Warning: Eyes will bleed! Very long post! 
Coloured lens should be worn for your own protection! 
There has been a lot of talk about backing currency with gold again, but it is used for industrial purposes and this is the main reason we got away from using gold to back currencies. The Bretton Woods conference was designed to ensure that currency pegging was fair and equitable across the world. Unfortunately, this didn't really last long for many valid reasons.
Fiat is subject to political motives, everyone pretty much understands this today. Backing currency with any commodity is an incorrect approach, because the affects of commodity use and pricing, around the world, causes currency value to wildly gyrate, making international commerce almost impossible to conduct.
To get a realistic picture of the affect of commodities as currency, you need look no further than the history of the U.S. Trade Dollar (see pretty picture).
This is what it looked like AFTER being used as currency:
and
Question: Do you think the circulated trade dollar above, is what is stamped on the reverse? This was problem No. 1.
Every time a trade dollar was shipped abroad for payment, either from the U.S. or between other countries, each coin was required to be assayed to determine: A) its purity; B) its actual weight in grams, and; C) its real value per piece, based on the former points.
In a world where no country could be trusted to tell the truth about their trade coin authenticity, this presented huge problems with global trade. The process of assaying the value of each coin, stamping its approval, and transporting it to where it needed to go for payments, became problem No. 2.
Finally, there was an inequity in the system based on resource availability. The majority of silver, gold, and platinum deposits rest with a small number of countries on the planet, in any meaningful quantity. These countries presently are ranked by mines/reserves of significance:
- Indonesia (Grasberg 106,231,000 troy ounces)
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South Africa (South Deep 81,213,000 troy ounces)
- Papua New Guinea (Lihir 64,100,000 troy ounces)
- Uzbekistan (Muruntau 50,000,000 troy ounces. 100% government owned)
- Russia (Olympiada 47,500,000 troy ounces)
- Mongolia (Oyu Tolgoi 46,340,000 troy ounces. 34% government owned)
- Dominican Republic (Pueblo Viejo 40,085,000 troy ounces)
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South Africa (Mponeng 39,557,000 troy ounces)
- Australia (Cadia East 37,600,000 troy ounces)
- Ghana W. Africa (29,830,000 troy ounces)
(Source: http://www.mining.com/web/worlds-top-10-gold-deposits/ )
Notice the U.S. does not even place on this list, nor China.
Clearly, the largest reserves of gold in the world are in South Africa, at a total value of 120,770,000 troy ounces. That would be, in today's USD value and at current market rates, $143,064,142,000.00. This is not a lot of money when you consider the gross domestic product of South Africa is only $350,653,000,000.00... most of which is gold, platinum, coal, and diamonds. http://atlas.media.mit.edu/profile/country/zaf/
One of the main points overlooked by gold bugs, is that the commodity is used heavily in industry. The gold has to come from somewhere, so mining, in general, is the primary source of the needed material. What do you pay mines with when currencies are backed by the very product that mines produce? I do not think they will accept being paid in chickens. 
Finally, another point gold bugs do not understand, is that there are few countries in the world which possess sufficient supplies of all commodities they require to operate annually. If you you are a major "net" oil and automobile importer, how do you pay for the product you must import? If you pay in gold-backed USD, the country you are sending those to, will want the gold, not the notes. How long do you think a country's gold reserves (in bullion) can last under such conditions?
Example:
The U.S. government's gold reserves amount to 261,498,926 troy ounces with a present value of only $309,771,627,739.60 (Source: http://www.fiscal.treasury.gov/fsreports/rpt/goldRpt/current_report.htm ). Again this is not a lot compared to an annual GDP of $16.77 trillion.
The U.S. economy's top 3 imports are automobiles, computers, and crude petroleum. Total annual value of these products is presently values at $341,011,623,122.96. Based on current market values of gold and these aforementioned products, we would have a net deficit of $31,239,995,383.36 in gold bullion reserves or, 26,371,767.16 troy ounces.
This means we would have insufficient reserves to import other more needed products such as, refined petroleum (gasoline at $45,409,345,906.58 annually), medicines ($46,604,033,312.00 annually), vegetables ($38.8 billion), etc.
Source: http://atlas.media.mit.edu/explore/tree_map/hs/import/usa/all/show/2012/
Political Control/Power
Question: Who owns the gold mines? Governments, private individuals and corporations. When a commodity actually becomes your currency, political and economic control reverts to those entities which control supply of the underlying commodity, and so does price.
Currently commodities are priced in markets where supply and demands curves determine overall market or end-user value. Prices rise as rarity increases, fall as supply outpaces demand for the commodity (we all know this). When a commodity is used to support currency, markets no longer determine the underlying value, the producers do. Since gold is mined, the miners set the price they are willing to accept for their scarce resource. Since they will not accept script (currency) for their product, they also affect the pricing of other commodities they are willing to accept as payment.
I annotated the Top 10 list above, where governments own a sizable percentage or all of the mining operations. This should spark some thought.
Question: Who would you want controlling your financial well-being?
- U.S. government through GDP-based fiat currency,
- Corporations who own the commodity your currency is based on?
- Foreign governments who own the commodity your currency is based on?
- Private wealthy individuals who own a sizable percentage of the
commodity your currency is based on?
I also want to point out that, the Russian government can decide any day that they are going to nationalize the country's natural resources. Russia, as with any country, could take this route to ensure the sustainability of their economy. That would mean that they would have a very high influence over your future financial stability. Is that desirable?
The Answer
Speaking of how radical Allen is, my idea of the most ideal monetary system is the total abolition of national currencies around the globe. Although many Bitcoiners believe the purpose behind Satoshi Nakamoto's creation of the blockchain and Bitcoin was to replace national control of national currencies, I suspect his intentions where more Start Trek-like. Creating a single, global, digital currency, having limited quantity of monetary units, as well as 8 decimal values, was to remove government, corporate, and wealthy citizen's control over monetary policies that adversely affected global populations. We have seen some recent conversation about trade pacts with the EU and the U.S., Russia with China, China with African countries, etc. What these all have in common is sustainability, but also future power over other nations.
If you digitize the global economy, replacing all currencies and central banks with one semi-centralized, consensus driven digital currency, what is accomplished? First, you have removed the power of all the self-motivated parties (governments, the wealthy, and corporations), to affect financial conditions of trade or national economies. This is a plus, due to the ability to leverage the asset valuation of commodities as globally owned/produced, versus that of price fixing monopolies and oligopolies we have seen develop in the past hundred plus years on the planet. You cannot remove price setting completely, but you remove the abilities of governments to deflate or inflate their national currency values purely to affect competitive advantages in the global markets.
I can go on for hundreds of pages about how this is the ONLY solution for fiat currency issues we see globally. If you need examples of how this would be more beneficial, you need look no further than Argentina, Venezuela, Japan, and other countries where governmental policies have adversely affected the purchasing power of national currencies, damaging the financial stability of nations' citizenry.
