I agree with what you say about a gold backed currency, or any static currency supply, leading to deflation as new value is created. I also agree with your oth

I agree with what you say about a gold backed currency, or any static currency supply, leading to deflation as new value is created. I also agree with your other statement that money is backed by all the physical things. I would have said that money is a representation or abstraction of the value of all things that it can buy. As the number of things that can be bought increases the money supply needs to increase to maintain acceptable valuation. If the money available is static the value of things that can be bought would have to deflate to accommodate the new things that can be bought. It seems that the number of things that can bought increases with time so we have to live with one of the two scenarios and seem to prefer the the first. For most people the deflationary scenario would seem more unsettling than the inflationary one.