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.