Friedman calls (2) a “pure gold standard”. Anything else that claims to be a gold standard is and must be a “pseudo gold standard”. It might be a pseudo gold standard either because something disrupts the Humean price-specie flow mechanism–the “rules of the game” are not obeyed–so that deficit countries do not reliably lose and surplus countries do not reliably gain gold. It might be a pseudo gold standard because the money multiplier is not reliable and stable–because the banking system does not transparently and rapidly transmute a k% shift in the stock of gold into a k% shift in the money stock.
Or, in short, to Friedman a gold standard is only a real gold standard if it produces a path for the money stock that is a k% rule. Anything else is a pseudo gold standard.Or, as DeLong puts it; an arrangement that won't help, the monetarist central bank do... its job of keeping our fiat-money system stable by making Say’s Law true enough in practice.
HSIB's bold in the above. As we're fond of saying, Say's Law--Supply is (implicit) Demand--requires a competent monetary policy, to hold true.
Have I just given an unconvincing Straussian reading of Friedman–that he knows what he is doing, and that what he is doing is leaving the theoretical husk to the fanatics von Mises and Rueff while keeping the rational kernel for himself, and making the point that a gold standard is a good monetary policy only if it turns out to mimic a good monetarist fiat-money standard policy? That his apparent confusion is simply a way of accomplishing those two tasks without splitting Mont Pelerin of the 1960s into yet more mutually-feuding camps?Plausible. Very plausible.