What Hayek said is that the bubbles popped pretty early on (which is a good thing) because they could not be maintained and continued by the institutions that existed back then. That the bubbles popped is a good thing. A gold standard keeps the inflation stable, because gold can't be printed. Hayek goes on to say that a gold standard would not work because governments have an incentive to "cheat" and blow up giant bubbles, which cannot be done successfully with a gold standard.
I think that currency should not be issued by governments at all, the absence of government issued money would mean competing currencies, and in a situation where gold competes with other currencies, gold often wins the confidence of the people.
That would be an interesting item to deregulate. I've always been fascinated that the U.S. government doesn't mandate an official language [1] and just incidentally uses English for most purposes (with Spanish becoming increasingly relevant). As far as I can tell, it hasn't caused any major problems for the country and may be a better way to handle the issue. Could currency be the same way?
[1] Language being another item that governments tend to regulate.
I think that currency should not be issued by governments at all, the absence of government issued money would mean competing currencies, and in a situation where gold competes with other currencies, gold often wins the confidence of the people.