How does the gold standard keep pace with a growing economy?

believes the outcome of panics and busts during the depression. He needs to be reminded Government intervention and regulation is what lead to a depression and not the free-markets.

also never forget to ask when challenged; Would you prefer to pay high prices with fiat money, or low prices with sound money?

When the people use precious metals as a form of currency one things is for sure, that person has intrinsic purchasing power aka Real Money. This actually makes competition even more bullish as business are trying harder to earn a currency that can not be printed out of thin air or punched in a computer. many people believe Capitalist are Pro-Business; not is farther from the truth. We Demand high qualities of goods or services with cheaper prices in which the market determines these prices.

sadly we don't have much of that anymore in America so your imagination will have to substitute

to balance, yes there are some issues with a gold standard, however not a lot of people lost there assets or suffered hard times when we were on it. In fact it was through the Gold Standard that we were able to recover from the Great Depression, This time I don't know how America will recover the next crisis when few people own Gold or Silver.

There was a time during the late 1800's when the amount of gold being mined and added to the money supply lagged production, so prices fell for quite a few years.

Keynesian numbskulls consider this long period of price deflation to be a problem, but the fact that during this period production outgrew the gold supply was not a problem at all. In fact this occurred during the height of the industrial revolution. A working guy could earn some money, stuff it in a jar, and pull it out 10 years later and it'd buy more stuff. What's wrong with that?

That said, while a gold standard would be far superior to our current monetary system, an even better way to go would be market determined money, or in Ron Paul's words, "competing currencies".

Just remove the capital gains taxes from the use of gold, silver and other monetary assets and let's see what happens.

If more "stuff" is created, then the same amount of gold buys more "stuff". Free markets determine how much gold it takes to buy a certain amount of a certain thing. So there is always enough gold to pay for everything, so long as nobody tries to "fix" the value of gold.

The supply of gold increases at a market determined rate. As more gold is mined, the remaining supply will be increasingly difficult and cost-intensive to mine. So, as the price of gold increases (i.e. a certain weight of gold can buy more products), there will be more incentive to mine gold as the new higher benefit will outweigh the new higher costs.
So, as the demand for gold increases, the supply will naturally increase.

For a while.

Eventually, remaining gold will become more and more scarce, which is what your friend envisions. For all practical purposes, eventually all gold will be in the market.

At this point, as more goods are produced, and the quantity of money remains the same, deflation occurs. This means that the same amount of gold held previously will now buy more goods.

One other consideration is the velocity of money. Picture a small economy of 2 people. For some reason, they trade in gold instead of direct barter. Assume the amount of gold in this tiny economy is fixed with each person having 20 units of gold. One person raises pigs and the other person grows tomatoes. They have unlimited wants. Each pig costs 20 units of gold, and each tomato costs 5 units of gold. Suppose once per week the pig farmer buys 4 tomatoes, and the tomato grower buys one pig. Now, suppose the pig farmer buys 4 tomatoes daily and the tomato farmer buys 1 pig daily. As long as they each earn 20 units of gold, they can buy what they want. Say they purchase one pig and four tomatoes hourly instead. Now, instead of spending 20 units of gold each per week, they are spending 3360 units of gold each per week. The physical amount of gold in the economy doesn't change. But, the number and speed of transactions change. Also, notice that they went from earning 20 units per week to 3360 units per week - AND they were able to buy proportionally more goods....

There are problems with a gold standard, but economic growth is not one of them.