Deposit insurance should be illegal

Fiat currencies are vulnerable to inflation by the banking system. In order to prevent this we can either remove deposit insurance from the banking institutions so that they can fail... or we can make fractional-reserve banking illegal.

Since fractional-reserve banking (frb) is not aggressive (just as counterfeiting is not aggressive) then we cannot ban frb if we are being respectful of natural rights. We can however remove deposit insurance from banks which means that no bank which practices fractional-reserve banking would be immune from failure. This would prevent unsound banking and enable only sound banking.

Since it is the government which provides deposit insurance then to ban it would require a law to be made against the government... which is known as a constitution (a constitutional law). If the definition of a constitution is a law made against the government then to make deposit insurance illegal and thereby against the constitution would prevent unsound banking (and give us only sound banking). We cannot ban counterfeiting and fractional-reserve banking under common law and so the only means by which we can prevent unsound banking is by making (the provision of) deposit insurance illegal. This is in the case where deposit insurance is only provided by the government... naturally private deposit insurance is fine.

To prevent unsound banking and make anything other than sound banking impossible we must ban deposit insurance (provided by the state) and make the constitution prohibit deposit insurance. Deposit insurance (provided by the state) should be illegal.