....what happens to the interactions between banks and ordinary citizens? For example, should the dollar melt down I can understand how inflation drives costs up and real wages down, but what happens to things like mortgages and automobile loans? Do the debt balances change, or the percentage rates on those loans? Do banks desperately try to salvage their loans by seizing defaulted assets (which probably have no markets anyway)?

The only recent example of this I can think of is Argentina's, and I know next to nothing about it. What would be the effects of a collapse (or even a slow decline) of the dollar?

A collapsing dollar? I made this post in May of last year:

There's nothing to be worried about! All that will happen is what has happened a hundred times before since paper money was introduced. It hasn't happened to the US before, but Germany, China, practially all of Eastern Europe and Latin America have seen it happen. Anyone imagine the US is exempt?

Treasury prints money ever more recklessly. Prices start increasing on a weekly basis. Posting a letter costs 60c on Monday and 75c by Friday. Pretty soon is costs $5. Soon after this, things start going slightly crazy. Your ($-denominated) savings are worthless, but you pay off the mortgage on your house for the price of a cup of coffee. Cigarettes take over as currency. So do foreign currencies - those that have not been caught up in the same panic. Jewelry is handy.

Barter takes over to some extent, but so do regulation and command. Essentials are rationed. People in uniforms tend to play a bigger role in daily life. Some people unused to soup kitchens get to see the rougher side of life. There's a considerable upsurge in criminality.

There is near total economic disruption for a few weeks or months, but all in all it is amazing how people cope. A new currency is introduced amid a regime of tight regulation, and promises are made about things not being allowed to happen again.

Inside a couple of years things could be back to normal. The National Debt has been wiped out. So have the savings of a lot of people. So have the debts of a lot of people. Many financial institutions have gone bust. Wealth has been dramatically rearranged, but on the whole the US will have more of it - because all the $ bonds owned by Japanese and others are as worthless as those decorative old Imperial Chinese bonds that some people collect or frame and put on their walls.

Except US bonds will be even more worthless because they're not so pretty!

WARNING: buy gold; don't hold $-denominated savings!

BTW, anyone who heeded my advice is already sitting on a very big profit!

Gold is the best bet to pay off your home loan and hudle along for food and other stuff until situation improves...