Basis for value of money
The value of money depends on what it can purchase, not what it is made of. Fiat money has value because it can be utilized to purchase goods and services, even though it has no intrinsic value or utility other than as a medium of exchange. It is more difficult to concede that the same is true of gold and silver. While their intrinsic value remains unaltered by the quantity available, their value as a medium of exchange is directly depend on the availability of goods and services for sale. This is illustrated by the fact that when huge quantities of gold and silver were discovered in the New World and brought back to Europe for conversion into coin, the purchasing power of those coins fell by 60% to 80%, i.e. prices of commodities rose, because the supply of goods for sale did not keep pace with the increased supply of money.
Today's national currencies are back by the governments that issue them, not by gold or silver, and the governments are backed by the productive capacity of the societies they represent.
source: wikipedia.org
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History of money
Characteristics of money
Desirable features
Modern forms
Credit
Money Creation
Problems with precious metals as money
Problems with paper as money
Basis for value of money
Economics
Private currencies
The Future of Money
Supply
The World's Richest People
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