Question of the Day: Why not Print More Money?

[FeathersMcGraw]

Originally posted by: FrontlineWarrior

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?

I suggest you go to your library and find a textbook on basic economics.

Even if you want to assume that just printing money gets you something for nothing (and it doesn't: those foreign governments can now take the money you've just put into circulation, use it to buy American goods, creating demand and inflating prices just as if that money had been originally used domestically), the fact that you've bought foreign goods correspondingly reduces the need for American goods of the type purchased, which means that American firms are going to see reduced revenue. Reduced revenue (typically) leads to lower profits, a reduced ability to invest/hire new workers, and, in extreme cases, layoffs. This impacts the ability of workers for those companies to continue to purchase goods and services, and now the "free money" you've created has negatively impacted certain sectors of domestic industry.

 

[Jeff7]

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

So that's the site that's always stamped on money nowadays. Doesn't that qualify as defacing money?

 

[Jeff7]

If you follow Star Trek, like Deep Space 9 especially, gold is worthless. Quark found some bars in a vault - "They're covered with gold! Worthless gold!" The replicators in the show could produce gold for everyone easily. So if everyone has gold, it's worth decreases, to the point of being worthless.
If the government just printed money, and gave it to some people, the public's faith in money's value would be injured - if it can just be printed and given away freely, what worth does it really have? Why bother working for it then? Trust supports money - you trust that the dollar you are given for some work, or a product, will be useful to trade elsewhere for other products or services.

 

[Mallow]

More money made = inflation, which means the value of the dollar decreases = not a good thing.

 

[heartsurgeon]

money (printed or otherwise) is an abstraction.

the worth of money is the perception of its worth.

if people perceive it to be worth alot - you can get more goods and services for a dollar.
if people perceive it to be worth less - you can get less goods and services for a dollar.

exchange rates between different currencies are also based upon perceived worth.

large "stable" economies have more stable currencies - hence the international perception of the dollar and the euro as the
currency of choice for transactions.

as long as you print more money and public perception of its worth doesn't vary - you can get away with it.
once people start to notice that there are more dollars out their - the perception of its worth will start to decrease.

everything..goods, services, the value of gold, the worth of a particular currency - is all based on market conditions (that is public perception of their worth).

it all comes down to psychology!
oh my goodness...forget the mathematical or physical sciences where "facts" actually exist..
we are ruled by psychology.......this can't be good.

 

[xirtam]

Supply and demand. The more dollars available, the less they're worth. Printing more money doesn't increase the amount of wealth, but merely changes the overall value of the unit dollar.

If dollars were 200% easier to get, for example, burgers would just cost twice as many dollars. Just think of a dollar as a representation of a unit amount of wealth. The easier the dollar is to get, the lower the amount of wealth it represents.

Whoever said "inflation" was right on the money.

Yeah, I hate puns too.

 

[Night201]

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.

That's what I believe the reason is, or so I am told. Makes sense.

 

[Rufio]

i tried to print my own money but i got in trouble.

 

[xirtam]

Originally posted by: Night201

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.

That's what I believe the reason is, or so I am told. Makes sense.

I don't think this is true any longer. Yeah, we've got a gold repository in Fort Knox, but we've been having inflation problems since more money was printed than was backed by gold bars. Of course, there was a time in our history when inflation was a good thing, as we were suffering from deflation. But that hasn't been the case for the last... oh... 50 years or so.

 

[Kevin]

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.

Thats a misconception. Our money is backed by the faith and well being of the United States Government...

 

[FeathersMcGraw]

Originally posted by: xirtam

I don't think this is true any longer. Yeah, we've got a gold repository in Fort Knox, but we've been having inflation problems since more money was printed than was backed by gold bars. Of course, there was a time in our history when inflation was a good thing, as we were suffering from deflation. But that hasn't been the case for the last... oh... 50 years or so.

Even longer.

Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything This has been the case since 1933. The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy.

 

[xirtam]

Thanks. Wasn't sure when they made the executive decision to devalue the dollar.