Gold as jewelry also has its place to show everyone, "look at how rich I am". This is still true in some communities. Also, gold chains were used as a "wallet". One could simply take a link or two to pay for something and close the remaining necklace back together.

I guess it all comes down to the barter system. Currency works as a middle man so people don't have to trade with multiple others to get what they really want. Anything not rare or that which can be easily produced wouldn't work. I always heard the word "faith" and not "force" when explaining the value of the U.S. dollar. The value of the dollar is backed by the faith of the people in the U.S. economy. I like your example better.

Also, I recently watched a documentary on counterfeiting U.S. dollars and they said that half of all counterfeit bills come from Peru. I think Iran has been trying to flood the world market with counterfeit bills as a way to destabilize the U.S. economy.