Sounds like what I was thinking when I said that credit can increase the money supply without the Fed creating new high powered money.
So, do you agree that a gold regime where the high powered money supply grows more slowly than the economy is deflationary?
It could well be, but I don't know that it has to be deflationary. That's certainly a worry if you're a debtor. I don't know if credit money can make up the difference or not. The demand for liquidity in a tight monetary regime might allow for a substantial increase in credit on the same monetary base. As long as the public is satisfied that the money they use isn't being debased they won't be inclined to convert to gold, which in the old system didn't earn interest even on savings, according to Grant.
Bretton Woods fell apart not because of domestic problems but because of the Triffin dilemma. The U.S. dollar was becoming the world's reserve currency after WWII and there were more dollars overseas than we had gold to back them. The French repatriated dollars for gold and we either had to reign in the dollar and suffer recession, or break the last link to gold and risk inflation. Foreign policy may have trumped monetary policy in this debate.