Gold bugs will tell you the problem with modern money is that it is not backed by anything real. Fiat currency, they say, has value only because the government declares it does. What we need, they argue, is a return to hard currency. Something with intrinsic value. Something like gold.
Here is the problem: gold is fiat currency. It always has been.
Consider what intrinsic value actually means. Oil has it. I can burn oil and cook dinner, heat a house, move a car down a highway. Wood has it. I can burn wood or build something with it. Bronze and iron have it. Better tools, better weapons, better infrastructure. These materials do things independent of what anyone declares them worth.
Gold, prior to the late 1960s, did essentially none of that. You could make jewelry. You could make coins. Both of those applications derive their value entirely from the fact that people agreed gold was pretty and scarce and therefore worth wanting. That agreement goes back a long way: archaeological evidence puts gold jewelry in Eastern Europe as early as 4000 BCE, and by 2600 BCE it was central to Mesopotamian and Egyptian culture. That is not intrinsic value. That is a collective hallucination backed by tradition. Which is, to use the technical term, fiat.
The dollar has value because the United States government says it does and because millions of transactions every day reinforce that agreement. Gold had value because ancient humans thought it looked nice and that agreement compounded across millennia. The mechanism is identical. One of them just has better branding.
Now, something did change in the 1960s. We discovered that gold is an exceptional electrical conductor, resistant to corrosion, and uniquely reliable in high-performance connections. Unlike copper or silver, gold does not oxidize or tarnish, making it the material of choice for connectors, bonding wires, and circuit board contacts where a failed connection is not an option. That is why it shows up in space probes, in military hardware, in high-end audio equipment, and in the contacts inside your phone. Gold finally acquired genuine intrinsic value, the kind that exists whether or not anyone agrees it should.
But here is where the gold bug argument collapses entirely. The moment gold became industrially useful, it became a terrible candidate for a currency base. You do not want your monetary supply competing with the semiconductor industry. You do not want the money supply to contract every time someone builds a satellite. The World Gold Council reports that electronics consumed 271 tonnes of gold in 2024 alone, driven largely by AI infrastructure. That demand is structural and growing. A commodity with genuine industrial demand is not more stable as a currency foundation. It is less stable, because now it has two sources of demand pulling against each other.
The gold standard was always a confidence game. Nixon proved it on August 15, 1971, when he closed the gold window and the international monetary system did not collapse. It adapted. Because the system had always been running on collective agreement, not on the inherent properties of a yellow metal. The Bretton Woods system lasted as long as it did not because gold is magical, but because enough countries agreed to behave as if it were.
The gold standard worked, to the extent it did, for the same reason fiat currency works: shared belief, institutional reinforcement, and the absence of a better alternative that enough people would accept. The difference is that we have gotten considerably better at managing monetary systems since we were trading lumps of shiny metal by weight.
Gold is fine. It is useful in electronics. It makes handsome jewelry. It is a reasonable store of value in a diversified portfolio, if you are into that sort of thing.
It is not, and never was, the honest alternative to fiat currency. It was the original one.