[skookumchuck]

The government banks issuing T bills is indeed an example of creating money with no backing, which results in inflation.

Those are not in the nature of free banking, however. It's a special government privilege.

[cinquemb]

"A privilege is a certain entitlement to immunity granted by the state or another authority to a restricted group, either by birth or on a conditional basis. Land-titles and taxi medallions are pronounced examples of transferable privilege. These can be revoked in certain circumstances."[0]

Who grants the "special government privilege"?

One could dare say that this "special government privilege" could be challenged by any group of actors with varying degrees of sufficient power, at any time, and/or become effectively revoked, especially when a government overextends itself in trying to execute it's influence over an economy.

[0] https://en.wikipedia.org/wiki/Privilege_(legal_ethics)