I think I've started reading this 5 times now. Just rebumping it to keep it in my 'my comments' view.
Remember the processing points: The old dolar was backed by gold, and gold represents labor already perfurmed and constitutes real, portable wealth.
FRN's are I.O.U.'s -- a promise for someone to perform labor at some future point to pay the interest on what we are borrowing and spending today. All we do when we spend an FRN is pass the I.O.U. on to somebody else to worry about working it off in the future in exchange for goods and services we consume today.
It's a lose-lose situation. Expansion, contraction policy is the mechanism for skimming and scamming off the meger savings people are able to sock away by the periodic loss of the purchasing power of their saved assets.
You just can't put an FRN in the bank and expect to buy a loaf of bread for it 10 years down the road as you could with gold-backed currency.