Fiat money is a bad thing; in the long run, it is like a game of musical chairs in which most chairs will suddenly be removed all-at-once. And, historically, no state has indefinitely resisted the temptation to inflate fiat currency madly.
You say that as if fiat currencies have existed for more than a few decades.
Inconvertible paper money has been repeatedly introduced over the centuries, beginning in China.
That said, I can't think of many countries that gave into the urge to "inflate the currency madly". At least not ones that weren't already in the process of collapsing. Do you have any data to back up your claim?
America alone has had three distinct episodes of unconvertible paper money (four if the Confederacy is counted separately), and the world has had a great many. (China, France, Germany, Austria, Greece, Argentina, Zimbabwe, and Venezuela come immediately to mind.) In the case of America, learn for example about the Continental Bills of Credit.
A standard based upon just one commodity (such as gold) is far from perfect, and states can debase such currencies; but they don't go to Hell as quickly as does fiat currency.
There are also issues with things like countries leveraging asymmetric trade to drain each other's gold reserves, even if the trade wouldn't otherwise negatively impact their economy, and the monetary supply having literally nothing to do with the productive capacity of the country.
You are here thinking exactly like a mercantilist. If goods can be bought cheaply in nation B because nation A is selling them thus to acquire the currency of nation B, then buyers from other nations have incentive to move their holdings of that currency into nation B to make purchases. And, as whatever commodity is used as money become more dear as money, there is incentive both to produce more of it and to shift more of it from other uses into use as money.
And you should take a look at the expansion of the US money supply relative to that of the American GDP over the last twenty years; the former certainly does not reflect the latter.
An ideal monetary order would require the elimination of legal-tender laws, and almost certainly have competing issuers of currencies based upon evolving baskets of multiple commodities.
And that causes even more problems, not the least of which are things like company scrip, abusive payment requirements, and an exponentially more complicated tax process.
To the extent that the mythology of abusive company scrip and payment systems has actually been researched, it has been falsified. See, for example, “Did Coal Miners ‘Owe Their Souls to the Company Store’? Theory and Evidence from the Early 1900s” by Price V. Fishback in The Journal of Economic History v46 #4. Much of what is taught as economic history is little better than Just So Stories.
(As an undergraduate seeking a BSc in economics, I was required to declare a field of specialization. I had enough coursework each in money-and-banking and in economic history; I chose the former. I moved to different fields in graduate school.)
Currencies, at least in the way your talking about them, are one of those things were "free markets" make absolutely no sense.
In response to that bald claim, I'll make a bald denial.
