You revalue the gold to some set quantity of money (hopefully after pulling a lot of it out of the system) and then you ONLY let money supply increase with the increase of physical reserves.
Based upon our issue of legal tender gold and silver coinage since 1986, we’ve actually got as much, or a bit more, face value bullion in circulation as was circulating at the time of the theft of the gold by Roosevelt.
Revalued to some value larger than current spot, it would work. Numbers would change, but the ratio of valuation would remain the same. Most of the bigwigs who carp about problems with this do so because they wouldn’t make a pile of dough on the transition and they would be severely constrained at lending because money wouldn’t be created by debt issuance and people wouldn’t be mortgaging their azzes off, they’d be able to save for serious purchases or pay a significant fraction up front.
This is because the baby-boomers, and their equivalents in other countries, are retiring. A worker retires at the top of their economic productivity. They then proceed to take their investments and move them into somewhere safe, like cash, t-bills, and municipals. This means the money isn't available for mortgages and consumer loans (cars & credit cards).
They also stop forking over the highest taxes they will ever pay in their lifetimes. The US, and other nations in turn, will go from the largest generation in history, the boomers, to one of the smallest, Gen X. Look for government revenue from taxes to shrink until Gen Y comes on line when Gen X retires. That will be in about 20 years.
Things will not be so bad in the US for two reasons, 1) the boomers produced a boomlet, Gen Y, and 2) because of immigration. I am heartily in favor of a lot of immigrants coming here. They will mitigate a good bit of the financial pain. I just want them to do it legally. No amnesty, you enter illegally, you MUST leave. Then you can come in properly. We just get to pick and choose those who will be a good fit for us (US).
SpyNavy
Garde la Foi, mes amis! Nous nous sommes les sauveurs de la République! Maintenant et Toujours!
(Keep the Faith, my friends! We are the saviors of the Republic! Now and Forever!)
LonePalm, le Républicain du verre cassé (The Broken Glass Republican)
mark this excellent explanation - so I can find it later...