If gold truly provides monetary stability, then why has society severed the connection between gold and money?

Because gold is solid proof of work already done, but credit-based money is statistically significant evidence of work to be done. Both have ascertainable value. Credit-based money is better than gold-based money, because credit-based money finances creation of the wealth it finances. Gold does nothing. It has been plan B for centuries, awaiting plan A, fiat money.

Fiat money is a technology made possible by improvements in information technology. Underwriting credit and establishing “brand” credit require tools. When enough good tools for creating trusted banks capable of sound underwriting came into being, credit-based money was an inevitable next step.

A well-run government has future revenues from taxes. It can borrow against them. More important, a government can actually “counterfeit” money — i.e., create it without backing — so long as it doesn’t abuse the privilege. That money can create demand, which makes producers creditworthy, which makes financing possible, which enables the economy to absorb the newly printed money.

Tax lawyers have a question they ask when someone proposes a novel tax-avoidance scheme: “Where’s the sex?” What fundamental trick is being pulled off, like paying deductible interest to earn tax-free income, or converting ordinary income to capital gains? The question applies to any new technology. Fiat money finances the future production that makes it valuable. That’s the sex. That’s the reason it is better than gold-based money. No amount of logic-chopping and dictionary-consulting is going to change that material fact. Fiat money gets things done that gold-backed money cannot get done. And getting things done is why we’re here.

Will the dollar ultimately fail? Maybe. Even a candle burnt at one end runs down. But if it is the best technology available, one uses it, because living in perpetual darkness is not better than risking darkness in the future.