Why fiat and commodity currency are not so different after all

 Before 1964, all US quarters were made of (mostly) silver. Paper money was just a promise that silver would be given to you upon request. While gold and silver are pretty, and are useful in many applications, it is their scarcity that makes them valuable.

Here I must go into a bit of monetary theory. I will put forth that money's worth is based on its scarcity. It does not matter where that scarcity comes from. This is a fundamental underpinning of what I will present next. 

The reason why commodity money is seen as "more real" than fiat currency is only because precious metals' scarcity is natural, not artificial. A government has a hard time inflating a precious metal or commodity currency, and thus people trust it, as the only player in the currency's inflation rate is the Earth itself--though there are many ways around this. 

I will present, as an example, what happening in California during the gold rush. Everything there was ten, twenty times the price, in gold, of what it was in other places around the nation. This is because, in this instance, gold was inflated. It fell prey to the same failures that people attribute to fiat currency. 

Again, imagine if someone were to bring back a metal-rich asteroid in a world where money was still tied to the price of gold. The price of gold would drop to almost nothing, and the entire monetary system would fall apart. Hyperinflation would reign.

I believe that commodity money is useful for securing trust in the entity that issues that currency. It makes money harder to inflate. This mattered more before centralized governments handled by monetary experts with advanced degrees and (hopefully) high qualifications as economists. Fiat currency's scarcity is artificial, but with a government that is smart, that shouldn't make a difference. The scarcity of a dollar bill is the same basic scarcity as an ounce of gold. There are only so many of them around. 

I believe that fiat currency is better suited to modern western democracies, as they allow the government the freedom to play with the monetary supply. This matters, as it allows the government to employ Keynesian economics to the economy without having to divest huge stores of material. You may call this a bad deal, but as long as trust remains and the government in question is relatively honest, this can only be a good thing. Fiat currency is not tied to the whims of the Earth itself. As long as the government printing the money remains less erratic than the Earth itself, then fiat currency is a smart choice.