A gold standard has few advantages over a responsibly run fiat currency, as we have had since about 1980
The best and indeed only argument for gold is the view that we must, sooner or later, return to rampant inflation. That has been the rule for fiat money throughout most of human history. I think today seigniorage is not an important source of government revenue and financial markets punish politicians for inflation pretty quickly.
The argument here is that governments can finance their spending through taxation; debt (which is deferred taxation); or inflation (which erodes the value of debt). The rise of Independent Central Banking and stable inflation targetting (currently the Bank of England targets an inflation rate of 2%) seems to have restricted the government's ability to "simply" inflate it's way out of debt, and the absense of high inflation is evidence that everything's ok. As Tyler says, since 1980 the fiat currency has been "responsibly run".
But has it? We measure inflation with the consumer price index (CPI) which compares the price of a basket of typical consumer goods across different time periods. This is the rate that the Bank of England tries to keep at 2%, but is only a rough proxy for such an abstract concept as "inflation". So since when did inflation = CPI?
Well, since 2003 which is when Gordon Brown introduce CPI rather than RPI. The Retail Price Index works along similar lines to the CPI but is broader, including Council Tax and mortgage repayments. Since these are some of the largest components of our monthly bills, you'd think they should be included in the measure of the cost of living. The Office of National Statistics still produces the RPI and as Edmund Conway shows inflation is above 5% for most families, and almost 9% for pensioners.
Bottom Line: Central Bank Independence isn't a binary issue; contemporary Central Bankers have yet to be properly tested; there's a lot more credit available than blunt proxies illustrate.
Update: Eddie George (former Governer of the Bank of England), speaking in the Belfast Telegraph:
"We knew that we were having to stimulate consumer spending. We knew we had pushed it up to levels which couldn't possibly be sustained into the medium and long term. But for the time being, if we had not done that, the UK economy would have gone into recession just as the United States did."
He said he was "very conscious" that stimulating consumer demand could give rise to problems in the future. "My legacy to the MPC, if you like, has been 'sort that out'," he said.