The Physics of Money

Cassandra's Legacy is a gen. Ugo Bardi knows how the world works at a deep level and writes about this all encompassing subject in elegant and nuanced fashion, which is why BRT quotes him on a regular basis. 

There is a question that has been nagging me for years: why do we keep in our pockets both paper money (banknotes or bills) and metallic coins? It wouldn't be difficult to write higher numbers on coins just a little bit larger than the ones we use today. In Europe, the largest coin is worth 2 Euros, but what would prevent the mint to make coins worth 10, 20 or even 100 Euros? In any case, the metal of the coins is worth very little in comparison to the face value. On the other hand, why do we need coins at all? Why can't we have pieces of paper worth just cents rather than euros or dollars? After all, the Italian economy in the 1970s ran for years almost without metal coins; all on the basis of paper money used also as small change.

It took me a while to understand this point and only recently I found an explanation based on physical factors. Probably, this point is clear to economists, but, it doesn't seem to be common knowledge or, at least, I couldn't find it in the Web, so I thought I could discuss it here. Of course, I am not an economist, I am a physical chemist, but since I'll be telling about the physics of money, I think I can try. So, let me start.

In the beginning, there was gold. 

Read his piece, you will learn a great deal about money, I know I have. :)