Why don’t countries print more money and solve the problem of poverty?

Perhaps it’s something that many of us have thought about at some point. Why don’t central banks print more money, pay down their governments’ debts, help the poor, exempt individuals from paying taxes, and make everyone’s situation better?

Why don’t countries print more money?

Any administration that takes this move risks throwing its country into a quagmire of hyperinflation, which might ruin the economy. Printing more money does not make citizens wealthier; rather, it results in price increases.

The distinction between wealth and money

Money is merely a representation of the wealth that exists, hence creating money does not produce wealth. As a result, printing more money without increasing the wealth it represents will result in each unit of money representing a smaller proportion of the wealth being divided further.

print more money
print more money and solve the problem of poverty

How is a currency’s value decided, and what basis is it issued on?

In terms of economics, the government’s injection of cash into the market must be proportional to the economy’s size and the volume of domestic production. This means that every printed monetary unit must be matched by a balance of foreign exchange reserves, gold reserves, or real products and services created in society, in order for the money circulating in the market to have real value rather than just printed paper.

Read More: Investing in gold: 7 ways to invest money in gold

When currencies are pumped in excess of the size of the economy (goods, services, foreign exchange reserves, etc. ), the purchasing value of the currency falls, prices rise, and inflation rises with it, and countries enter a state of instability that leads to economic collapse and the collapse of the social structure and other sectors.

The creation of money by the Central Bank is an economically sophisticated technological operation, and if money is issued without a cover, one basic effect will occur: an increase in prices, as the money supply grows without being balanced by an increase in commodities and services.

As a result, people lose faith in the local currency, and a wave of pessimism sets in, leading to people selling what they have of it and buying foreign currencies or in-kind assets like real estate and gold, causing the currency’s value to fall even further, eventually leading to its collapse and economic collapse.

print more money
print more money and solve the problem of poverty

explanation that is not scientific

If the government printed a large amount of money and everyone had a large amount of it! Of course, if everyone gets affluent, there will no longer be anyone to harvest veggies, transport them, or sell them to you. You won’t be able to find somebody to fix your car or shave your hair because everyone has become a billionaire and no longer needs to work to earn money, causing life to be disturbed.

the scientific explanation

Money, like any other commodity, is subject to the basic laws of economics and the rules of demand and supply, which means that the prices of products and services are set by the supply and demand process. Individuals (there is more surplus than needed), prompting manufacturers to lower the pricing of their products as a marketing tactic and a way to persuade individuals to purchase larger quantities.

And the inverse is also true. The lower the supply of a given product, the higher its price, because the quantity supplied is little and does not match the needs of individuals. As a result, persons who want this product must pay more than the prior price in order to receive the goods before the supply runs out.

Read more: 06 safe steps to get out of debt

The same principle applies to money: if the amount of printed money (supply) is greater and faster than the state’s natural economic growth, this will result in the availability of more liquidity (money) than usual within individuals’ reach, and this liquidity will encourage consumers to buy larger quantities of goods and services.

As a result, total demand for goods will rise, encouraging producers to raise their prices to match the increased demand.

For example, suppose the economy only contains one commodity, “apples,” and the quantity supplied is 100 apples, and the money available in the market (in individuals or society) is 100 local currencies; if the state prints additional money worth 100 currencies, the final outcome of the money will be 200 coins in front of only 100 apples, implying that one apple was previously worth one local currency, but after the increase, it is now worth 200 coins.

Why don't countries print more money and solve the problem of poverty?
print more money and solve the problem of poverty

This simple example demonstrates that printing money without actual economic growth will result in price inflation (Hyper Inflation), similar to what occurred in Germany in 1920, because the amount of money printed will be greater than domestic production (goods and services), forcing producers to raise their prices to match strong demand and liquidity availability.

In the end, this financial abundance will be a curse on individuals since the purchase value of the currency will erode, so that 100 local currencies buy 100 apples before printing money, but only 50 apples after printing money (because the price of an apple became 2 currencies).

In 2008, this scenario played out badly for the country of Zimbabwe, when one US cent equaled 500 billion Zimbabwean dollars, forcing the government to abandon the native currency in favor of the US dollar or the South African rand.

It’s also similar to what happened with the Egyptian pound in the last five years when it was worth five dollars before the revolution, but after the government borrowed to finance the public budget deficit, and the debts worsened, the government continued to print the Egyptian pound without cover, until the dollar was worth more than 15 pounds.

And if current government policies continue, the situation will worsen, with the Egyptian pound’s value plummeting.

To grasp the terrible consequences of printing money that is not proportional to the actual local economy, consider the economic catastrophe in Venezuela, which is currently undergoing its worst crisis in history.

The Venezuelan currency lost 99 percent of its worth, people began to consume, and the market’s supply ran out, leaving retail and drug store shelves in Venezuela empty.

Following this simplified analysis, if you believe that printing money will solve the problem, you are mistaken. Printing more money without controls will exacerbate the crisis and lead to the economy’s collapse, as the currency will lose its market value, turning the majority of people into millionaires and even billionaires, but unable to buy anything due to astronomical prices for products, services, and goods.

Related Posts

Ways to Plan a Family Budget

10 Ways to Plan a Family Budget: A Step-by-Step Guide

Budgeting doesn’t have to be complicated! Even if you don’t have much experience with it, you can still manage your money and plan for a happy future….

Increase Productivity at Work

How To Increase Productivity at Work: 6 Tips That Will Make You More Effective

Today’s workforce is more productive than ever before. With the advent of smartphones, the world has become what can be termed a 24/7 office. Working from home,…

Voice Marketing

The Rise of Voice Marketing: How Brands are Connecting with Customers

Voice marketing, or using your natural voice to promote a product or service, has grown significantly in popularity over the past year. With new hardware such as…

creative marketing ideas

creative marketing ideas… Definition and Importance

The more new and creative techniques there were, the more I was able to attract clients and persuade them to do business sustainably with you. If today’s…

Screenshot 19

Marketing a company’s achievements… Grooming and the self-image industry

Marketing a company’s achievements is one of the clever methods used by seasoned marketers; to work on creating a positive self-image about the company and strengthening its…

home appliances sales

home appliances sales…Facts and Statistics

The project of selling home appliances is one of the high-profit projects, which has a very high demand rate, and you are in front of a huge…

Leave a Reply

Your email address will not be published. Required fields are marked *