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Originally Posted by ibis  The advantage is supposed to be that while gold's value is itself a form of fiat value - in that it is sustained only by belief in its value - the limited supplies of it mean that a government cannot simply print more.
That doesn't prevent capitalist economies from blowing up, or governments from going into debt, of course, since both those things happened at regular intervals throughout the history of metallic-standard currencies. In fact, bar devaluation, it's hard to think of anything it does prevent - and devaluation can be prevented by the rigid currency pegs that are part of the gold standard system, without actually having any reference to gold. |
Ok, a couple of things to clear up. First, all economic value is subjective, whether that good is the medium of exchange or a Maserati. The term "good" only has meaning for an item with respect to the subjective valuation attached to it by a prospective consumer.
On the other hand, we can say that gold has intrinsic value because of the qualities of this metal which many people do in fact find valuable. This no longer theory: this is a real-world, historical interpretation. Gold has industrial and cosmetic uses which are highly valued by many people. It also satisfies all the properties of a medium of exchange better than any other commodity.
Similarly, we can say that government paper money does not have intrinsic value, since there are negligible non-monetary uses for it. If it wasn't for the status of euros as legal tender, it's hard to see where the demand for them would come from.
It's possible for gold standard economies to suffer booms and busts, bank failures, and government bankruptcy, but the dynamics are very, very different. Also, while we can think of the gold standard to mean a gold-backed government money monopoly instead of an unbacked government money monopoly, we can also think of the gold standard to mean "free market money", i.e. the money that would emerge from its competitive production, i.e. free banking in a decentralised legal system (that implies among other things the abolition of coercive legal tender laws, currency pegs, bank holidays, and fraudulent fractional reserve arrangements). The gold standard alone (in the former sense of the term) is not enough to prevent important factors which tend to lead to major boom/bust scenarios.