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

[IATIA]

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.

[Losty]

Pray tell...

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

[wiploc]

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.

1. For some value of "run fine."

2. Even if that were true (as opposed to being, presumably, an ignorance-based assumption) it would not refute or even tend to refute Keynes' proof that economies don't necessarily return to full production.

[CapnAwesome]

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.

---

He's probably a Ron Paul fan.

Nobody other than Ron Paul zealots believe this to be a good idea.

[Jackalope]

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.

Well, three things - gold also has significant industrial as well as ornamental value, two things that fiat currency lacks.

Other than that, no argument from me.

[Anomalocaris]

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.

[Cyberman]

If paper money was banned and all transactions were made silver & gold, what would happen?

Then I'd have no gold or silver in my wallet either.

[Cyberman]

Deflation.

Manager: If we could move on to the subject of fiscal policy?

Ford: Fiscal policy? How can you have money if none of you produces anything? It doesn't grow on trees!

Manager: Since we decided to adopt the leaf as legal tender, we have all of course become immensely rich. But we have run into a small inflation problem owing to high leaf availability. That means the current rate is something like three major deciduous forests buying one ship's peanut. In order to obviate this problem and revalue the leaf, we've decided on an extensive campaign of defoliation and burn down all the forests. I think that's a sensible move, don't you?

Golgafrinchans: Fiscally shrewd! Very, very sound!

[Jenny A]

Deflation.

That would be a great thing, I suppose.

Only if you think the The Great Depression was a good thing. . . That's what it was, a time of deflation or "hard money." Anyone who owed anyone anything would be in deep trouble as the dollars necessary to pay off the debt would cost more than the dollars borrowed. Both home owners and the U.S. government, not to mention small businessmen who rely on operating loans, would be in deep shit.

[Pizza]

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