If the country's short of cash why don't they just print some more?

Question

i understand that money's got to be worth something but how is it made > or<

Answer 1

In the past when one could convert money directly into gold, a country&#039;s money had to be backed up by the gold it held or could lay its hands on. Now that this link has been broken (except by buying the metal with your cash), what does the wealth of a country consist of? If a new country, say S. Ossetia decided to have its own currency, can it print as much of it as it likes? Your question is an interesting one. For instance, since some banks in Scotland can print their own banknotes, can they just increase their liquidity by printing more notes? I suppose they have to get the BoE&#039;s permission or someone&#039;s to print more, but how do they decide? I guess it would take a couple of lectures at least to answer these questions.

Answer 2

Great idea!

To make it easier, why don&#039;t they just pass a law saying we can all photocopy £20 notes and use them as legal tender?

;-)

Answer 3

The short answer is, it would cause massive inflation.  The more the country printed, the less it would be worth.

In fact, your plan is currently being tried in a country called Zimbabwe.  They have been printing money like crazy to cover shortages and fund the government, for a few years now.  The money is now pretty much worthless - it costs over a billion Zimbabwean dollars to go grocery shopping.

Money is a transaction marker.  It just symbolizes value.  If more money is put into circulation, each unit of money has less value.

Answer 4

This has happened in the past - notably in Germany back in the war times. Problem is, if a country just prints more money without having anything of value to back it up in the treasury (gold, diamonds, whatever) then the money gets worth less, which is called Inflation (or Hyperinflation). This means that although people have more money, stuff also costs more so the balance is kept. If the US government just printed another hundred billion dollars and handed it all out, the price of everything would rise substantially. This is what happened in Germany when they tried, and the price of Eggs and Bread rose by over 1,000 times very quickly. People were burning money because it was more cost effective than buying wood, and people would need a wheelbarrow full of money just to buy the bare essentials!

All in all, it&#039;s really not a very good idea :-)

Answer 5

because then the pound will just be worth less if we just print more off it

Answer 6

Like you said, then money wouldn&#039;t be worth anything. And the older and worn money gets, they shred it; therefore, it&#039;s no longer in circulation anymore. Then they are able to print new money to replace it still leaving its value, because nothing was &quot;added&quot;.

Answer 7

Hi!! You are right money has to be worth something and that something is a countries` GDP, the amount of money a country has by what it has produced in goods and trade.(inward investments)

To just print money would just spread it around for people to spend and as it had no GDP behind it inflation would be rife and reach uncontrollable measures leading ultimately to hyper inflation.

Examples Germany in the 1920, and recently Zimbabwe today,1000%

inflation. Do you understand the situation now?

  

Answer 8

Because we&#039;d end up with the kind of inflation that they have in Zimbabwe: Where the cost of a loaf of bread goes up several thousand dollars an hour !

Answer 9

that causes inflation because printing more money without something to back it up will make all the money worth less