Why is trading with bags of gems a thing?

Some other stuff converts into more gems, such as backgrounds

Some background and emoticons convert to 80-100 gems a piece so if you use these you pretty much break even. The reason they're used so much as currency is mostly due to the stability in their price, unlike card/emote/bg prices that are all over the place depending on sales and bundles

people don't trade this way. you got it all wrong. you're not supposed to turn your cards into gems. ._. you might turn emoticons, backgrounds into gems, or you can buy sack of gems on market and use it as a currency, like tf2 keys etc.

Sacks of gems became a thing originally because when the 7 day trade restrictions from market purchases was first implemented sacks of gems didn't have the 7 day restriction, also because many people had spare gems from the holiday auction. Like banana said turning cards into gems isn't a good idea.

All part of Gabe's plan for this Summah Sale.

A lot of emoticons and backgrounds used to have 80 and even 100 gems rewards back when the event happened, people were entering event auctions with hundreds of thousands and even millions of gems, so people clearly have a shitton of them left over. Also 100 cards worth 1 cent would end up being 1 dollar, not 10 dollars. The gems can also be used to transform them into card packs, which isn't really worth it in my opinion, but they do have some additional use.

So at the start of the event a lot of people had a lot of useless items they didn't need in their inventory like emoticons and backgrounds, there was no use for them and most people didn't want them anyway. Not to mention that they used to cost 0.03 cents in huge amounts, there were thousands upon thousands of items that would yield 80-100 rewards in that price range and people started buying them like crazy, raising the lowest price for anything to 0.07. Gems themselves started with the price of like 0.30 and by the end of the event ended up being like 1.20$ and then balanced out at 0.70 afterwards.

Make gems, create a badge for those games that aren't on Steam anymore (if you have one), sell those overpriced cards, profit.
Just look at this: http://steamcommunity.com/market/search?q=&category_753_Game[]=any&appid=753#p1_price_desc lol.