I've been studying economics for several years now, on an armchair basis. (I was caught up in the middle of the dotcom bubble, KNEW something was wrong, and started learning about why.) You've hit a nerve here with me; I suspect that the fiat money system we are using now is slowly destroying us.
There are a number of schools of thought about money. The one I personally think makes the most sense is from the father of Austrian economics, Ludwig von Mises. Per Mises, money is "the most marketable commodity".
That's all. That's it. Real money, in a system that self-arranges, instead of having things forced on it from the outside, is just a commodity. Past a certain point, a commodity becomes popular enough that it can be used as money. Even if I don't want the commodity myself, if I know that someone else will take it for things that I want, then I will also take it. Because I am now taking it, then other people who want my products will also start taking it. There's a very powerful network effect that happens after a certain point.
Historically, the commodities that the market settled on have generally been gold and silver. That's not always the case; some islanders used seashells. But, by and large, that was what we ended up using. Both metals are compact, fungible (they can be broken into pieces; if you have a 1-ounce coin and need change, you can literally break it in half and spend the pieces), are beautiful, contain high value in a small space, and, best of all, are hard to manufacture. They can't be made out of nothing; it takes a lot of work to find, mine, refine, and smelt gold and silver into coins and bars. This means that when you are holding these metals, you are holding VALUE, and not just promises of unspecified value.
In a normal market economy, there's really no need for centralized control of the money supply. When you realize that money is just the most marketable commodity, it doesn't have to be treated any differently than any other commodity. We don't worry about, for instance, the soap supply. Or the sawdust supply. These things take care of themselves. If there are shortages, the increased demand will raise prices (in the case of gold, making everything else cheaper in terms of gold), which will attract new producers to explore and mine more of it. If there's too much, the amount of goods that gold will buy drops, and some producers either curtail production or go out of business. It's self-regulating.
The only reason for a government-issued currency is to give that government more power. Politicians looooove getting their hands on the money supply, because it lets them tax you without you realizing it. You may have noticed the dollar dropping of late.... this is probably related to the fact that the Federal Reserve has been inflating the money supply madly for the last 10 or 12 years. Previously, the liquidity went mostly into the stock market. Asset inflation is one of the most seductive forms of inflation -- people LOVE IT, even though it's terribly dangerous.
The Fed was particularly bad in 2001 -- I believe the money supply (measured by M3, one of the "broader" measures of money) grew by 18% that year. It grew 12% last year, and it's on track to exceed that amount this year. By way of comparison, during the entire two decades of the 40s and 50s, the money supply increased by about 18%. (and apparently there were big arguments amongst the economists of the time, because the GNP had grown by a much larger amount, and some of them were worried that the money supply wasn't keeping up.)
In other words, in ONE YEAR of fiscal excess we equaled TWENTY YEARS' worth of (presumably) healthy money expansion. This is NOT how to run a stable system.
I could literally write pages and pages about this; there's a lot more here than I'm talking about, but this is just a comment, not a novel. :-)
Cconsider: if you get yourself an inkjet, and buy some good paper, and print up a bunch of $100 bills, you can, if not caught, spend those bills for real goods and services. If you are caught, you will most likely do jail time. The only difference between you with your inkjet and the Federal Reserve is a matter of degree. They are spitting out vast piles of money with no inherent promises to pay anything. It took them no work at all to produce it, and yet by government decree it has value. There is essentially NO DIFFERENCE between your printer and the Fed's, at least in terms of damage to the economy. The government, by printing all this paper, can take real wealth from its citizens and use it for its own ends. And mostly, the citizens are unaware of it. You'd get mad if they showed up and stole $500 from you every month, but if they bleed you to death slowly by inflation, you don't notice.
That's what's really good about a commodity money system. Politicians can't just invent new money at will. Someone has to work very hard to collect the commodity; it's not free, and it keeps politicians much more honest with the purse strings. I do not believe that we would have the vast debts and deficit, if we were on a gold standard. All the gold would have left the country and we'd be broke! We were flagrantly overspending in the late 60s, with Lyndon Johnson's Great Society and the Vietnam War at the same time, and the French started turning in their dollars for gold when they saw we'd printed a lot more bills than we had gold to cover. So Nixon took us off the gold standard once and for all, and the fiscal policy of the government has been on a steady downward slide ever since.
Money needs to be a store of value to work properly. When it has no real value but is decreed by fiat to be valuable anyway, this causes problems, which slowly and steadily accelerate.
I could possibly write a real article. Not just about money, but rather about the huge mess we're in, economically, how we got there, and (maybe) how we slowly get out of it. Let me know if you're interested.