The Austrian School is not insane

Fiat currencies are vulnerable to inflation caused by both the government and the banks. If the banks are guaranteed by the government they will be able to cause inflation just as the government is able to do. With banks this generally occurs when the banks engage in something called fractional-reserve banking. Which can only exist with state support. So if there is a fiat currency and state support for the banks then the banks will be able to inflate the currency for private gain. Inflation by the banking system is different to the inflation which is typically generated by the government in that there is a private incentive to cause inflation. The assets of the bank are held privately unlike those of the government. So if there is a fiat currency and we want to avoid enabling banks to inflate the currency then we need to make sure the government is 'alive' to the risks of fractional-reserve banking. Such a government can be described as an Austrian government... named after the Austrian school of economics. If the government is an Austrian government then banks will not be able to inflate the money supply because either frb will be prohibited or there will be no deposit insurance (and banks can fail). If the government is Austrian the banks will not be able to inflate the currency even if there is a fiat currency. If there is a fiat currency and a non-Austrian government then there is a risk of bank inflation. There is a risk of bank inflation if there is both a fiat currency and a non-Austrian government. If there is a fiat currency then the government needs to be Austrian otherwise the banks will be able to inflate the currency. Bank inflation will be prevented if one of two possible conditions is satisfied: i) there is no fiat currency... instead there is a hard currency; or ii) there is an Austrian government. If neither of these is true then the (private) banks will have the ability to inflate the currency. The banks will be able to inflate the currency if neither of these conditions is true. Only an Austrian government can prevent bank inflation of a fiat currency.

Deposit insurance causes debt

Without the existence of deposit insurance there would be very much less debt owed to banks. People would borrow less from the banks which would mean there would be less inflation of the currency. The reason deposit insurance tends to lead to more debt is that without deposit insurance (DI) the customers of the bank would be unwilling to lock up their money in the loan. Deposit insurance enables the banks to loan out the customer deposits without any material risk to the customers. But if there is no DI then the customers of the bank might lose their money... certainly for a limited period of time and perhaps forever if the money loaned is not returned. It is because of DI that there is so much debt in the economy. Without DI there would be very much less debt in the economy.

Inflation is a form of aggression

We have a right to be free from bank inflation. This is true whether or not the banks are guaranteed by the state. If they are guaranteed by the state and able to increase the money supply then savers are being exploited against their wishes. If the state has any authority then its money is not the same as other (private) forms of credit and as a consequence it has a responsibility not to exploit savers. So if banks have deposit insurance and increase the money supply savers are being exploited... which is a violation of their rights. If state money is important savers have a right to be free from inflation. If banks are not guaranteed then this is a private kind of fraud. Clearly people who use a bank do not expect their savings to be spent by the bank on loans... the only function of the bank is to keep the money safe... so their rights have been violated knowingly by the bank. Private frb is a violation of our natural rights because we have been lied to deliberately by the bank. The bank has failed to do the one thing which is required of it. When banks are guaranteed by the state this is a violation of all savers because we have a right to be protected by the state from inflation. Deposit insurance is a violation of our rights because banks are not part of the state and so have no right to benefit from this subsidy at the cost of savers. We have a right for there to be no deposit insurance. Deposit insurance is a violation of our rights. Since (state) money can be thought of as a store of wealth and as the property of those who own it... then deposit insurance is an aggressive invasion of those rights. Inflation is aggressive and deposit insurance is aggressive.

Inflation by banks is illegal

If we assume that it is necessary to have a viable currency for an economy (and a civilisation) to work then fractional-reserve banking is a bad thing for civilisation. Whether or not the banks are guaranteed and permitted to increase the money supply frb still causes problems for the economy. If we take the case where banks are not guaranteed by the state and they are maliciously spending their customers' money then this is clearly a crime. The bank has promised to look after the money (that is their only function) and they have failed to do so. This is fraud. (They have defaulted on a promise.) If however the bank has a guarantee from the state and permission to increase the money supply then this too is problematic because the inflation caused takes wealth from other people without their consent. For the banks and not the government to cause inflation in this manner is a crime because the rest of the economy has not consented to the inflation... and the banks are not democratically accountable. The banks have no right to increase the money supply and cause inflation even if they have been given permission from the state. The state has no right to deprive the people of a viable currency in this manner. The state and the banks in combination have let the people down (failed in their obligations) if the banks are able to cause inflation. The state has failed in its proprietorial duty to protect the people and the economy (by enabling the banks to cause inflation). The banks have inflicted a crime on the people by inflating the currency via fractional reserve lending. Fractional-reserve banking is a crime whether or not it is guaranteed and permitted by the state... the law is objective not subjective and frb is a crime whether or not the state agrees. Frb if a crime even if there is deposit insurance. It is a crime for the banks to cause inflation (always). Only the state can execute inflation without breaking the law... it is a crime for any private firm to cause inflation. Inflation is a crime if it is not caused by the state. Only the state can legally produce inflation. Inflation is illegal unless the state does it. Only the state can legally produce inflation.