Question of the Day: Why not Print More Money?

[FrontlineWarrior]

Back when I was a wee little lad I wondered why the government couldn't just print more money so that poor people can have some cash to buy stuff. Fast forward 12 years and I'm still not sure. Does anyone have explanations for this? What are the problems with just printing a whole lot of money? Bonus: What if this was done secretly by the govt?

 

[BennyD]

print lots of money and money = 0.0000000001 % of normal money

the more you make, the less it will be worth

 

[VBboy]

I always like to consider extreme cases.

Imagine them printing gazilions of dollars and handing them out. No one would want to work because they'd all be rich, and so nothing would be produced. Economy would go to the krapper in a few years.

 

[FrontlineWarrior]

But what if it was only handed out to really poor people?

 

[Skyclad1uhm1]

Products would still need to be made, and as you will get a shortage of most things fast those prices will skyrocket, adjusting themselves to the new situation.

Imagine getting 30M instead of 30K, and a normal family car being 30M instead of 30K. Does this change anything? No.

 

[FrontlineWarrior]

Originally posted by: BennyD
print lots of money and money = 0.0000000001 % of normal money

the more you make, the less it will be worth

Can you elaborate? This is my intuition too, but I'm having trouble sorting out the details.

 

[rudeguy]

I did a goodle search to find a good explanation...and all I could find was this, but I think thats pretty cool

 

[VBboy]

Originally posted by: FrontlineWarrior
But what if it was only handed out to really poor people?

Who would get to decide who is poor and who isn't? And what do you think Welfare, Social Security, and other government programs are for?

 

[FrontlineWarrior]

Originally posted by: Skyclad1uhm1
Products would still need to be made, and as you will get a shortage of most things fast those prices will skyrocket, adjusting themselves to the new situation.

Imagine getting 30M instead of 30K, and a normal family car being 30M instead of 30K. Does this change anything? No.

Ahhh now we're getting somewhere. This sounds like a very simple and reasonable explanation!

 

[VBboy]

Originally posted by: rudeguy5757
I did a goodle search to find a good explanation...and all I could find was this, but I think thats pretty cool

LOL, I don't know how that is relevant, but it's funny. I'm going to try it.

 

[Hayabusa Rider]

Reason: Inflation

Releasing a significant amount of money without anyone knowing is pretty much an X-Files kind of thing. The truth would be out ther, and peole would know it.

 

[Skyclad1uhm1]

Originally posted by: FrontlineWarrior
But what if it was only handed out to really poor people?

More people having money -> more people buying stuff -> higher demand -> higher prices -> devaluation of the money -> you are taking from part of the people and giving to the poor -> welfare mean anything to you?

 

[BennyD]

lets say everyone was given 1000 times thier annual salary a year extra.

since everyone would be "rich" then everyone would want a gold house.

as there is only so much gold, the price of gold would go up 1000x to afford the demand

everything else would go up slowly to match the rise in pay.

things like bread and milk which there are plenty of would go up because the retailers want to make more money to afford the now overly priced goods.

 

[FrontlineWarrior]

Skyclad1uhm1, you are a little cranky. Go have some coffee.

Thanks for the explanation though. heh

 

[propellerhead]

Each dollar that the US Treasury prints is backed by an equivalent amount of gold or some precious metal. The paper bill is just a representation of that so we don't have to carry gold bullions around to trade for goods.

So they can't just print more unless they have more gold to back it up.

 

[FrontlineWarrior]

Originally posted by: propellerhead
Each dollar that the US Treasury prints is backed by an equivalent amount of gold or some precious metal. The paper bill is just a representation of that so we don't have to carry gold bullions around to trade for goods.

So they can't just print more unless they have more gold to back it up.

My understanding was that the US went off the gold standard a long time ago. It's just pretty paper now.

 

[rudeguy]

this kind of explains it in a backwards sort of way, it answers the question why dont we shred money to control inflation...

first you have the inflation in the form of an increase in money and credit and then as an aftereffect we experience rising prices

 

[FrontlineWarrior]

edit: sorry dumb question. plz disregard.

Another question: Suppose the US secretly prints a grip of new money. They buy a grip of stuff from FOREIGN markets, on a one time, kinda hush hush, deal. Now, eventually this money will be used to buy US stuff, and basically we get foreign goods for nothing. So if this is a one time thing, can this method be used to... let's say... reduce the national debt a little, albeit illegally?

 

[tcsenter]

Each dollar that the US Treasury prints is backed by an equivalent amount of gold or some precious metal. The paper bill is just a representation of that so we don't have to carry gold bullions around to trade for goods.

lol! Welcome to the 19th Century!

US Currency is backed by the "full faith and credit" of the United States Government. Your dollar is backed by trust, not by gold.

But what if it was only handed out to really poor people?

They'd piss it away and have absolutely nothing to show for it, since if they could handle money wisely, they wouldn't be really poor people.

 

[Mday]

what we are worth is still fixed to some standard, like GDP, however in the case of the US, it's also that we're so powerful and internationally recognized. ppl actually invest in currency, that is buy some certain "foreign" currency and hope for profits in "native" currency after some price changes. any extra cash that gets printed will devalue the "face" value of the dollar internationally. mind you amount of cash which exists does increase (or decrease), but not to the extent that is significant.

The entire world went off the gold standard. why? the US is worth more than all the gold in the world (sort of).

 

[FrontlineWarrior]

I just realized my foreign market question was really stupid cuz that's basically what counterfeitters do. lol.

 

[FrontlineWarrior]

Originally posted by: tcsenter

They'd piss it away and have absolutely nothing to show for it, since if they could handle money wisely, they wouldn't be really poor people.

LMAO! Not very sympathetic to the poor eh?

 

[XZeroII]

The main answer has been discussed (ecnomics dealing with supply and demand), but it also has to do with the fact that our gov't doesn't print our money. The Federal Reserve prints our money. The Federal Reserve is NOT part of our government. They are a private (for profit) corporation. It's completely up to them how much money we have floating around at any given time. If they decided to, they could bring our entire country to it's knees in a few days. President Wilson (who signed the bill handing over control of the printing of money to the Federal Reserve) said on his deathbed that creating the Federal Reserve was the worse decision of his life and he hopes that the people will be able to forgive him for this.

 

[glen]

M x V = P x Q

M= money supply
V = velocity ( how many times a dollar is spent in a year)
P= consumer price index
Q= GDP

You can calculate how much P has to increase as M increases, which we cal inflation.

there will be zero gain in GDP.

 

[FrontlineWarrior]

Woah, that's a bit of trivia you don't hear everyday... good stuff XZeroII

edit: wait a minute... http://www.federalreserve.gov/faq.htmWho owns the Federal Reserve? The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.