The Downside and Alternatives
A lot of the argument in the article is based on the idea that the gold standard succeeded in the past, whereas our current fiat currency has failed, and that this is an argument for going back to it. I believe (along with most economists) that this is misguided.
The author omits to mention that although there was very little inflation during the 19th century, there were repeated recessions and depressions of what - by modern standards - were catastrophic proportions. The argument made for the gold standard is that the supply of gold is fixed, or nearly so, and that it is therefore impossible for inflation to be caused by an oversupply of gold. The historical evidence bears this out. The down-side is that economic growth often leads to an increase in the demand for money, which if the currency is gold-backed cannot be filled by an increase in supply, and must result in an increase in its price: in deflation. Prices drop, incentives to invest trail off, the economy enters a contracting spiral, and a recession results. These deflationary spirals were a major concern (and a mystery) to 19th century economists.
Now, of course, we know there are also inflationary spirals, and these have happened much more frequently in the last 50 years. Inflation erodes the value of liquid savings and makes debts easier to pay. Deflation makes savings more valuable and debts harder to repay. Deflation therefore creates a disincentive to invest savings (since they increase in value anyway), whereas inflation forces savings to be invested, or else they lose value.
Is either thing preferable to the other ? In their extremes, no. However, the consensus today says that low levels on inflation are probably better than zero or negative inflation. This is because we would prefer people to invest their savings, rather than keep them under the bed, and the erosion in the value of debt makes the economy more "forgiving".
Additionally, deflationary spirals seem to be much more severe and tougher to live through than inflationary ones. Wages tend to be sticky downwards and thus very hard to cut. In a deflationary environment, the value of wages rise, and thus employers will tend to shed staff. Since there is no incentive to invest savings, new jobs are not created, and chronic unemployment results. Demand for goods falls, further pulling down the value of real investments, and causing prices to fall still further. There is no inflationary equivalent to this death-spiral. Inflation causes real wages to fall, but real prices rise, and there is no obstable to raising wages. Market interest rates are also adjusted to compensate. Inflation is very bad for those with savings or on fixed incomes, but it does not have the severe feedback effects deflation has.
Since the gold-standard will inevitably produce mild deflation, it does not seem to be the best solution. Nonetheless, monetary stability is desirable. We would like mild inflation, but we would like it to be at a predictable rate.
One option is the current system, commonly called fiat currency. Fiat currency is explained in terms of the quantity theory of money, which basically says that money in intrinsically worthless, and therefore its value depends only on the quantity in circulation. This tends to give the impression that the system is grossly unstable and open to influence by errors of judgement and political corruption, and many gold-bugs play up this point endlessly.
In modern monetary regimes, governments do no print money and spend it themselves. Rather, they license central banks to print money and issue it by buying back government bonds. The banks tend to be fairly transparent and independent, these days, and the recent record of low inflation tends to indicate that this works well.
It is also worth noting that because currency is only issued in exchange for bonds, that are themselves inherently valuable, the modern system actually fulfills the ancient "real bills doctrine". This says that provided money is only issued in exchange for valuable commodities, it is backed by those commodities. Modern money is, from this view, not fiat money at all, and its behaviour is not explained by the quantity theory. In this view, if the demand for money rises, the bank will buy back debt in response. It will later reissue this debt if the demand for money falls. Thus the currency is not totally unbacked, but rather backed by government debt. I should admit, at this stage, that this idea is not mainstream.
Another interesting idea, which I first came across in a book of Hayek's essays, is of using commodity money (of which gold-backed money is one type), but backing the currency with a basket of goods. If you choose a basket of goods such that the non-labour raw materials for almost all finished products and services are included, the value of money will fluctuate in line with the amount of stuff actually available to buy. Thus inflation should average out at zero, which is rather better than the gold-standard, where it averages out negative.