i go back a ways, and i'm not so sure i understand the practicalities of this oft-repeated question.
i remember when it was illegal for a US citizen to buy or sell gold - and the friendship of your local dentist or jeweler was a thing of value, since they could.
but... backed by gold?
what is the real, practical difference between a currency backed by gold, and a currency with which one may buy gold at market rates? i can't say i really see one.
The following is largely what I posted in a different thread:
The value of gold is relative to the scarcity/abundancy of it and difficulty/ease of mining it. The whole conception of gold being a "hard asset" is flawed, although the flawed conception is not apparent either in theory or practice today. From the 16th century and onwards, gold primarily facilitated trade. Adam Smith showed that mercantile nations, which hoarded gold instead of freely circulating gold for trade pruposes, restricted trade. The object of political economy thus became to increase exports and restrict foreign goods for home consumption, which increased the gold reserves.
Regarding issuing paper money to facilitate trade, Smith and David Ricardo and others argued that, a paper currency which falls below the value of gold and silver does not sink the value of those metals; they exchange for an equal amount of goods as when paper money was of equal value.
i.e.:
1 oz gold = 1000 USD; 1 oz gold = 100 hours labour; 10 USD = 1 hours labour
1 oz gold = 1200 USD; 1 oz gold = 100 hours labour; 12 USD = 1 hours labour
However, with the decoupling of gold from USD, gold is no longer a facilitator of trade, but instead becomes a goods that falls or rises in value in comparison with USD. If the gold standard was returned macroeconomic stability would be enhanced (well, at least if the US closed its borders).
The traditional explanation of inflation is when the amount of money put into circulation exceeds the amount of new goods/services in circulation. With a gold standard, inflation is restricted, or almost not possible. The problem with cycles, depression and prosperity, stems largely from hoarding/releasing gold, issuing/contracting USD (through many means), which is hopelessly obfuscated in neo-liberal economics.