WAZIPOINT Engineering Science & Technology: If Printing Money is in Hands of Humans, Why not Print as Much as Need?

Thursday, February 20, 2020

If Printing Money is in Hands of Humans, Why not Print as Much as Need?

If printing money is in the hands of humans, why not print enough money so that no one is poor in this world?

Well, imagine that: you and I and Juan are the only men in the country.

You have chickens, I have wheat and Juan has pigs.

One day we realize one thing: I want meat, you want wheat, and I don't want chickens or eggs, but Juan wants eggs.

In other words, to get what we want we have to go to the third party and hope that it wants to sell ... it's a roll.

So we decided: let's put a clear value on wheat and pig hens. Look at a chicken worth a piece of paper, a pig is worth 3 and a sack of wheat is worth half. We already have money.

But how do we make the value real? Very simple we count how many pigs there are how many hens and how many sacks of wheat and we make only as many pieces of paper as pigs hens and sacks we have. Not one more.

What happens now is that you can buy whatever you want because you are not giving the chicken you are giving the potential to have a chicken.

But what if Juan thinks he is too poor and comes up with the idea that printing more money can buy more chickens and wheat?

Well, let's see. Juan prints more papers and buys and buys. But suddenly when we are going to buy Juan he asks us for more money for the pigs ... because he already knows that there is more money than pigs, that is, our currency is devalued, as a consequence we put the most expensive hens and wheat. Everything became more expensive. Did someone really get richer? No, only Juan scams us a little until we realize our economy is regulated again by the mechanism known as inflation.

If you enter currency without having to cover it you do not generate value, you generate inflation and inflation weakens the economy because in the world there are not only 3 people there are many countries and so these countries see that your currency is weakening and lose faith in your market and do not want Invest in your country and your country becomes even poorer. That is why it is very important that money be a realistic reflection of what the country has and produces.

Why a Government Cannot Print Unlimited Money?

A government cannot print unlimited money because doing so can have severe economic consequences and lead to a range of problems. Here are a few key reasons why printing unlimited money is not a viable approach:

Inflation: When a government prints excessive amounts of money, it increases the money supply in the economy without a corresponding increase in the production of goods and services. This leads to an excess of money chasing a limited supply of goods, resulting in inflation. As prices rise, the purchasing power of money decreases, causing a decrease in the standard of living for individuals and creating economic instability.

Loss of confidence: Unlimited money printing erodes public trust and confidence in the currency. If people expect that the value of their money will rapidly decline due to excessive printing, they may lose faith in the currency and look for alternative forms of wealth storage, such as foreign currencies or tangible assets. This can lead to a depreciation of the domestic currency and a loss of international credibility.

Economic imbalances: Excessive money printing can distort economic behavior and create imbalances in the economy. It can encourage speculative investments, misallocation of resources, and artificial booms that are not sustainable in the long run. This can lead to economic bubbles, followed by sharp contractions and recessions when the imbalances are corrected.

Reduced investment and savings: When the value of money declines rapidly, individuals and businesses may be discouraged from saving and investing. If people expect their savings to lose value, they are more likely to spend their money quickly or seek alternative investment options. This can lead to a reduction in capital formation, which is vital for long-term economic growth.

International repercussions: Printing unlimited money can have negative consequences for international trade and relations. If a country's currency rapidly depreciates due to excessive printing, it can lead to trade imbalances, currency devaluations, and potential conflicts with other nations. It can also harm a country's ability to attract foreign investment and access international markets.

Governments have a responsibility to maintain the stability and integrity of their currency. To achieve this, they typically employ central banks that carefully manage the money supply and implement monetary policies aimed at maintaining price stability, controlling inflation, and promoting sustainable economic growth. While governments can engage in responsible monetary expansion to stimulate the economy or address specific issues, unlimited money printing is not a viable or sustainable solution due to the potential adverse consequences it can bring.

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