Quote from Roy Fokker
libertarians don't dismiss "currency" as "fiat money". libertarians have never had problems with sound money or money backed to fixed assets (ideally precious metals). Most American libertarians simply want government to follow what is outlined in the Constitution, a document which incidentally all citizens claim they love and honor.
A few points.
1. The Constitution does entitle Congress to authorize a federal reserve, much as I - like you - disagree with having such a beast.
Article 2, Section 8
The Congress shall have Power:
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
That Congress has passed its power to the federal reserve is worrysome, but within its right. Just as the War Powers Act dumped Congressional responsibility upon the Executive. In BOTH cases, Congress has chosen to exercise its Constitutional authority by farming it out. That is a form of exercise of power, in this case a power specifically granted it as an enumerated Power.
2. Milton Friedman, in his book, Money Mischief, goes to great lenths to point out the positive and negative aspects of monetary valuation. Fiat money has advantages, and disadvantages. So does backed currencies. Friedman points out that backed currencies can be manipulated, as well - and have been.
He points out the inherent dangers of fiat money - namely, YOUR concern that a liberal printing press creates inflation.
He also points out the limitations on current fiat money: the international linking of currency serves to put pressure on each individual currency producer to maintain policies that favor the international money market. In Friedman's opinion, this fact makes current 'fiat money' less manipulative than in the past.
Look at it THIS way: your concern is that the printing presses are churning out so much money, the fed wants to hide this fact - and hide the inflation that results. However, you cannot hide this fact, for long, in the international markets. They react not only overt monetary policy, but the symptoms of such a policy. Hence, the devaluation of the dollar.
The fed is NOT getting away with a hidden printing press. THAT is the problem. I will submit that inflationary growth is a third disadvantage of fiat money.
I believe that the best policy would be NO federal reserve, NO control on interest rates, and a growing monetary supply set to a fixed standard, say growth at 3%, a year, fixed. I am sorry to say, however, that the current system is entrenched.
3. Regarding trade inbalances. I will submit that such an animal is arbitrary, at best. However, because the control of fiat money lies within the international market, international trade is going to be an issue. I also pointed out that there was no real method by which to control such trade, short of tyranny, and so, I focused instead on what CAN be controlled - debt.
The bottom line is this: I understand the inherent dangers of fiat money. Having said that, I am not a believer in the fact that backing the currency would be a better course of action. A BETTER course of action is removing the fed and fixing the growth of money to an immovable standard. Money MUST expand, or else, the economy cannot expand. Both should be allowed to do so at a reasonable, and fixed rate.
A consistent and fixed rate of growth would go far to reduce the number of recessions and downturns. You don't need a fed for that, only a Congress with the resolve to do its duty. Unfortunately, there is no such animal.