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Somewhat related question, but not the same goal

In my current concept metals (from nickel to iridium, based on density) are used in the magic system. So in a way they are directly tied to power.

I was thinking, that's a good way to have a "gold standard". (they are useful in many circumstances, helpful for achieve other (terminal) goals.)

So I came up with rough conversion spreadsheets linking them to the price of a iron ingot (which is not included as currency, but useful nevertheless).

Now, before I base my entire work (since this is woven really deep into my worldbuilding) on this (I have some doubts left), I got here for a reality check.

More Info on magic system:

- Magic can not be used to create things (So you can't create gold for example)

- It can be used to accelerate growth/yield for example of food crops (but only to ~quadruple the crops or speed up the growth and nutrient and water use would still be that of the final yield.

- No resurrection, only slightly better healing, no time travel and so on.

- The most utility of using magic is to exert power (Warfare, Protection, Intimidation)

- Metal is a necessity for the execution of any magic feat and is consumed in proportion to the power of the effect. Individual prowess dictates how much a single person can "convert" however. So you can't just consume a ton of copper :)

General Info:

- The tech level is late-roman in the cities to hunter-gatherer societies still in the stone-age in the outer reaches of my map.

- Most bigger settlements and trading posts would have a way to measure the density of a substance (i.e. an ancient version of a pycnometer)

- Coins of different worth are created out of tempered glass, and forgeryproofed via magic means, but they are only used in the innermost centres of civilization. They are basically a huge nuisance to reproduce (you need a complicated mechanical device and they have a magic fingerprint) so most people will not bother.
Joachim: How are the coins directly tied to power within the magic system?

- They exist for an easier flow of riches within the big cities and are basically a fiat-currency. People don't want to take big bags of weighty metals with them for larger trade deals. They are backed by the power of military (magic assisted) guilds.

So in most civilized and half-civilized regions of my world goods and services are exchanged using small amounts of different metals.

• Is there any big, glaring problem with that?


• Do I need to come up with explanations why X would not happen?


• Are there any loopholes left?


• Do you need more info to answer the question?


• I am ready to tune the availability of metals on the planet to fit the economy. What would be needed here?

The problem I see here is that it's not obvious from your description whether a single unit of any precious metal does the same thing for any person involved.

From your description it seems that you want to have not a monetary system, but a barter system.
I'm thinking here of your metals not as of currency, but rather as of a calculable unit of value. Something like a cow in northern European early middle ages. Not that they carried cows as a currency, but rather that they could convert a price of any given item to cows and trade with that in mind. (Say, a sword is worth two cows, two slaves are worth a cow, so you can trade four slaves for a sword).

If your society is agricultural, and uses fertility magic - and if there is averagely the same result any mage can get from a fixed amount of metal, I can see it becoming a value measure. Say, a pound of copper is necessary for an average mage to make an average family plot of land fertile for a year. Then I can see this 'pound of copper' becoming a base from which barter values of all other items and metals are calculated.

Scarcity

Before the discovery of the silver and gold mines in America and the development of fiat money, Europe was constantly short of precious metals for coins, to the point that tally sticks were commonly used.

Now, you somewhat alleviate the issue by allowing for more metals^{more on this later} to act as coins, but you worsen it considerably by creating a process that consumes the metal (thus removing it from circulation).

Also, while iron is certainly more abundant than gold and silver, it is not as if late roman technology was very effective at extracting it. They had iron, but it was not as abundant as today.

Bad metals

If Europe had scarcity of gold and silver... why did not they solve it by using iron coins? Well, previous metals are precious because they have some interesting properties, like being impervious to oxidation. An iron coin would not last long as such.

This adds to the fact that to, for ease of use (and other reasons), coins were minted as a way of ensuring the weight and purity of the material they contained, so people would not need to weight and measure absolutely each coin that passed through their hands. But iron is harder to work into coins (less ductile) than gold, silver or copper, and as stated above any markings of the coins would be lost to oxidation rather quickly.

Your currency is consumable for a purpose other than currency. That will affect its value.

Magic uses up your metal. If metal is also your currency then that metal it has 2 roles and the one will affect the other.

Suppose I want to buy chickens. I want to be paid in metal. Big magic doings in my locality have consumed all the metal. I have none left to pay for my chickens. I trade for it by exchanging some good looking pants that I made.

2 weeks prior I had some metal. A magic user needed it for her magic. She wanted to buy it from me. But how does she pay? She can't pay with metal - she needs the metal for her magic! I invited her to trade me for it with wart removal services and a chicken. We traded. The metal is just another item and we are in a barter system.

2 weeks from now she needs more metal for magic. But metal is now hard to find! Now for the metal she needs she must trade 8 chickens and make a bald guy grow back his hair. The metal is worth more, because it is scarce.

The good thing about metal currency in our system is that (except for some industrial uses) precious metal is not used up. There are gold bars in a Swiss vault that were once in Roman eagles and were melted and remelted over the years. If your metal is used up it becomes scarce and then less useful as currency.

Deflation

When you have a shrinking money supply, it causes deflation. It effectively forces the economy to shrink to match the amount of money available. I.e. people lose their jobs.

In your system, the money literally disappears from the economy. This is a bad characteristic for money. Rather than a shrinking money supply, you want one that grows with the economy. Our modern solution has been money without intrinsic worth. We can therefore print as much of it as we need. Deflation is rare in modern economies as a result. Historically it was part of the business cycle. Every so often, there would be a shortage of gold followed by a depression.

As described, your system is perpetually short of metal. People who have metal will get richer while people who don't get poorer.