Increases and decreases in the money supply are not - in themselves - the problem. Low interest rates are not necessarily a problem, either. After all, the demand for cash balances as well as the supply of and demand for loanable funds all fluctuate over time.
As HabbaBabba is (I think) trying to say, even in a gold coin economy, there is a difference between “money” and “gold” since the gold has to be in a monetary form to be actually money. So, gold coins and bars can be smelted and turned into jewelry whenever this use of gold is more profitable than its monetary use, and vice-versa.
Increases and decreases in the supply of monetary gold in a pure-gold-coin economy are driven by the same law of supply and demand that drives increases and decreases in the production of any good. One notable difference is that - because very little gold is consumed over time (almost all gold ever mined is still above-ground in usable form) - the quantity of gold above ground is immensely larger than annual production.
Clayton -