[freehunter]

The year is 3000 AD. Civilization has collapsed, governments are non-existent, and the remaining human tribes need some sort of currency to facilitate trade. I need a goat for my farm, so I walk up to the goat breeder and hand him a pile of gold. Does he take that gold and smelt it into something? Probably not, he's a goat breeder. He might be able to take that gold and trade it to someone else for something he needs, but I'd imagine the person making gold jewelry or semiconductors will also sell goat food. So he'd have to give that gold to a hay farmer, who would trade that gold for a new plow and now the plow maker might be able to smelt that gold into something useful. But the gold has no use for the goat breeder or hay farmer.

Now I hand him a stack of papers with numbers printed on them. The goat breeder has no use for these papers, but he also had no use for the gold. He'd need to trade them for something. Let's run it all back up the same line and we see it doesn't end at "and now the smelter has something useful" because paper isn't useful to the smelter either... but running the paper through that chain of merchants has proven that there's value attached to the paper. The smelter then recognizes the value of the paper and trades the paper to the miners who supply the metal, because the traders who supply the metal want to buy some goat milk from me and they know I accept this weird paper in exchange for my goat's milk.

That's how currency has worked since the beginning of civilization. Ancient people weren't melting down coins to make something more valuable, they were trading the coins as-is without a worry about how useful the raw materials are. They just needed something anything that everyone agreed had a certain amount of value to it that's also difficult to fake. Gold has no intrinsic value for 90% of all humans on the planet, it's just a way to exchange goods and services based on an arbitrary-but-universally-recognized token.

[bumby]

Perhaps a dumb question, but how much does the ability to acquire new money factor into this?

I’d assume it’s more work to dig up and purify gold ore than make linen paper. Wouldn’t this mean some currencies are inherently more stable?

[freehunter]

I imagine in this situation the tribes would eventually develop their own currency as they rebuilt and became more complex. The video game Fallout, for example, uses bottle caps as currency even though they aren't making new bottle caps anymore. But given enough time in the game's universe as more people come out of their shelters and return to the surface world, they'd realize that this increasingly rare currency isn't going to last forever. And then they'd start minting new coins or printing new papers.

Gold and silver works great for newer and less technologically advanced civilizations, because it's easier to smelt metal than print new US Dollars on speciality linen paper. It would be easier to lose the ability to smelt metal and then later regain that ability than it is to lose the ability to print USD and try to regain it. But once you reach a certain level of technological sophistication, minting fake gold coins becomes easier than printing new USD and people start to trust the currency less.

So I guess yes, precious metals would be easier to rebuild civilization with because it could be more easily reproduced as technology advances. But no matter what I think every civilization would abandon precious metals as they progressed, because counterfeiting becomes very easy very quickly.