Yes, I am aware of the introduction of steel pennies. However, as you noted, this was because of a copper shortage, not a steel shortage. Your points contradict each other.
So what is it? Is steel too valuable, or not valuable enough? Is it the standard of currency, or a weak replacement?
IIRC, the theory is that steel was completely consumed by the need to manufacture weapons and armor. Iron ore could not be mined fast enough, iron smelting could not process the ore quickly enough, or that iron could not be processed into steel quickly enough to satisfy the demand of the military. Extended wars can and have caused exactly these kinds of shortages. It's one of the reasons that German military arms and equipment manufactured in 1944 and 1945 are poorer quality metal. They simply didn't have access to anything better and couldn't manufacture enough as it was. In other words, excessive demand on Krynn drove the price of steel up.
It would require a fairly long period of difficulty in manufacturing steel to really cause a major shift in value, of course. But that's extremely believable if wars were lasting as long as elves and dragons live, and weapons and armor were being destroyed by magical means. Making steel on an industrial scale is
really, really difficult. You can use a blast furnace to make pig iron, but that's several steps removed from steel, and of the the
metals of antiquity, iron was the most difficult to melt. It's not like Krynn societies have access to
crucible steel (18th century) or the
Bessemer process (19th century). They very likely have
no industrial steel making process at all. At best we'd be looking at a
finery forge or
bloomeries and
cementation.
Steel production is so important that for a very long time the industrial capacity of a nation was a direct function of that nation's ability to produce steel. The only reason that stopped is because of the industrial production of alternatives (aluminum, plastics, advanced materials). The real kick-off of the
first industrial revolution was
steel making. You finally had high enough quality steel to make machines precise enough and strong enough to handle steam engines.
If you want another example of a metal that is both ubiquitous and was once absurdly expensive, you can look to aluminum. It's the second most abundant element in the earth's crust. It's more abundant than iron, and only lags behind silicon. Yet it was once extremely difficult to smelt. When the Washington Monument was completed, a capstone was put in place made of 100 oz (a little more than 2.8 kg) of pure aluminum. It was the largest casting of aluminum ever done at the time, and it was worth it's weight in silver.
Under commodity currency, the value of the currency is derived
directly from the use value of the commodity from which the currency is made. That means that, yes, during a period of excessive unchecked and unmet demand, currency backed by steel would be more valuable than alternatives by the sheer fact that the value of the currency was equal to the value of the metal.
Another key requirement of commodity currency is that it only retains it's valuable when it can be accurately assayed
. That is, when it's value can be compared and proven. For early human history, gold did not become a store of value until after the discovery of
touchstones which were used to compare a sample of gold to a known-pure sample of gold. Every merchant needs to be able to test a coin. Perhaps magic exists on Krynn which makes gold, silver, and copper easy to mimic. However, iron has an additional property: It's magnetic. It could be possible to test iron via it's magnetic properties. Though, I suspect that it wouldn't be reasonable to detect adulteration of the metal this way in reality, it might be an interesting way to do so in a fictional world where magic or other options might be available.
Finally, we have to look at what happens to currency over time. This is similar to how modern pennies are copper-plated to give the appearance of commodity value. We no longer care about the commodity of the metal at all. It's all fiat currency, after all. However, we still make pennies look copper, nickels look nickel, quarters and dimes look silver, etc. Once you have a history of steel being the material you make coins out of, suddenly, people tend to trust coins made out of steel. Even if the steel isn't actually all that valuable. You might continue to make steel coins and use fiat currency, instead backing the value of the coins by trust in whomever minted the coin.
Of course, iron and steel have the fundamental problem that they tend to corrode and iron corrosion does not protect the metal like copper, silver, nickel, or even aluminum oxides do. A coin is not a very good store of value if the coin won't survive until it needs to be spent. That means if you want an iron coin to last a long time, you'll probably need to coat them in oil to shield the coins from the atmosphere. A magical society may have other alternatives: a simple enchantment might be possible to protect each coin, or maybe the stamping process included runes to discourage corrosion. The enchantment might even serve to proof the the coin as valid and not counterfeit.
So, I can think of a lot of ways that steel currency might come to be. I don't think it's very likely, but at the same time I don't think it's wholly unreasonable, either.
