If paper money was banned & silver & gold came back, what would happen?

[H2O]

Deficit spending would become difficult. We couldn't stimulate the economy, so recession could become permanent.

Our country used to run just fine without central banking and deficit spending.

What he said.

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You see, if I told you then I'd need to then call the thing I tell you a secret. To make sure that you hold that secret close and never tell anyone that secret we would need to get to know each other much more than the internet permits, thus rendering the reason we are using this message board and I don't want to end the internet. So, as you can see, I cannot tell you that information.

If you stick around you might just take Alice's prize in 2015

And what would that be?

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The arguments of those in favor of a gold standard is funny. It's true that paper money only has the value that we imagine it to have, but gold is exactly the same. Gold is only valuable because we believe it to be valuable. So it's not really that different, except for one important thing. There is a limited supply of gold. The amount of goods and services we have now far outstrips the total value of gold on the planet. When that happened the need for a fiat currency overcame the stability provided by the gold standard.

Since you put it that way "our goods and services exceed the value of all gold on earth" then I would say we should use another material to use as a standard value system for trading so that our economy doesn't move on imaginary standards and tangible ones instead.

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The arguments of those in favor of a gold standard is funny. It's true that paper money only has the value that we imagine it to have, but gold is exactly the same. Gold is only valuable because we believe it to be valuable. So it's not really that different, except for one important thing. There is a limited supply of gold.

The problem is the limit on the supply does not move in relation to the amount of material productive capital in the world. If a large gold deposit is discovered and exploited by an interested party, then gold will depreciate and inflation will strike. This has happened repeatedly in history, a more extreme example being the massive inflation seen in Spain after conquistadors injected massive amountS of gold into the Spanish economy, creating lasting impoverishment of Spanish peasantry and craftsmen classes, by devaluing the small amount of wealth they have that were backed by silver and gold. So Gold is most definitely not a cure for fluctuation in monetary value.

Makes sense but this wasn't about injecting more gold into the economy, it was about returning to a tangible value system.

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We need to go back to the cowry shells and beads standard. :p

I'd rather return to fur standards. Buffalo or otter skins, anyone?

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Probably an anomaly. The US AG sector was a bubble in the years during WWI that had definitively and despairingly burst as a result of that conflict ending. Farm mortgages had skyrocketed, doubling over the span of ten years from 1910-1920 (to the tune of 74billion, adjusted). They bought larger acreages to provide larger supplies of grain for the economic war effort, encouraged by the Food Admin, wait for it.....Herbert Hoover. Tractors to cut down on labor prices (and to facilitate production on all of their newly leased acres). Newer, better seed - in some cases irrigation. At the height of the grain bubble, a bushel was worth 2 dollars and you could get 15 bushels from an acre. For reference, that single crop was worth $2.2B alone - then. It's enough to pay off the entire ag sectors mortgages in 2 seasons in 1910, or 4 in 1920. But then..........the war ends. Europe recovers...Russia begins exporting -the price of grain plummets to $1 a bushel at the end of the 1921 season...where it would remain.

Most of the ag sector becomes insolvent overnight, having only recently signed the loans (consider the lack of financial oversight involved in this..these loans were not the loans we might expect today) to their new acreage and equipment. And that brings us round to the probable anomaly. Bankruptcy and foreclosure sales became the rural norm. If a farmer was eating from a gold plate - he'd probably purchased it from a neighbors property held by the bank in auction - for pennies. Entire estates and acreage sold for $5. Billions of dollars simply vanished. Many became tenant farmers - AG consolidated......the rest of the country benefited from this. The "roaring twenties", at least in part..perhaps in whole, was a product of this unidirectional flow of wealth away from rural farming areas (where banks were holding daily fire sales) to financial centers in populated areas where the banks themselves where headquartered. The Depression began a decade earlier for farmers. The Dust bowl, hitting when the entire nation had "caught up" to AG and rural America was natures coup de grace.

This is why there are no farmers left-in a nutshell (the larger consolidating bodies capable of surviving the 20's and 30 became the wartime mech ag/weapons manufacturers of WWII, and where the only players in the game organized enough to take advantage of the wartime and postwar economy of the 30's, 40's, and 50's), and also why a farmer then, eating from a gold plate would only be doing so by the misfortunes of a fellow farmers..misfortunes which - likely enough...would soon befall him...and some other schmuck would be eating from a gold plate...fancying the novelty of it all, thinking himself rich....Unless that farmer were, more plainly, a holder of ag futures in some distant urban center - at which point the plate was probably his, no sweat.

I'm sorry but could you abbreviate your reply into a quicker summary? I'm not ready to read too much today.