Mises, in his “regression theorem of money,” explained why we use paper money (although he didn’t set out to do this). Today’s demand for money is based on what economic agents believe about yesterday’s purchasing power. In fact, this is the history of money in reverse — from barter, where gold was merely one commodity among many, to the paper money of today, whose “ancestors” were still exchangeable for gold. Had this convertibility into gold never existed in the past, no one would use such money today. By the way, there are known cases of completely non-convertible, fiat paper money being introduced. These cases — in China, in Iran during the Mongol era — ended in mass rebellions. Modern non-convertible money is a reflection of convertible money, and convertible money, in turn, is “true” money. Yet the purchasing power of this money keeps steadily falling. Contrary to what monetarists and Keynesians expected — that “the price of gold is ensured by a strong dollar” — since the dollar’s peg to gold was abolished in 1971, it has fallen in value relative to gold by a factor of forty.