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

[Jackalope]

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.

That is to say, pretty much everyone, except the homeless - and they'd pretty much be screwed by virtue of depending on the charity of others - who are also broke.

So who does benefit? Those who control the supply, like always.

[Jenny A]

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.

That is to say, pretty much everyone, except the homeless - and they'd pretty much be screwed by virtue of depending on the charity of others - who are also broke.

So who does benefit? Those who control the supply, like always.

I don't think much of anyone benefited from The Great Depression.

If we switched to a gold standard or worse yet to actual gold coinage, those who either had gold or the ability to mine gold would benefit. But that's an awfully small number of people.

[Jackalope]

Yeah, that's pretty much what I meant.

[The Grand Nudger]

People would get tired of carrying around piles of metal and invent some lighter...easier to fold in your wallet form of currency....
(you thinking of buying a pile of coins, thats just a scam to bilk the elderly of their SSI..... you know.)

[Anomalocaris]

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.

The loan negotiated with expectation of deflation would have to have negative interest rate to get around that problem.

But the real problem with deflation is it destroys incentive for investment, since you get richer by simply pulling money out of circulation and then sit on it. With enough deflation, no one would invest in anything except immediate necessity and most economic activities would come to a stop.

So for dynamism in an economy with much more than subsistence activity, moderate inflation is not only a good thing, it is a necessary thing.

[psychoslice]

I think the price of gold and silver would drop.

[Losty]

If we went back to a time of trading and bartering....we could have anything we wanted and take it out in trade. I think the religious people of the world would finally relax their policy on sex outside of marraige

[wiploc]

So who does benefit? Those who control the supply, like always.

I don't think much of anyone benefited from The Great Depression.

I don't say that farmers were better off in the depression, but I've read that they were eating off gold plates. When money's scarce or no good, there may be some tendency to benefit providers of goods for which demand is inelastic.

[Jenny A]

I don't say that farmers were better off in the depression, but I've read that they were eating off gold plates. When money's scarce or no good, there may be some tendency to benefit providers of goods for which demand is inelastic.

As long as they didn't have a mortgage and didn't have to borrow for seed money yes. Otherwise no.

[The Grand Nudger]

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.