Why can't the state print a lot of money so that everyone has enough?

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:55

Sometimes it seems that solving financial problems is quite simple at the state level. You just need to turn on the printing press and print enough bills. But why can't the state print a lot of money and give it to people? Is it the greed of the rulers, or are there other reasons? The word “inflation” immediately comes to mind, that is, an increase in the price level for absolutely everything, because money in this case actually loses its real value.

Inflation

If a product is purchased and a certain amount of money is given for it, then an increase in the number of banknotes will not lead to an increase in the number of goods. As a result, there will be more money per unit of goods, the price rises and inflation begins.

However, there is another side to inflation, and in such cases the question really becomes: "Why can't the state print a lot of money?". If a country is in a recession with a reduction inproduction capacity and an increase in the number of unemployed, then a small demand will lead to the opposite situation. Enterprises will increase their output, the number of unemployed will decrease. During such periods, inflation is practically not noticeable and a loose monetary policy helps to smooth out the economic downturn in the country.

What is money and when did it appear?

Why can't the state print a lot of money? First of all, money is also a commodity, which is a certain equivalent of the cost of services and goods. But money can perform its function only with the direct participation of people who determine the value of these goods and services.

Money appeared at the moment when people began to have surpluses of goods. At first, their function was performed by goods in high demand, such as s alt. Then, after man learned to work metals, coins appeared.

It is believed that as early as the 7th-7th century BC, money already existed in China. The term "money" itself appeared in Ancient Rome, where a mint was opened during the reign of Caesar.

Paper money also first appeared in China, but much later, around the 9th century AD.

Today, money is a debt obligation, which is issued to the population by the state. In turn, the organization that prints money takes as a pledge from the state precious metals as collateral for debt obligations.

Snap togold

There is an erroneous opinion regarding the question why the state cannot print a lot of money so that everyone has enough, and it consists in the fact that supposedly the amount of money should not exceed the amount of gold reserves. In fact, not a single currency in the world is backed by a gold reserve. Although the gold reserves more than once became the cause of the economic crisis. This happened during the Great Depression (1929-1939). Then an interesting situation happened: the limited supply of gold led to a lack of money and, as a result, deflation, most enterprises went bankrupt, and people simply lost their jobs.

And in Spain in the XVI century there was a reverse situation. In those years, the country was practically "littered" with gold and silver, as Spanish explorers actively discovered new lands, robbed the local population (Peru, Mexico). As a result, prices in the country rose by almost 4 times, because there was much more money supply than goods.

Modern monetary system

Why can't the state print a lot of money? Maybe it's a pyramid scheme? In fact, the modern economy does not involve backing the money supply with precious metals, this practice is a thing of the past.

An example is the United States. At some point in time, the Central Bank transferred the right to print money to private hands. And now the Federal Reserve is simply lending printed money to the US government. At present, the state's external debt ismore than 14 trillion dollars, that is, every US citizen already owes 54 thousand dollars. It is clear that it is not even worth talking about his return. And we can say that there are all signs of a financial pyramid. But the most important thing is not even this, but the fact that the dollar is the world currency. Therefore, if the dollar collapses, it will undermine the economies of many countries.

Maybe there are not enough goods?

Why can't the state print a lot of money to have enough? Maybe there are not enough goods and services in the country. There is logic here. However, until people began to use money, it was quite difficult to exchange goods for exactly those that a particular buyer needs. That is, one needs apples, another needs pears, a third needs meat, and only the fourth also needs apples, and so on. For a transaction to take place, all these people must gather in one place and exchange the goods they need, but this happens very rarely. Therefore, money fully fulfills its function, being a display of the value of the goods and a means of simplifying exchange transactions.

Of course, if the number of goods increases, then there will be more money. But in practice, not everything is so simple. After all, a hundred rubles can participate in exchange transactions more than once. In addition, the speed of turnover of the monetary unit is also very important. Therefore, even if there are more goods and services, there will still not be more money.

Maybe the IMF is to blame?

Why is the state notcan print a lot of money? Perhaps the IMF charter provides for restrictions? By the way, Russia is a member of this organization. Indeed, once such a restriction existed, but today this item has been excluded from the charter of the fund. Now each state independently determines the currency regime. However, some countries to this day adhere to the regime of the currency committee. For example, the Hong Kong dollar is directly pegged to the US dollar.

Maybe all the money is in the financial sector?

Why can't the government print a lot of money and give it away? Maybe they all "settle" in the banking system, but never reach people?

Indeed, additional emission is hardly noticeable for an ordinary citizen or even for a large enterprise. The money goes to the banking sector, which, in turn, increases lending to the real sector. As a result, the increase in liquidity in the banking sector leads to cheaper loans and, accordingly, the demand for services and goods increases, and turnover grows.

Now we will spend everything, and our children will repay debts

Some people are sure that if a lot of currency is provided for use now, then these debts will have to be given to their children. That's why the government can't print a lot of money. In fact, money and debt are completely different things. If you take a glass of sugar from a neighbor and undertake to return it the next day, then this is a debt, but not money. What if we buystore a glass of sugar, paying with money, then no debt arises. As a result, it turns out that there is no debt for a purchase in the store and the money does not disappear anywhere, it just goes to another “owner”. This means that it is impossible to spend all the money that is in circulation. But this happens at the household level.

If a country borrows to pay its current expenses, the situation is different. Yes, indeed, in twenty years the budgetary burden of debt obligations may fall on the shoulders of children in the form of increased taxes. But this situation is not directly related to money, but to the monetary policy of a particular state.