Having a fixed exchange rate with precious metals was a counterintuitively a good idea before the advent of electronic currencies. Counterintuitive because fixing a market means deadweight loss and implicit taxes. Likewise it looks like a bad idea to turn currencies into longterm purchase power retaining assets by pegging it to gold. Why would you want that? It’s called currency because it is suppose to hold value during transactions (current) not in between (incurrent). Your current account should be zero, your wallet empty (except for right before and after trading). Wealth should be kept in an interest bearing asset! In spite all of this the theoretically bad gold standard had something going for it, it kept…
Inflationary monetary policies at bay. Somewhat that is, not that there was a global market price for gold like nowadays. Especially warring nations in the last century had a habit of extending the money supply.
Prices comparable from memory between longer periods of time. (If bread was a dollar in 1965 you could guess it would be about a dollar in 1966) Although this money illusion is indeed a big implicit tax on holdings, so is getting information on rapidly changing relative prices. It’s like traveling to other countries and constantly needing a calculator.
Users from having to go to the bank frequently and swapping in and out of their interest bearing saving accounts. Absent this flexible credit market or barring high transaction cost you would like the currencies’ caching period to last for months even years.
Especially the latter, but really all of the above, were side-benefits of a bad thing. A low does of toxins can be healthy. These benefits became nonsense with the advent of electronic currencies.
Afterword
This backing myth is hard to debunk, mainly because our ideas about currency have been shaped by badly formatted precursors. The most important misconception of all that lies at the heart of this matter: That value of currency comes from nature, or labour or the government. And it just doesn’t. Currency value comes from the trades it enables by lowering transaction costs. The bitcoin arguably has the lowest transaction cost out there,even though ethereum transaction fees is lower and fexible. No backing needed.