[getsoutalive]

Sorry, you are correct, I do not have hard numbers for actual money supply, I misspoke. We were legally on a hard currency standard during that time, so officially, the money supply would be growing only as quickly as new gold were added to the system. Historically, this has been on the order of 2-3%/yr. However, from the link below we see that from 1800-1900, the CPI rose in 22 years, was flat in 38 years and fell in 40 years. And the CPI in 1800 was twice as high as in 1900. Threfore, over the course of one of the greatest periods of economic growth ever seen, there was mild deflation that made money twice as valuable. If mild and expected deflation was the demon it is claimed to be, how is any of this possible?

http://woodrow.mpls.frb.fed.us/research/data/us/calc/hist1800.cfm

[headsonpikes]

The discipline of the market has prevented serious inflation in serious countries for two decades. Central Bankers in free economies cannot merely fire up the printing presses and have their way with their country's currency any more - only the pathetic Zimbabwes, Burmas, and Cubas of this world can do that.

This discipline has had the effect of motivating CBs in Europe to liquidate their gold holdings over the last decade. This process is unlikely to continue; almost impossible, in fact, since the CBs involved have expressed no interest in further large sales. Meanwhile, Russia, India, and China are clearly moving towards enlarging their bullion holdings.

In round figures, annual demand for gold is 4000T, while annual mined production is only 3000T. The 1000T shortfall has been met by CB liquidation over the last term. That's disappearing as a damper. The price of gold in dollars should rise to about $700/oz to balance annual supply/demand, according to mining economists.

Just as with oil, new gold production is expensive and time-consuming. I've been involved with mining stocks, and their promotion and finance for twenty years, and I'm still surprised at how long it takes from discovery to production - almost a decade, in most cases. Gold production is still dropping year on year, because the artificially low prices in the late '90s discouraged investment in both exploration and development. Production cannot materially increase for several years, no matter the price of gold - that's why we'll get a speculative blow-off peak at some absurd price point when the bubble attracts broad participation, but that's a long way down the road from here, imho.

This is still early days.

[expat_panama]

...the money supply would be growing only as quickly as new gold were added to the system...

It would have been far better for all had this been literally true.  

The amount of gold in existence only controls the reserve backing, but the money supply is a function of interest rates, inflation, and economic activity.  Even with the gold standard people could loan borrowed money and thus expand the money supply.  It's true that over the centuries the price of gold would eventually return to a norm, and that's why some people can suggest that there was no inflation.

They lie.  You can see on your link that what really happened was that inflation would soar way into the double digits, only to plunge without warning into double digit deflation.   This presented a hellacious environment for business and untold unspeakable suffering for the people as a whole.