[Derek's comments quoted >>like this<<]
1. I disagree that a 6% increase in money supply is "inflation in money" at
6%. You need to also consider the demand for money, which could also be
rising at 6%.
<<
I was trying to semantically note a difference between "inflation in the money supply" and "inflation in prices". I apologize for using the word "inflation" in both cases. Looking over all the arguments, I think we both agree that prices may not increase as fast as the money supply so long as there are offseting increases in productivity (related to your "demand for money"), and assuming constant velocity.
I don't think it's accurate to say that the Government is
getting 6% from you due to inflation.
<<
I assume you are referring to the part of the increase in the money supply that doesn't result in higher prices because of increased productivity (e.g., the 2% part in my example), and that you do already agree that when prices are pushed up I am harmed (e.g., the 4% part).
Maybe this point will be more clear if reduced to the simplest case: Assume that the money supply and productivity rise at the same rate, say 2%, and prices hold constant. Magically, the government and their friends (such as the banks) have 2% to spend on their favorite activities! When they consume, it comes out of the economy as a whole. It came from someone else, since the government doesn't really produce (much of) anything. Where did it come from? It came from the productivity increases due to the better use of capital, and etc. (in spite of the government regulatory burden, diversion of resources into non-productive uses, and other productivity drains). If the government had not "printed" 2% more money for their own nefarious purposes, I would have benefited by my increased purchasing power, by a ~2% drop in prices. So, they clearly transfered the benefits from the increase in productivity from me to themselves.
That is why I say they took the full 6% from me.
>>2. I am sympathetic to the argument of the government taxing nominal
increases in wealth, which are largely due to inflation. It's your strongest
argument in my opinion.
<<
Thank you!
What they do here is really bad. If I move to the proverbial "house next door", I end up short a hundred grand due to taxes. Have I profited? - the [proverbial] house just purchased is identical to the one I just sold. What the government has done is increase the money supply, which robs anyone with savings through inflation. This also causes the price of houses, stocks, and other capital goods to go up, so they can rob us again using the capital gains tax, whenever these goods are traded. (Note both the inflation and this penalty for trading also cause misallocations in the economy. For example, I have a strong disincentive to selling my home, even if other factors would recommend that course of action to me.)
3. I have noticed that gold-standard advocates seem to dismiss the negative
effects of deflation too readily.
<<
Just like the Chicago-school folks dismiss the problems of inflation!
Namely, I'm referring to the problem that
with deflation, holding currency becomes the most attractive an[d] lowest risk
investment. This reduces consumer demand, reduces capital investment by
corporation[s], and creates massive uncertainty about jobs and income.
Furthermore, deflation raises real incomes, which are not necessarily tied
to productivity increases. This makes employers very reluctant to hire new
employees, and leads to increasing unemployment.
<<
Much of what you state is true only during the transition from an inflationary scenario to a deflationary one; and where there is any instability in prices. When people know that they can count on a constant, ongoing, mild deflation of prices, these other decisions you mention above, and also the interest rates, will all take this into account; just as we can obviously survive with a mild inflation (at least for long periods of time).
For instance, people may not get automatic pay raises, esp. if they don't increase their productivity at above the average rate. But, even with constant saleries, they will be able to consume more, because the items they purchase will be produced less expensively. Loans will have lower interest rates, and etc.
Holding currency _should_ be the lowest risk. But, if I want greater returns (like most people), I will invest in something riskier, such as a business, that adds value. Generally speaking, the higher risk I take the greater returns I should expect (on average). I don't see this relationship being upset by moving away from a perpetual state of inflation. In fact, as you point out a commodity-based money reduces the currency risk; but I see this as a good thing, not a bad one as you do.
4. A predictable, rules-based approach to increasing the money supply
(let's say 2-3% a year in line with the long term productivity increases in
a mature economy would solve all these problems, and furthermore decouple
monetary policy from the "government", since the increase in money is a
matter of law, and not subject to the whims of central bankers.
<<
a. First, I don't agree with your doomsday predictions caused by productivity increases.
b. Being a "matter of law" is still too prone to fiddling by the lawmakers, if you ask me. Look at how they have ignored the even stronger covenant called the Constitution, especially on the issue of money! Every time the lawmakers needed some more money for their wars (or whatever), they would only have to fiddle the rate, just like they raise the debt ceiling nowadays without even blinking.
c. Your proposal still allows the government to steal 2-3% per year! There is no Libertarian justification I can see that the government (and it's cronies) should be the beneficiary of all productivity increases from some point in time onward.
>>5. I have seen estimates that if the world was to immediately convert to a
full gold standard, that the price of gold would need to convert to around
$4,000 in today's dollars just to support current economic activity in the
world. This is one reason why the gold standard will never happen.
<<
I have seen similar estimates. I don't know if these are founded in reality or 'gold fanatic' fantasy. But, just because $4000 per ounce sounds high compared to today's prices, does not mean that it couldn't happen. Since fiat money has taken over virtually every corner of the globe, today's gold value is diminished. If gold resumed it's role as the primary form of money, it naturally would have more value than today. Why not $4000?
I don't kid myself about the prospects for the gold standard to come back anytime soon, unless there is an economic catastrophe. But, just like with liberty, it pays to be ready. History has the strangest way of doing things suddenly that were brewing for a long time.
6. Finally, this board is the only place I could ever possibly be confused
with having Keynesian sympathies. To the rest of the world, I'm a radical
Chicago-school advocate. You and Berg always get me into the very
uncomfortable position of arguing for the state!
<<
Ha! Ha!
Well, just say no! I am sure you can stop. 
I recommend 'cold turkey'. Just make this promise to yourself: "After today, I will no longer argue on behalf of the state."
More seriously:
Libertarians accept that central planning and government control are a bad thing in most fields; then why do so many agree that a centrally managed money supply is such a good thing? I suppose that with five generations living under the current central bank, it is hard for people to imagine anything different.
Just remember, here in the United States we have abolished the central bank twice before, and have flourished for nearly 100 years without one. During that time, many of the other things that Libertarians are against such as empire, war, welfare, the surveillance state, regulation of everything, and etc. were held in check at least in part because the government didn't have the ability to finance every whim (especially war) through the central bank. Some other countries have gone without fiat money even longer, with good results.
Cheers!
Rich