Adaptation of the gold standard

Money and Prices

 

This is probably my most cited lecture of Rothbard.

The concept that there isn't enough gold has been debunked since Ancient Rome if not before.  The Romans had Gold, Silver and Copper coins so they could condust large, medium and small transactions.  The most free banking system to ever exist in Scottland used gold and silver.  Under the Gold Standard in the US there were other metals used for small transactions.

If there is an influx of gold then there will be some inflation and that will cause distortions in the economy.  But even if a new gold mine or some alchemic source is found, gold has alternate uses.  So as new gold enters the system, people use this gold for uses other than money thus raising the price.

Keep in mind that most Austrians are not for the gold standard although most would say that fixing the number of paper dollars to an amount of gold is a wise thing to do.  The best thing to do is to get rid of the dollar and all other monopoly currencies and let the market determine money.  In the historical examples of this in Scottland and for breif periods where there was no central bank in the US, people would write contracts in amounts of gold or notes for gold in the cases of large transactions and in silver for small transactions.

because doesn't slight inflation have to happen so that there is enough money?

No, any amount of money will do, the value of each unit of money would rise.  Thus, prices would drop. 

Now you can reach a point where it would be uneconomical to use a certain money because the denominations would become too small, but then Mises Regression Theorem would come into play, and the market would shift to a more suitable money, for example, silver or copper monies.

I presented the idea that more and more sub divisions of currency could be added but still there is no more gold in the market and the price of gold can't really adjust to this can it?

Sure it can. Also, do not forget the Regression Theorem.

Reversly, what if there is an influx in the amount of gold on the market? Wouldnt that debase the entire currency?

Sure, if there was an extremely large influx of gold (compared to the total amount of gold in the world), but this would be extremely unlikely.  Also, even if this did happen, it is still an extremely horrible argument FOR replacing hard money with a fiat money.  Fiat money is the thing that can be printed out of thin air, at least you would have to work hard to mine more gold, and cannot just be arbitrarilly created by government decree.

What stops gold from shifting in value.

Everything is always changing in value, value is subjective... money is no different.

So in short how does the gold standard adapt to fufil its purpose?

What do you exactly mean by "fulfill its purpose?"

Are there any other major advantages of the gold standard?

Stable money supply (the amount of gold added yearly is miniscule compared to the whole), prices dropping (price deflation), limits government since they would not be able to use the inflation tax, stable purchasing power, wealth is not shifted to those who are lucky enough to recieve the money first... There are plenty more but I think that is a decent enough list.

Also, most Austrians do not support a gold standard, they really support a free market for money.  Anything can become money, but Gold and Silver (Copper too) are the historical monies, and would most likely become the monies if the legal tender laws were abolished and people were free to choose whatever money they wanted.