We cannot rely on the invisible hand to spontaneously generate a stable monetary system. In ancient times, it was necessary for governments to invent money in order to deal with the high transaction costs of bartering in the market. After the Industrial Revolution increased the volatility of all modern economies, the establishment of central banks has been the leading cause for the significantly reduced monetary disturbances in the world.
No, my wife has not been adding exotic mushrooms to my diet-I had planned to use the above paragraph as an opening for an April Fools' Day commentary. As you have probably guessed on your own, none of the three claims above is true. The tool we call money evolved without central design in various societies in antiquity. And it was only after governments took control and discovered easy ways to manipulate the money supply that monetary instability became endemic.
The truth is simple: In this area (as in so many other cases) the government has not been the solution but a big part of the problem. Friedrich Hayek noted how monetary intervention "has been as much a cause as a consequence of instability." As I have pointed out in previous commentaries, markets tend to punish inefficiencies while politics is good at rewarding them. The more central banks fail to maintain stability in the financial sector, the more power they receive in the hope of preventing future crises. The more our bureaucracy fails to accomplish the goals set by the legislators, the more funds they are able to extract from us.
The bad news from Hayek is that past interventions have pushed our monetary system beyond the point of no return. We have ended up with economies that depend on credit institutions, which in turn require deliberate control. Because of that we will never know what self-regulating alternative mechanisms could have evolved and our dream of removing government from the control of money is likely to remain unfulfilled.