First by acceptance in trade, based on the expectation that it will remain valuable and second by its role in the discharge of debts where failure to repay has unpleasant consequences. When taxes are present a third valuation appears in the penalties for failure to pay taxes. The control of the fiat money supply together with rules on the granting of credit and the bankruptcy, default and reorganization rules, in essence, provide lower and upper bounds for the price level in the economy. They also determine the innovation rate of the economy. The rates of interest for loans combined with the harshness of the bankruptcy and reorganization laws help to determine the rate of innovation in a society.
Government controls only one among many interest rates.
A host of institutional details involving risk and transactions cost determine the others. The velocity of both money and credit may vary. Even though velocity may vary, human decision-making takes a finite amount of time. This implies that velocity will remain bounded. Beyond some speed of circulation expectations will degenerate and the economy will break down.