go under.

I believe that abolishing legal tender laws would be the quickest way get rid of the Fed — or at least tame it. If the Fed followed a loose monetary policy, it would be punished by people who would shift their assets into other currencies. International currency exchanges already perform this — and keep central banks somewhat honest. But if domestic markets could participate as well — the Fed would be faced with the choice of either keeping monetary policy very tight or going out of business.

I once asked Ron Paul what his plan was to get us back to sound money, and he said that all we need to do is “legalize the competition”, with both private money (e-gold, digital currencies, etc.) and foreign fiat currencies. The Fed would be forced to maintain a tight monetary stance or fold.

I believe that Hayek was an advocate of this approach.