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It's true that libertarians don't need to be interested in the gold standard per se. I'm not advocating - or at least, I'm not intending to advocate - that gold should be the medium of exchange.
When I talk about the gold standard, I mean "free market money", the money that would emerge spontaneously from the marketplace. It could be anything, and which good would emerge is not a praxeological truth. There's no economic law which says that in every free market economy, gold must emerge as the medium exchange.
What talking about gold as a medium of exchange serves to do is to help point out to people what the characteristics of a successful currency might be. We have now left the realm of theoretical economics and are using our theory-derived understanding of cause-and-effect to make provisional interpretations of history and unprovable predictions about possible future events.
For example, suppose that it is declared that in 6 months all legal tender laws will be repealed, central banks will be privatised and we will have free banking in a completely deregulated financial system where no money will be given legal advantage over any other.
In anticipation of this event, I would increase my gold, since my understanding of theory, my interpretations of history and my views on human psychology suggest that as soon as the legal tender laws are repealed, some gold-backed currency would almost immediately become the medium of exchange, and I would preserve my purchasing power in this way.
It's possible that I would be wrong. It's possible that some business would produce a currency tied to a sphere inside the sun and that everybody in society would choose to use it, in which case my gold wouldn't be so useful. It's completely impossible for me to prove that this wouldn't happen. But my provisional interpretation of reality suggests that the demand for space inside the sun is not very high or very widespread, so that it is unlikely to be a very marketable commodity and therefore unlikely to become money.
By the way, with respect to your final paragraph, wouldn't you agree that if everybody agreed to designate only the gold within a particular vault as money, that that would be another way to solve the inflation of supply problem? I have no interest in advocating this policy, though.
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Originally Posted by stringjack
