I was interpreting your "printing creates wealth" argument literally i.e. that some people think that by printing a billion euro we have created a billion euro of wealth. The more subtle point that managing the money supply, if done properly, can enhance economic performance and therefore create wealth is one that I subscribe to, the key word being the one in bold.
Friedman argued very much in the same way, but took it one step further by saying that the money supply should be mechanically increased by a certain percentage, and not based on some bankers or economists perceptions at any given time.
I buy into the idea that there is no human being or group of human beings that could possibly gather, analyse and interpret all economic activity that influences the price of money (which is what interest is) in a way that would allow them to accurately set interest rates and money supply. All tinkering with the money supply, especially when in the hands of some small political and banking elite is very dangerous, and in history has proven detrimental on all occasions.
According to Wiki if the World reverted to a gold standard the price of gold would have to be increased by 8 fold just to match the current money supply. There is something really weird about that. At the minute gold competes with other commodities and has found a price level. If we were to revert to a gold standard gold would suddenly be artificially much more valuable compared to other commodities than the open market currently deems it to be. That has to be wrong.
Not quite correct, but I see what you are trying to point out. If gold became money again in the morning then the following would happen:
Today: 1 ounce of gold = about $1350 and 1 barrel of oil = about $88 so one barrel of oil would trade at about 1/15th ounce of gold.
Tomorrow: 1 ounce of gold = 8 * $1350 (I don't know whether this figure is correct, so I'm just using it for demonstration) = $10800. Oil, however, would not still be selling at $88, but at 1/15th ounce of gold or about $720, as gold now is money, and not Dollars.
What you do show is that you cannot simply switch overnight, as all savings are immediately wiped out. But I don't think that even the most die hard gold bugs would suggest that.
The other problem is that the reason gold's open market price is lower than what it would be under a gold standard, is because fiat money is forced on us as legal tender. Fiat currency does not have the same market forces as gold has.
I worked this out before I read Wiki - there just isn't enuff gold to oil the wheels of modern economic activity. Economic activity today is much much higher in real terms than it was say 100 years ago. The gold supply on the other hand hasn't changed much. How can the similar gold supply be right for such hugely disparate levels of economic activity. If we had limited money supply to being one eighth of what it is today there is no doubt in my mind that economic growth would be much less. I concede though that we would have avoided inflation and the worst excesses of the asset bubbles. But surely economic growth is the ultimate objective.
I understand your points, but a real gold standard does not depend on any set amount of gold. Technically, any amount of gold backing, within reason, is enough. The idea of a gold standard is to maintain the value of money by restricting its inflatability. If the money supply is pretty much static then some prices have to go down for other prices to go up. And this is perfectly fine. The idea that price deflation is bad is a huge fallacy of modern political economics. If you look back at economic history since the industrial revolution you will find an uncanny recurrence of huge bubble/bust eras, that are directly linked to the amount of currency inflation.
Pretty much for the entire industrial revolution money was backed by gold. There were a few times, like major war times, where this was abandoned, but by and large, the western world used gold as money. This was a time of economic activity and growth that has not been matched since, while the money supply only increased by the amount of gold dug out of the ground. What did happen though was that gold bought you increasing amounts of "stuff", so that people didn't need nominal pay rises to have a better standard of living. You do not need to increase the money in circulation to have real economic growth, as opposed to nominal economic growth, which has now become the panacea.
Still I tend to believe the Wiki bible. It points out that the depression was worst and lasted longest for those who tried to preserve some sort of gold standard.