[Off-topic] xaccers:
Money used to be linked to things like the Gold Standard, the amount of money a nation had would be backed up by the amount of gold they had.

This caused several problems, for instance, if the value of gold dropped you'd have more money than gold, likewise if you exported a lot, you'd have more money than your gold reserves.

Coin consistencies would fluctuate to reflect the value of gold, so coins from one year could be worth more than those from another.

People would clip coins so they'd pay less for things. It's one of the reasons why Sir Isaac Newton invented the dots around the face of UK coins, and the ridges around the side, when he was in charge of the Royal Mint, to make it more obvious if someone had clipped the coin.

It would also cost more than the value of the coin to make the coin. A copper penny would be worth a penny of copper, but would cost more than that to make. Moving to fiat currency did away with this as the coin/note represents it's value rather than actually being it's value. A £10 note though is still a promissory note, that you could try and demand 10lb of gold (or equivalent of coinage) from the Bank of England. Unlike other promissory notes in circulation (such as Scottish bank notes), Bank of England notes are actually legal tender, the others have to be backed up by Bank of England notes.

At the moment, to stimulate the economy, central banks, such as the Bank of England are performing quantitative easing which is basically pumping more money into the system in the hope that it will trickle down to everyone. Retail banks are being pressured to use that money to lend to businesses so they can survive the hard times and keep the economy ticking over.

With money being tied to the gold standard, that isn't possible.

There's plenty of hard cash still around, the Royal Mint for instance regularly assesses what is in circulation and makes adjustments, for instance there are fewer £5 notes than there should be, so they have printed more and supplied them to banks rather than higher value notes.

Also, cotton paper money is harder to forge than coins, as demonstrated by the huge number of fake £1 coins in circulation.

World wide, cash is king, there are no bank cards etc, it's hard cash people handle. In the West it is very easy to presume that everyone in the world has internet banking or debit/credit cards when that isn't the case.

We have electronic banking because it is more secure than cash, and more convenient to transfer to others.

Look at the number of stagecoaches that were robbed because back then hard cash was transported to pay people rather than just adding numbers to their bank account balance.

In the UK we had over a decade of the Chancellor of the Exchequer over estimating growth to justify spending and borrowing (doing the equivalent of telling the bank you'll get bonuses and overtime when they aren't guaranteed).

The economy didn't do as well as the estimates, so it meant there was less money to spend so more was borrowed backed up by more over estimating of the next year's growth.

It reaches an amount that is frankly scary, and the only way out is export more which brings money into the country boosting the economy and bringing in more tax revenue, raise taxes where possible, and cut spending where possible.

It's the same with someone who'd taken out that loan by relying on their non-existent overtime and bonuses. To make ends meet, they have to reduce their spending and potentially get a second job to increase their income. It's not the bank's fault for lending the money, it was told it could be afforded, nor is it their employer's customers' fault for not buying as much and so reducing the amount of cash the employer has to give out as overtime and bonuses, that just makes it harder to pay the loan back. It's the individual's fault for borrowing money based on an imaginary income.

Likewise with the "banking crisis" being blamed for the current state of the economy, it's not the cause, it just makes it a bit harder to get back on track. Most of the money lent to banks such as Northern Rock has been paid back anyway, and we made a fair bit of profit on it.

With the Eurozone being in recession, by people and governments spending money they didn't have, the UK economy suffers too. 50% of our exports are to Europe, so if they've not got the spare cash to buy our goods then our businesses suffer, hence why they need loans to keep ticking over until the sales pick up, and why members of both sides of the Commons have been travelling the world trying to drum up business like the £500million China deal with Rolls Royce.

It's also why Toyota was given massive tax breaks to open factories in the UK during the 80s because the boost to the economy would far out weigh the money lost in those tax breaks (and people say bad things about Maggie).