Here you can see how the gold standard system can expand and shrink the money supply as appropriate, as part of the mechanism that maintains the value of the currency at its parity rate.
After three years of lagging, Europe's 12-nation common currency, the euro, is at parity with the dollar.
Argentina, Latin America's fastest-growing economy last year, has the most rigid exchange-rate system of all, with a currency board that fixes by law the value of the peso at parity with the dollar, and thus limits the money supply to the level of foreign currency reserves.
Then, you can pick whatever parity you like for the new currency.
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The latest conventional wisdom is to argue that the country was badly mistaken to cling for so long to the currency board, which pegged the peso at parity with the American dollar.
Although the IMF says it is budgetary concerns which led it to delay giving Argentina the cash it was hoping for, some economists suspect that the IMF now believes that Argentina's currency board, which enshrines the fixed-parity link between the peso and the dollar in law, has become unsustainable.
With the Canadian dollar running near parity with the U.S. dollar, currency exchange is presently not a factor.
However, a gold standard system can make available any amount of currency, as is appropriate given economic needs and the fixed parity value.
This law states that if you have the same good in two different locations, and their prices once adjusted for currency exchange rates are different, the market will tend to pull the prices back towards parity.
The Australian dollar hit parity with the U.S. dollar last week for the first time since Sydney floated the currency in 1983.
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