Thanks for the great responses. I am still curious in how the interest rate is set in a fed run gold standard. Isn’t there a definite number of dollars since it is tied to gold?
You can create any number of dollars while on a gold standard, just as with fiat currencies, but you have to pay the price. With fiat currencies, the price is a rising “price level”, which tends to be acceptable to governments because it’s only the poor and working class that end up paying. With a gold standard, the price is gold outflows. However, there can be a significant time lag between the creation of the money and the outflow of the gold, so usually government is able to blame the latter on something else and tries to legislate themselves out of things, usually with a currency devaluation (so as to again stick the poor and working class with the bill). This is what happened in the 70’s, for example – OPEC got blamed for “price-gouging” (even though the price of oil never changed in terms of gold), and Nixon devalued the dollar in 1971 and 1972 before just floating the damn thing in 1973.
Now obviously all of this is a big hassle, in the eyes of governments, and quite apparant to the poor and working class. It’s not nearly as sophisticated as fiat currencies, for that purpose, which is why governments have conspired to do away with the gold standard, inflate more or less in unison, and call it “price stability” instead of what it is (mass inflation).
For what it’s worth, I’ve read a whole lot of Rothbard and Mises, but nothing made the economics of the Great Depression more concrete in my mind than going down to the local coin shop and buying and studying a 1920’s-era Federal Reserve note. I’ve found showing it to people to be the most effective way to counter decades of deliberate economic obfuscation and reveal the crash of '29 for what it really was: the collapse of the single largest financial scam in the history of the world. (Even better if you can afford to show them a gold double eagle at the same time.)
