![]() It is as if someone overnight added a zero to every dollar bill that per se, changes nothing. What used to cost $1 now costs $10, that's all, nothing fundamental or real has changed. If you print more money you simply affect the terms of trade between money and goods, nothing else. If goods could trade with goods directly, without a middleman, we would not need money. The deeper reason for this is that money is really a facilitator of exchange between people, a middleman in a trade. So yes, there can be a short-lived stimulative effect of printing money.īottom line is, no government can print money to get out of a recession or downturn. In short, wages in real terms would rise and this would erode profits and as such, farms will not hire as many workers as you'd think. Also, workers will see the inflation around them and want higher dollar wages so they can continue to buy as much corn as before. You ask, won't firms rush to meet this extra demand caused by everyone having an extra hundred dollars? Yes, they would but they'd have to hire people to work in the farms and the higher demand for workers would likely raise their wage. This, roughly speaking, is inflation, and it is eroding the real value of your dollars - you are getting less corn for every dollar than you used to. Now you would have to give up, say $1.50 for each lb of corn. If you want to eat more than 100 lbs of corn a month, now you can do so but presumably, since others like you also want to do the same, the demand for corn in the economy would go up and very likely its price as well. ![]() Now suppose the government simply prints more dollar bills and gives you (and imagine everyone else) an additional hundred dollars. Each month you buy 100 lbs of corn exchanging $1 for 1 lb of corn so the real value of $1 is 1 lb of corn. Imagine the only good in the economy is corn and corn costs $1 a pound, and imagine you and all others earn $100 a month. Let me try to remove some of the confusion. (I hope this question wasn't convoluted.) Please explain, as I cant find a good answer anywhere online. So I don't understand how currency works and why we can't just print more money since it really isn't representative of anything of value. But it seems the American dollar is not a paper representation of the "money in the vault" no one goes to cash in their money in America. If the government gave everyone a bunch more money, there is no "checks and balances" since no one, at the end of the day, goes to the cashier station and exchanges their "chips" (money in this case) for something of value.Įxchanging your chips at the end of the day for MONEY back (which has value in our eyes) makes sense, hence why you can't give out more chips than the money you have in the vault. Hence the problem.īut how does that relate to American economics since there is no "cashing out" procedure. I understand the PROBLEM with doing that at the casino, because if you give people all these extra chips, then at the end of the night, when people CASH OUT, there will not be enough money in the vault to pay for all the chips. So, here is where I'm confused.if I apply the same idea of "printing more money and handing it out to the public" to my casino example, then that would be like the casino giving everyone at the poker table an extra $100 in chips to play with. So, the influx of cash (printed money) would seem to solve the unemployment problem. With TRUE unemployment probably somewhere around 15% in this country, if DEMAND rose, then companies would WANT to hire more people and build more processing plants to keep up with demand and raise their profits. (simple supply/demand economics) But this is where I'm curious. Also, people give the example that if the government were to print more money and just give everyone $50,000, then everyone would go out and buy things, thus making THINGS more in short supply, thus driving up the price of things. A lot of people out there are asking "why can't we just print more money and solve the poverty problem?" Terms like "inflation" and the "devaluing of the dollar" are the usual buzz answers to that question. So, here is my question.and I hope I explain it well. (which although has no intrinsic value, is determined to HAVE value.) MONEY.īack in the day, before Jimmy Carter, it was the same way, that, at any time, I could cash in my MONEY for GOLD. At the end of the day, if I choose, I could cash in my chips and get something of value for them. coins and bills) in essence is the same as chips at a casino. It is about currency and how our money is no longer backed by "gold." Money (i.e. So, my question might be more philosophical than economical, but it's wracking my brain and I can't seem to find an answer. ![]()
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