Tell me, a matter to be addressed in a libertarian society -
All fiat currencies inflate, it is in their very nature. It matters not if they are created by men of the utmost strength, probity and integrity, eventually the weak, mendacious and meretricious will gain control, theft will become the order of the day, and the currency will inflate, sure as God made little green apples.
Who cares whether the inflation rate is 2% or 20% per annum, the principle is the same.
Still, simply declaring that more currency exists today than existed yesterday does ensure there’s liquidity in the economy.
On the other hand, take a hard currency backed by, or even composed of, a scarce commodity. Lets take, for instance, just at random you understand, a currency made from, say, minted gold. Is there enough of the stuff to satisfy all transactions? I would suspect not.
Wouldn’t using gold, or any other scarce commodity, as the basis of exchange result in a massive currency shortage? Resulting in both deflation and a chronically, although not perpetually, depressed economy? Every time the economy started to take off it would be brought to a shuddering halt simply by there not being sufficient currency available to support increased expenditure.
Even if other and more common commodities, silver, copper, salt, potato crisps, were used to bulk out the currency, relieving the shortage and used for low value exchanges, we have the same problem. A fixed rate of exchange between commodities would have many of the characteristics of any other fiat currency, but a free rate would be hellish – continually fluctuating prices in multiple commodities.
What is the solution? If any?