Thrawn,
Long before Nixon and DeGaul, the challenge of establishing timely exchange values was one of the most significant impediments to efficient international trade. Acceptance became the principle consideration when establishing a particular currency's exchange value. A troubled economy with little international acceptance was more volatile than the money of a stable, global power irrespective of precious metal reserves. The more volatility, the harder it is to establish financial agreements that may take years to complete. Consequently the larger, more stable economies posses liquidity and demand, a far more efficient method of establishing value.
Let's just say that we go back to a monetary system limited by domestic gold reserves. We know that the value of the planet's monetary supply far exceeds the value of gold currently in circulation and keeps increasing. Even after we mine all the gold in existence we'll still be short by today's values. So now we have to re-value gold. It would be ok if it ended there but you see, there's always more "value" added to the world's asset pool, it has to be accounted for now by more gold in the vaults. Now we can't do that, we need to de-vaulue gold, now current assets are worth less, or they need to be re-valued. I can imagine what would happen to mortgages, interest bearing deposits, bonds and such but what happens when some genius decides to push a market around ala the Hunt bros.vs. silver or Soros and the G.B.P.? Although my mouth waters at the arbitrage opportunities, I can't see it as a healthy environment. Oh yeah, we'd also have to go back to federalizing precious metals. Brass wedding rings anyone?
In a depression everything loses value, and not equally. Staples become much more valuable versus non-essentials like gold, gemstones, or art. In the event of a depression one of the first victims would be a precious metal basis for currency valuation.
Regarding U.S.D. hyper inflation, as long as the U.S. maintains it's relative position in the global economy, demand for U.S.D. will be strong. One of the main factors in the ascendancy of the Euro involved yield curves, Euro based debt was cheaper than dollar based loans. Internationally, this made it an attractive instrument of exchange for obvious reasons. As demand grew, it became beneficial to hold Euro based assets as their exchange value increased. This can't go on forever and one hopes the E.U. member countries can keep it together long enough to truly homogenize the pan European economy. Nevertheless, backing the dollar with adequate gold reserves won't contribute much to that environment.
And finally,
Japan's current accounts have always been on the whole, negative with most of it's other trade partners. It's an import based economy. Few natural reserves and little economic sphere of influence. The trade deficit speaks to how much we buy from them against what we sell. At the time the yen was slipping against all the majors due to their need to acquire goods from external sources to keep their economy running. Often paid with dollars.
If I'm not mistaken, Japanese corporations are required to certify their books twice a year, at that time they are required to have a certain percentage of their assets in yen based equity. This causes a significant repatriation of yen in financial markets, boosting value. Combined with heavily protectionist trade practices, these policies enable the Japanese M.O.F. modulate currency values to prevent substantial Yen devaluation against other issues. We don't have the same privilege and I suspect don't want it for too many reasons to list here.
