4 ms·

Did you read the link on money supply? Base money is not used in all transactions. https://en.wikipedia.org/wiki/Money_multiplier https://en.wikipedia.org/wik

• FredPret 5y ago
  The whole concept of a gold standard is that you can trade your paper money in for real metal at any time. What you describe, base gold supply + credit, implies fractional reserve banking. As soon as you have a fractional reserve, the gold standard promise no longer holds. The question becomes - what level of fractionality is acceptable? And who decides that, the government? What stops them from decreeing that one ounce of gold now represents a billion dollars and letting the printing press fly? (In fact, this is precisely what did happen. Look up the historic value of the British Pound. Gradually got watered down over the centuries as I described.) If the government can make up the fraction they want to use, let’s just skip the extra steps and let them make up the amount of money they want to print directly. Ultimately you can’t get away from the fact that we’re creating a hell of a lot of economic value every year and we’ll never dig up gold at the same rate, probably ever.