Humans have been determining the value of the creations of nature for a very long time. The whole idea of the 'free market' was formed around this very problem. The creations of humans are quite another problem altogether.

If a new product appears on the market, its value is determined by a formula which looks something like

V=(HN)(CD)(T)(RI)(HE)(E).

Where:

V is the amount of money validated

HN is an assessment of human need whether physical or psychological;

CD is the creative design input which is a combination of learned information plus the intuitive flash;

T is the existing technology;

RI is the resource input from nature;

HE is the physical effort or work supplied by humans; and

E is the energy supplied from nature in the form of fuels.

Because all six elements are critical, many forms of human endeavor do not add to value. For example, the value of the Russian Ruble is based almost completely on the value of their raw materials.

If this is the function by which the supply of money in a society is determined, then first and foremost as you note there is an assessment of human need.  And that would seem to be the location at which we go astray.

If the economy is merely a means to an end, then HN is limited and exists embedded within a social and natural environment. However, the utilitarian bias present in most of modern society tells us that more is always better than less, and that the role of the good society is the unending creation of new wealth.  

Disembedded from its social and natural context, the market logic undermines the social and natural endowments on which it depends. When confronted with social or environmental limitations, the presumption becomes that through our agency we hold within our power the ability to overcome the limitations placed upon us.  Yet, upon closer examination how much of the progress we attribute to human ingenuity derives from the consumption of impounded power, of E in you formula, so that rather than being a testament to our triumph over the natural world, our progress is ultimately shown to be utterely dependent upon it.

And what comes when we have fully expended that impounded energy?

As much as I would love to believe that there exists within human nature an inventiveness necessary to release us from the bonds of nature, I simply can't.

Rather than being captains of our own destiny, we are all adrift on an ocean not of our own creation.  For the liberal, this creates angst because it conflicts with the understanding that all have within them to power to change their fate. And the recognition that we are far less omnipotent and omniscient reduces us from masters of the universe to mere specks of dust.  

Yet, if we cease to struggle and to profess belief that we have agency that exists outide of the structure created for us by nature and man.  Then we might come to see that in the recongition that no man is an island, there is the wealth from knowing that we are all connected.  When we pass from this world, all that is human does not pass with us.  And it is in that continuity that out salvation lies.  In abandoning the sense that we alone matter, and recognizing that we live on in that which we leave for future generations.

And if through we beleve that our ingenuity provides for us what we consume from the stocks of nature, we leave those who come after us a world less rich.

This is my point is saying that there has to be some natural limitation on the currency supply, because the belief that human ingenuity allows us to transcend natural limiation disembeds the operation of the market from the natural and social contexts in which it exists. We come to believe that when coal is exhausted we will fall upon petroleum, then natural gas, the nuclear, ad infnifitum.  Until our asinine belief that we are gods is exposed for the foolishness it is.

The money supply is a means by which the disembedding of the market is facilitated, efforts to reembed the market, must thus place the money supply within the realm of what nature provides.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

I don't want money literally linked to anything.  But when the gold bugs come out of the woodwork, and trust me on this, it is damn difficult to discuss monetary policy without running into them, I like to point out that it makes MUCH more sense to tie monetary value to energy than to gold.

But yes, I agree with you.

"Remember the I35W bridge--who needs terrorists when there are Republicans"

I must take issue with the idea that the Great Depression was caused by the undersupply of currency resulting from the gold standard. Remember that overproduction led to full warehouses prior to the Depression.

An oversupply in which the market was allowed to take leave of any notion that it was bound by either natural or human constraints.

And so we had the Dustbowl, and Hoovervilles in Central Park.  Labor, Land, and money are fictitous commodities, they cannot be reduced to serve the needs of the market alone.

Why can't a self-regulating market economy ever be realized in practice? Pure market liberalism requires that people, nature, and finance capital be turned into pure commodities: labor, land, and money. Polanyi's definition of a commodity, though, is anything that is produced explicitly for sale on the market. But land, labor, and money do not fit this definition, as none of them are really produced for the market. Money is a token of purchasing power that exists because of state action. Land is nature, subdivided; it is not produced by people at all. Labor is, in actuality, human activity that is ultimately undertaken for reasons other than pure material gain. Much of economic theory is thus based on a fiction. In contrast to the ideas of the classical economists, land, labor, and money cannot and will not act as real commodities do and thus their allocation can never really be organized purely through the self-regulating market.

Part of Polanyi's argument here is a practical one that relates back to the idea of embedding that we have already discussed. As unrestrained markets impose increasingly severe costs on people and nature - social dislocation, community decline, greater economic insecurity, ecological degradation - society takes steps to protect itself. This is the second aspect of Polanyi's  "double movement" - the first movement is toward market liberalism, the second is the socially protective counter-movement. Workers demand that labor markets be increasingly organized by trade unions, and the state to step in to regulate minimum wages, maximum working hours, and to provide disability and unemployment benefits. Business wants the money supply and the banking system to be regulated by a central bank. Farmers agitate for land use regulations and farm price supports to protect themselves from the ravages of the market.

There are a number of interesting conclusions here. The state is never truly separate from the economy; it must step into these key markets for the "fictitious" commodities in order to promote economic and social stability. Also, the counter-movement for social protection is not the outcome of a simple class struggle between labor and capital; all segments of society participate in it. Finally, and again, contrary to contemporary libertarian thought, this social protection is typically introduced piece-by-piece, and pragmatically, rather than though some grand socialist plan. It is the market liberals, not their political opponents, who are the true utopian planners.

Perhaps even more importantly, Polanyi is also making a moral argument here: Human life (labor) and nature (the environment) have a sacrosanct dimension, an intrinsic worth that is not simply reducible to a market price, and thus can never be fully reconciled with complete subordination to the market.