Yes we create money out of thin air; quit worrying about it

Gold bugs who want to lash currency to bullion miss the essential point of what money is and what it is designed to do, says James Surowiecki writing for IEEE Spectrum.

The housing crisis and the mess in Europe makes people uneasy, argues the author. They want money to be better grounded and see its value restored:

This irrational fear is ultimately a legacy of the way money evolved: We cling to the belief that money needs to be backed by something “solid.” In that sense, we’re just like Marco Polo—still a bit amazed by the thought that you can base an entire economy on little pieces of paper.

Successful currencies, after all, are those that people use: They lubricate commerce, allow people to exchange goods and services, and thus encourage people to work and create. The German sociologist Georg Simmel described money as “pure interaction,” and that description seems apt—when money is working as it should, it is not so much a thing as it is a process.

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Hat tip, Daily Dish