Most of the money that evaporated only existed on paper or computer files anyway, no? As I understand it:

1) Since ancient times, the Crown or state acquires valuables such as scarce metals, and shapes them into bullion or coin to certify their value, so the state can use them to buy or hire what it needs. Citizens use the coins for trading and paying taxes too.

2) Comes a day when reserves run short, but the state doesn't want to cut back its spending. So, they debase the currency or issue paper money representing reserves they don't have. By law, the citizens must accept the "legal tender." Like a counterfeiter, the government is buying at regular price with the newly introduced money, but if the total value of goods and services has not increased and the supply of money has, then the price goes up and everyone who isn't on the gravy train will pay more for increasingly scarce goods and services. The money most people are holding shrinks in value, as the counterfeit or newly printed money takes its value from the total pool of money already in circulation.

3) Banks get into the act with fractional reserves. Any time the state or any citizen deposits $10 to a bank, the bank can then lend out $9. If that $9 is deposited again somewhere, then $8.10 can be lent out. And so forth. I've heard the original deposit can theoretically become nine times as much when you add up all those deposit accounts, but even if the figure is inaccurate the trend is clear. (The mint doesn't print enough money for us all to do those loans and deposits in cash, so we use cheques or bank transfers, to record what sums we and the banks owe to each other and the government. This system is very convenient for trade, as long as everyone trusts it.)

4) Those loans, totalling umpteen times all the bullion in Fort Knox and similar institutions together, owed by innumerable people (and corporations, and governments) are expected to be paid back with interest. The amount borrowed, largely created by a mathematical fiction, accrues interest out of thin air to add to the lender's recorded assets. We borrowed from banks some money they never had, agreeing to pay them back as much and more by selling our work or other products of value until our account be settled. They can't lose as long as we produce real value to pay back loans of fictional money.

5) In years when a nation's products from nature and industry increase, that growth may for a while mask the inflation of the currency. During these years, people who are squeezed out of this musical-chairs scene (being neither recipients of newly-printed inflation-indexed government payments, nor lucky and smart enough to win in the commercial game) can be blamed for their own poverty: "They didn't work hard enough." Of course, their expenses were going up due to inflation and scarcity, and their income wasn't. This system ensures there will always be losers.

6) If the gap between what is owed on the books, and the goods and services available in the nation to pay those debts, keeps growing, then eventually the paper debt will get so big that the bubble bursts; or else poverty will engulf so many people that trade stops. (The Great Depression was the latter; the situation they're now trying to prop up looks to me like the former.)

How's that for perspective? Is this a fair and comprehensive description, or have I distorted it? I am willing to learn from my mistakes.

At the risk of thread drift, if I may ask, what are our options now?

We might prop up the current system for a few more months. (Even another war probably couldn't prop it up longer this time.)

We could write off bad debts and start the same cycle again, with or without a new, less-depreciated currency replacing the old dollar. (Why are trade and capitalisation more active within an inflationary economy?)

We could in theory abandon inflation and return to barter and silver coinage, but that's difficult and complicated, so I doubt the public will accept living within our means until there are no other choices.

I'd like to hear about other options, please!