I'm with Björn on this. We will never go back to a gold backed currency since that would create a huge problem for the economy. The only reason to do it would be a complete break down of the monetary system and at that point it doesn't matter how much currency there is in circulation today. What is backing the monetary systems today is the whole economy behind it. An idea that we all can trade money for goods when we want to and all over the world. The economies of the world are all connected and the need to back the monetary system with gold isn't there any longer.
No, gold is just a commodity today and what is backing the currency is the value we have built up in the goods we possess, my apartment, my car, the road and railway outside my window, my gold, my old coins, the hydro plant upstream that was built 50 years ago, farms and woodlands... that is what really backs a currency today.
Gold today is just a commodity among other. No one is calling for creating a wheat or corn backed currency but that would be just as practical as a gold backed... except for the volume of wheat to pay off a car or a large building project. :lol:
By letting the value of gold float we end up on a reasonable pricing. Anyone wanting to trade in dollars for gold can do it at current spot without much trouble, but most of us want to trade it in for a steak, some ice cream or electricity. Very few dollars goes to buy gold. To lock it into a currency it would artificially inflate the price of gold while virtually bankrupt a country trying to buy that much gold in one go.
And what does it mean to back 1/4 of the currency? It's like building a quarter suspension bridge... here I have four dollar bills, which one is backed by gold? :mrgreen:
It's just a play with numbers and fills no practical means.
Göran