Economics Questions

Re: If all the paper money in a country was suddenly withdrawn

Matthew Weber — Wed, 06 Jun 2012 17:16:36 GMT

Expect riots in the streets. And I don't know why holders of debit cars would be immune from an obliteration of paper money, as the debit system in America symply represents dollars, i.e. paper money.

How the global economy would address such an issue is impossible to say, but you can bet the people on Main Street would rapidly move toward an ad hoc barter system as soon as the food supply begins to dwindle due to the fear of suppliers not being compensated for their goods.

Re: If all the paper money in a country was suddenly withdrawn

Bogart — Wed, 06 Jun 2012 15:15:19 GMT

There are similar examples throught history where the paper money does not dissapear but loses value at an exponential rate. We saw this in Weimar Germany and in Zimbabwae. In these cases the governments trying to pay off debts kept payments to the enforcement bureaus slightly higher than the rest of the payees. These enforcers in turn brutally kept people using the increasingly worthless currency and the economy fell too pieces as the pricing system lost all value. Eventually the enforcers were paid in confiscated assets to keep the crash in progress. Eventually the whole thing kind of deteriorated to abject misery and then turned up as people dropped the currency and began to use other currencies, gold and silver or a new currency of their country.

If paper money just dissapeared, I would expect exactly the same behavior by government and its enforcers. So there would be a rapid crash as the pricing system broke down. The enforcment bureaus would get paid in assets and the same series of events would happen albeit faster.

Re: If all the paper money in a country was suddenly withdrawn

smohit05 — Wed, 06 Jun 2012 03:37:03 GMT

Thanks for your answer :) Can you list some of the things that come to mind? I mean, people with credit/debit cards would still be able to buy stuff. Also, cheque transacations would continue to happen. Online money transfers would happen. What I'm curious about is the withdrawal of paper bills will definitely affect day-to-day living and the economy, but where would the effects be first seen and what would result into what happening? As in, something new would happen for the first few days/weeks, after which things would probably "settle down a little" when people and the goverment figure out at least a temporary solution. I'm more interested in those first few days/weeks.

Re: If all the paper money in a country was suddenly withdrawn

Neodoxy — Mon, 28 May 2012 17:28:53 GMT

The same thing that would happen with the total removal of any currency

The economy would collapse
Assuming no military dictatorships or anything of the like came to power then people would start to rebuild the economy. Hopefully mass starvation would be avoided.

Re: If all the paper money in a country was suddenly withdrawn

gamma_rat — Mon, 28 May 2012 16:40:56 GMT

Incalcuably massive and painful adjustments would be in order.

Re: If all the paper money in a country was suddenly withdrawn

Jack Roberts — Sun, 27 May 2012 15:13:17 GMT

*rubs his crystal ball*

People would revert to already established alternative currencies or medium of exchange, foreign or historic.

If all the paper money in a country was suddenly withdrawn

smohit05 — Sun, 27 May 2012 14:48:38 GMT

Hello, hypothetically speaking, if all the paper money in a country was suddenly withdrawn from circulation, how would this affect the economy and day-to-day living? Would the value of coins shoot up? Would the barter system come into practice? What other scenarios are possible?