Again, time preference solves this problem. If this were true, everybody would be a lender and nobody would be a borrower out of expectation of more money in the future. Fortunately, people have more desire for money now than for money in the future, which raises the price of the former.
But this hasn't happened in the real world. And besides, a rising value of each unit of money is useless if you lose your job thanks to a sustained fall in aggregate demand. What do you mean it hasn't happened in the real world? Are banks suddenly charging negative interest rates? To give a real life example of price deflation, consider Apple products. They tend to depreciate in price drastically over a period of a mere few months, yet their stores are always full of people ready to buy their products. They consider the reward for getting an Apple product a few months earlier to be worth the cost of buying it a few months earlier.
No. When Spain plundered the gold and silver of Mexico and and Peru, the massive and sudden increase in the Spanish money supply caused so much inflation that it wrecked any incentive to create technological innovations or a domestic industry. Only in the past decade has Spain fully returned to the European mainstream. When Ming Dynasty China experienced a massive influx of Spanish silver (in exchange for tea, porcelain, etc), the resulting inflation contributed to the peasant revolt which led to the collapse of the Ming Dynasty.
Likewise, the gold (or any limited metal) standard is simply unable to prevent massive and sudden expansions in money supply, and periodically adjusting the conversion rate makes it meaningless.
Finally, there will be a huge incentive to short the gold-backed dollar. Such a move will most likely cause high unemployment and a long recession. Congress will haul the Fed Chairman and Treasury officials for grilling every week. Eventually you'll lead to something like Argentina in 2001.
[/quote] So because there was a discovery of massive gold deposits when the New World was discovered, we should leave control of the monetary supply in control of a central bank, which has depreciated our dollar by a factor of 20 in the past 100 years? You also neglect to mention that Spain lacked a free-market economy when it plundered the New World. The point of the gold standard is to prevent drastic expasions in the money supply, to avoid inflation and boom-bust cycles that are associated with it. Also, isn't that inconsistant to demean gold because of the price inflation and associated problems it caused historically, and then bash it for not permitting enough price inflation?