“The value of gold is based on the total demand for gold relative to the supply of gold. Period.”
That’s exactly right. And the value of a Fed Note is based on the total demand for a Fed Note relative to the supply of Fed Notes. Period.
If you arbitrarily call either “money”, you have forced up the Demand function D for that item. One is a paper fiat, and one is a shiny yellow fiat.
That's the problem though. You can't keep a government, any government, from printing more whenever it wants to. That was the whole point of going off the gold standard to begin with. Baskets of commodities won't work either since there is no way to enforce the standard across borders and there is nothing to keep a government from simply redefining the basket whenever it wants to.
Gold takes the management of the currency's value out of the hands of the government. Only a market chosen commodity, not a government chosen commodity, can do that.
We don't have to play games with dollar to gold value conversions. All we have to do is remove the capital gains tax on gold, repeal the legal tender statutes, and repeal the prohibition on private banknotes. Dollars will continue to circulate for as long as the market needs them, but will eventually be replaced by other private currencies.
'Demand' for fed paper is prescribed by law. That is the meaning of 'fiat'. Absent the law, there is no demand. Fiat currencies also suffer from what is ultimately an unlimited supply problem. This is why fiat currencies always return to their fundamental value. That of a simple piece of paper. It is simply a matter of how long a government can keep the confidence game running.
"If you arbitrarily call either “money”, you have forced up the Demand function D for that item. One is a paper fiat, and one is a shiny yellow fiat."
This demonstrates a profound misunderstanding of the term 'fiat'. Physical gold is the antithesis of 'fiat'.