Say, if the dollar were to be totally backed by the gold standard, which is based on which?
So a man one day says, "Damn it, I want the real thing! Only gold for me! None of this fake money baloney! Gold is gold through all the ages!"
So he buys a gold bar.
"Say you, what's that gold bar worth?"
"I say, it's worth 25, 000 smackers - yeehaw!"
"25, 000 smackers of that fake money baloney?"
So how can the gold be said to back the dollar? Which is backing which?
The only way Joe can buy some farm equipment with his gold coins is that the seller trusts he can exchange those gold coins for...dollars! How about that!
That's all well and good. Gold is nice. You can do so much with it; it never corrodes. But clearly gold is not what truly backs the currency, nor can it truly ever - that is, if one wants a healthy economy.