There are a few ways to deal with that, but reserve and currency management is really a topic worth a thread (or book) of its own. Acknowledging that backed currency in itself in not a panacea for all economic issues lets move on for the time being.

While technically, it is theoretically possible to not create bubbles under a fiat system - the core problem is that the system itself is inherently politically driven. In theoretical terms, something that is hypothetically workable can quickly become unworkable when management of said system becomes the domain of politicians.

A core reason backed currency is favored by many, is the inherent restraint it puts on politicians.

Sure, over time.. if we assume for a second that our political class is capable of learning, eventually it may be possible to learn enough about the economic and monetary dynamic to evolve a comprehensive enough set of guidelines, laws, and regulations that result in the creation of the proper amount of money at the proper time and keep things flowing smoothly from a rational constructionist standpoint.

The problem, is even assuming that - I think it will still take literally several hundred more years of massive booms and busts to get there.

For who could be free when every other man's humour might domineer over him? - John Locke (2nd Treatise, sect 57)