Stability is certainly a worthwhile goal, to a point—in the end nothing alive can be completely stable—but there is no reason why it must come at the expense of liberty. The main issue is negative externalities, which are already addressed by the Non-Aggression Principle; i.e. your liberty applies to yourself and your own property, not other people or their property, unless they consent. Libertarian society is not a free-for-all. What little scope for petty conflict remains can be addressed adequately through social means rather than force.
> In a well-functioning democracy, the people are the government so the idea of a governmental monopoly is diluted somewhat.
Even in the ideal model, "the people are the government" in approximately the same way that individuals cells are a human being. Part of a vast collective, in other words, with no individual influence or control, retained only to serve the collective, and ultimately disposable. That's fine for cells in the body but a horrible way to think about sentient beings.
I do think there are times when they are juxtaposed. "The Constitution is not a suicide pact" is the cliché. Ideally they can coexist, but for the libertarian ideal to work, humans have to be rationale. I think we are anything but rational although we like to pretend we are most times.
>unless they consent.
That consent, to a certain extent, is implicit on being a willing participant in a free democratic society. It's part of the social contract.
>"the people are the government" in approximately the same way that individuals cells are a human being
I don't think I agree with this analogy. A collection of human cells cannot volitionally decide for the human being to become something wholly different. A government, by the people, can change it's entire makeup to serve it's changing values. When I say the people are the government, I mean the people in a functioning democracy have the power to make the government reflect their value system. I feel like you are misinterpreting my statement by reading it through a individualist/collectivist lens.
You stance optimizes for liberty as you rightly point out. People, however, generally want a society that balances liberty and stability. Laws and policies are enacted to try and find that right balance. It's similar to the centralized banking model vs. a completely laissez-faire economy; it's enacted to provide stability, perhaps at the expense of some liberty. I don't think people inherently have an issue with the government having a monopoly as long as they have a say in how that government functions. In a well-functioning democracy, the people are the government so the idea of a governmental monopoly is diluted somewhat.