Myth: Gold Makes Boom-Bust Cycles Worse
According to some commentators on the gold standard, an increase in the supply of gold generates similar distortions as money out of “thin air” does.
Let us start with a barter economy. John the miner produces ten ounces of gold. The reason why he mines gold is because he believes there is a market for it. Gold contributes to the well-being of individuals.
He exchanges his ten ounces of gold for various goods such as potatoes and tomatoes.
Now people have discovered that gold apart from being useful in making jewelry is also useful for some other applications.