[ogreyonder]

While I appreciate the effort that went into writing this thought experiment, that's not what I'm interested in.

I would like a historical example demonstrating the problem of the gold standard. The world worked this way for centuries, so surely there must be some documented case of one of the doom scenarios you proposed.

[gnaritas]

One need only look at the occurrences of and severity of the markets boom bust cycle before and after the we left the gold standard. We've had no depressions since the great depression and the recessions since then have been far milder than the many depressions/recessions before then. Depressions were a common occurrence under the gold standard, we've had none since we went off it. This doesn't prove causation, but given the role of deflation[1] in many of those recessions/depressions, it's certainly correlated.

The world didn't abandon the gold standard because it was working; they abandoned it because gold is a poor currency that suffered from deflation. Bitcoin will have the same problems, but may succeed anyway because it can't and won't replace the dollar, but will serve as digital gold; it's a good commodity but a poor currency. No one sane will be pricing anything in Bitcoin, they'll spot price in Bitcoin based on the current USD exchange rate.

I'm a Bitcoin supporter, but that doesn't mean I have to ignore history.

[1] http://en.wikipedia.org/wiki/List_of_recessions_in_the_Unite...