More than ridiculous: Irrelevant. Using gold as reference means that the value of everything else equals the amount of gold. Dig more gold out of the ground, a

More than ridiculous: Irrelevant. Using gold as reference means that the value of everything else equals the amount of gold. Dig more gold out of the ground, and the amount of money increases, which sort of means that digging for gold creates value. Building a house without digging for gold does not create overall value in such a system, if you do that you're devaluating all the existing assets and transferring some value to you. It's not a terribly attractive system IMNSHO. Central banks tried to make it more attractive by trying to fix prices instead of the tying the total value of the economy to gold, turning it into a notionally gold-backed system. It's also not a relevant difference; as you can imagine, introducing gold-backed currency doesn't turn uninsured depots into insured deposits.