With paper notes, it is no longer a question of, periodically, minting coins with less gold content, but simply of an increased quantity of notes, each, thereby representing a reduced quantity of gold/universal labour. The only thing that, really, stood behind such tokens, was always, then, the authority of the state, and the state always had the power to determine, by diktat, the value of the standard of prices, by either varying the metal content of precious metal coins, or by changing the quantity of paper notes put in circulation, and the amount of gold each was redeemable for.
This was not something arising only in the post-war period! Indeed, the establishment of central banks, like the Federal Reserve, in 1913, went along with the dominance of industrial-capital, in the form of large-scale socialised capitals, and development of Fordism and the social-democratic state. That depended upon a modus vivendi between capital and labour, in which living standards would rise year on year, made possible by annual rises in productivity, which ensured that the rate of surplus value rose, at the same time. Because workers object to falling nominal wages, even when real wages rise, the means to achieve this was, via moderate rises in inflation each year, so that both nominal and real wages were seen to rise, but prices rose as values declined. So, for example,
c $100 (100 commodity units) + v $50 (50 commodity units) + s $50 (50 commodity units) = $200 (200 commodity units @ $1 per unit).
With 10% inflation, and a rise in productivity of 20%
c $110 (120 units) + v $55 (60 units) + s $55 (60 units) = $220 (240 units) @ $0.92 per unit.
As workers only need 50 units, not 60, to reproduce their labour-power, a rise in real wages to 55 units can be achieved, whilst the rate of surplus value and profits rise. So,
c $110 (120 units) + v $50.42 (55 units) + s $59.58 (65 units)
Moreover, for oligopolies, price wars are destructive of prices, as any firm that raises prices will not lead to others following suit, as they seek to gain market share, any that cut prices, will see others follow suit, for the same reason, and the consequence is reduced profit. Consequently, central banks seek to have the general level of prices rise each year, to avoid such conditions, even though annual rises in productivity bring falling unit values for commodities that would, with a stable currency, lead to, year on year, falls in the general level of prices. There are other reasons why states like to see a small rise in prices each year, too, for example, that falling prices encourage consumers to delay spending in the expectation of future lower prices, and such behaviour leads to an overproduction of commodities, and so difficulty for capital to realise profits.
An illustration that inflation was not something that arose just after 1970, can be seen by looking at a chart of UK inflation from 1860-2015.
This had nothing to do with “The speed and intricacy of the circuits of capital ... far outstripping the capacity of gold (heavy, difficult to move physically, restricted in quantity) to facilitate it”. It was a function of excessive liquidity, an example of which, on a grand scale, had been shown in Weimar. US inflation was more subdued than that in Britain in the 1940's, 50's and 60's, despite its additional liquidity injections, because a) its productivity revolution enabled a massive rise in output, absorbing the liquidity, and b) large amounts of $'s went overseas, creating inflation there, whilst the US benefited from importing these commodities at lower prices, due to the fixed rate of the Dollar against other currencies.
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