> Which directly leads to instability when the value of the backing changes. You're not correct. Instability leads to changes in the buying power of currency,

> Which directly leads to instability when the value of the backing changes. You're not correct. Instability leads to changes in the buying power of currency, not the other way around. Unless you're talking about monetary inflation. What mechanism do you think there is to change the value of gold in a gold-backed world? The mechanism is that when there are better places to put your money than keeping it in dollars (gold backed or otherwise) the value of those dollars goes down. And vice versa, when there are fewer better places to put your money, more wealth will be held as currency and push its price up (this is why deflation is seen as bad - beacause it generally coincides with an economy that has been invisibly failing for years). Monetary policy had been inflationary and insolvent, and rampant expansion of the money supply lead to high price inflation which of course ended in a crash. It was monetary expansion that lead to the problems in the 70s not mysterious changes to the value of gold.