World production is around 2,500 tons per year out of a total of 165,000 tons of above ground gold, a gold supply growth rate of 1.5% a year- and the production rate relative to total reserves is growing exponentially as superior capitalist production produces ever-more gold per year. If technology continues to advance thanks to dynamic market processes, we might see 5% or even, yes, 10% annual increases in the gold stock in a few decades.
This 1.5% annual increase, in addition to changes in circulation, is a pretty rapid rate of circulating gold supply growth compared to the “inflation” (Austrian definition) which supposedly caused the 19th century business cycle.
I’m not. Your own link notes that the Keyensian analysis claims that higher interest rates increase the demand for money, implying lower interest rates reduce the demand for money.
This Keynesian position is obviously incorrect as it does not take into account the pure rate of interest, and hence when gold is used as money, lower interest rates increase the demand for money, especially when increased demand for money increases sales revenue.
I also noted that you tend to link to Mises articles without creating your own argument; I’d appreciate it if you were able to put it into your own words rather than rely on the (highly reputable, I’m sure) Austrian economists who write those.
Please prove that the production rate is necessarily (and always?) growing exponentially due to “superior capitalist production” (and please define that term while you’re at it). Your last sentence is just pure speculation - why should anyone take it seriously?
It might not; it’s just an extrapolation. It’s best for you to hope it doesn’t happen, though.
This is irrelevant anyway, because the amount of gold being mined does not necessarily reflect the amount of gold in circulation, which fluctuates dramatically.
This seems to be a giant red herring thrown in the face of my post about how fractional-reserve banking can expand the (perceived) money supply vastly more than mining more gold or even printing more paper fiat currency. You seem to have (conveniently) ignored that post.
You don’t seem to understand what gave rise to the “financial panics” during the 19th century. It was mainly due to fractional-reserve banking. Note that this fractional-reserve banking went on in spite of there being a gold standard during that time.
That in itself in no way means that rapid money-supply growth would necessarily still occur under a gold standard.
I didn’t answer your question - I rejected it. Furthermore, I attacked the foundation on which your question seemed to be based. Do I need to repeat what I asked? I’ll be happy to do so until you answer it.
During the period 1871-1895, base money grew 8%. This was a period of multiple recessions despite little growth in the currency supply. If less than 1% monetary base growth can trash an economy, bad news for gold.
So I guess you’re left with 100% reserve banking- not because it works, it’s probably a disaster in practice due to lack of overnight lending, but because there are hardly any examples of it in practice in an industrialized economy. Which requires fractional reserves banking to be illegal, and that’s a pretty statist form of financial regulation.
I also gotta point out that outlawing fractional reserve banking alone will not stop the growth of the money supply. There are many types of privately created money, such as financial derivatives and the M4, that don’t involve 100% backing. In order to really stop the growth of money creation it’s necessary to have some really broad restrictions on financial activities such as mortgage backed securities, credit default obligations, etc. It would require an Austrian version of Dodd Frank, except a thousand pages longer.