Why a gold standard is a bad idea (III)

Regular readers know that I have stood against the idea of a gold standard (see my previous posts in 2008, 2010 and 2011). I have always regarded the hard money crowd as longing for a mythical time and place that never quite existed. I came upon some analysis from Frances Wooley at Worthwhile Canadian Initiative that highlighted some of the points that I made about the inflexibility of a gold standard by analyzing a time and place that is mythical - Middle Earth [emphasis added]: The full economic impact of [the dragon] Smaug [with his gold treasure hoard] can only be understood by recognizing that the dragon's arrival resulted in a severe monetary shock. On the left is shown Smaug's hoard. On the right, for purposes of comparison, are the gold reserves of the Bank of England. It is clear from a simple inspection of these two figures that the amount of gold coinage Smaug withdrew from ...