[mpyne]

> This limits the rate at which the real economy can grow

I don't believe this is true if you allow speculation and credit in the economy. AFAIK even on the gold standard banks were not required to be able to satisfy every gold-backed bill they distributed out.

Of course, it helps more than having no scarce item would, but if the problem continued then people would eventually shift to trade in something else while conserving their gold-backed currencies to pay government taxes.