Could somebody answer this,
A friend used this argument against the gold standard, he thinks it is an unstable base for a currency to base it on the shortage, even if the gold is used only as a competing currencie along side other currencies.
If one gram gold at some time was worth a couple of millions, then nature would be raped in the search of gold that could double their wealth instead of them producing prosperity. If an individual suddenly found large amouts of new gold then this individual would be the richest private person in the world over a night without having produced any prosperity.
Is there any flaws in his thinking?.
Sorry if my english is bad!.
Your English is fine, but you should probably read some economics...
When the supply of money increases relative to everything else, it's called inflation... It means that money is worth less. Money becomes less desirable. The Earth will not be ravaged in an insane quest for gold, because the purchasing power of gold is going to fall/rise at a rate entirely proportional to its rate of inflation/deflation relative to all the things it could possibly purchase.
I mean... Why restrict it to money? Money has special characteristics that other goods don't - its accepted as a means of exchange - but it's also a scarce good. What if everyone suddenly gets it into their head to become a peanut farmer, because peanuts have a certain purchasing power relative to everything else in the economy today? What do you think is going to happen to the relative purchasing power of peanuts as their supply relative to everything else increases? Don't you think people might decide to stop becoming peanut farmers as the price of peanuts slides?
If an individual suddenly found large amouts of new gold then this individual would be the richest private person in the world over a night without having produced any prosperity.
This is more likely than someone with a money printing press using it to, I dunno, print money?
Besides, real wealth is purchasing power. He's not forcing anyone to treat his gold, or anyone else's, as if it had any particular purchasing power.
Can deflation in a free market gold standard be a good thing?.
Yes, because then the purchasing power of gold would rise. That is, the same amount of gold would become exchangeable for a larger amount of other goods/services.
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Voluntaryism Forum
How does deflation in a gold standard, where the price is fixed by law, behave compared to a deflation in the free market?, any historic examples?.
Under a gold standard, currency units are simply defined in terms of specific weights of gold. A gold standard can arise in the free market, where the currency units are simply customary. So "gold standard" and "free market" are hardly mutually-exclusive terms.
But if the market was rigged by the U.S. government, could the deflation not effect the economy in any bad ways then?.
First off, a market that's rigged by the US (or any other) government is not a free market. Second, in such a rigged (i.e. government-controlled) market, there is indeed a form of harmful deflation that could occur: confiscatory deflation. This is where the government freezes bank accounts and other financial assets to keep people from spending their currency as quickly as they want to.