I recall reading that both the world's population and the quantity of gold have increased by app. 1% annually for the last 200 years or so. This would seem to make the idea of a gold standard a superb idea.

However, if those who possess the vast bulk of the gold (lenders) demand, say, 5% interest when making loans, won't the lenders end up with all the gold?

In other words, all of each new year's production would go to the lenders, plus some of the already-existing gold.

To make it simple, let's say the lenders own practically all the gold, lend out half of it, and 5% interest/year is what their borrowers are willing to pay. I'll make up some easy-to-understand numbers:

World's (lenders') gold: 100 tons
Gold lent: 50 tons
Interest due: 2.5 tons
Annual production: 1 ton

There is thus a shortfall of 1.5 tons of gold which must be repaid to the lenders after one year. This gold must come from the borrowers' paltry existing stock. If this process continues, year after year, won't the lenders own ALL the gold, and the borrowers have NONE?

My understanding is that a country on the gold standard wouldn't get into that situation to begin with.

Something you have to get your head around is that gold is money. I'm saying this arbitrarily, but because paper-bugs don't understand the properties of money:
-fungibility (basically this ten-dollar bill is a perfect substitute for that ten-dollar bill)
-complete recognizability and acceptance within the country
-a good store of wealth long-term. Little global supply relative to other physical goods but small global production relative to the amount above ground, and it can't easily be destroyed by natural processes. The resulting roughly fixed supply implies range-bound long-term prices

I'm forgetting a couple other characteristics. The point is - gold is money (so are silver and to a lesser extent copper). In a debt-based financial system your point is valid. But a country on the trimetallic standard (gol, silver, and copper) runs on money - not debt.

As such, people wouldn't borrow money from a bank unless they felt they had a reasonable chance of a return greater than the rate of interest. They'd therefore mainly borrow money to start businesses only.

Ofcourse fiat money (paper money) COULD operate similarly, but the institutions with the printing presses would always be tempted to print money.

You simply can't print gold.

Fischer, yes you are correct that growth in the gold supply and global population have roughly paralleled each other (almost as if "Mother Nature" INTENDED US to have a gold standard). My understanding is that those numbers are closer to 2%, and are somewhat volatile - but that doesn't alter the general principle.

However, there is a third variable: economic growth. The bankers tell us that despite living in a finite system that we should be able to LEVERAGE population growth with our economic growth. In other words, the bankers tell us that with our population growing 1-2% that we should have global economic growth of 3-5%, indefinitely, which is impossible.

But to try to achieve the impossible (in order to sate the greed of those on top), these bankers have drowned us in "credit" (i.e. debt), because the only way you can PRETEND to have infinite growth in a finite system is through excessive credit. This excessive credit produces the "boom/bust" cycles which the BANKERS tell us are "natural events".

They are not. IF we were on a proper gold standard, fiscal discipline is enforced, and economic volatility is MINIMIZED.

As for the other part to your question: lenders ending up with all the gold? Yes, that is ALWAYS what the bankers try to do in a gold standard - as the next, best thing to no gold standard at all.

BUT, the way around that is that people NEVER "deposit" gold with a bank, nor do they ever borrow AGAINST their gold (unless they have an absolutely secure income stream to pay off those debts with PAPER).

Understand that in a gold standard, inflation is virtually nil, so people don't need to collect "interest" on their money. As a reminder, "interest" is a total illusion. Since the interest rate is ALWAYS lower than the rate of inflation, "interest" is nothing more than the bankers giving back PART OF what they stole.

So the ONLY time that people should put their bullion in a bank is inside a safety-deposit box, where LEGALLY it is YOU who is always in "possession" of that gold/silver.

AGREED WITH most everything Jeff , Except safety-lol- deposit boxes ...#1 HLS , NEW RULES : GOLD ONLY THAT IS COLLECTABLE ..OTHER RULES APPLY to What S/D Boxes can contain ! .. #2 ..WARRANT LESS SEARCHES , As was done in England this year ! .. Keep it in a Flower Pot !