Why can't poor countries just create more money from a machine?

Question

Why can't poor countries just create more money from a machine?

Answer 1

When you print more money, the value of the individual currency goes down, because you've created a mass amount of money, yes, but you haven't benefited your economy in any way by doing so. Inflation would occur, making the money you printed on par to the economy that you have.

Answer 2

The value of a country's money is based on economic output. If you just print more money without increasing output every dollar is worth less. It's a losing proposition.

Answer 3

They can, and they have.  The problem is that the money is worthless.  It devalues the money that is currently on the market.

Think of it this way:  That money represents wealth.  It has to be backed with something.  Let's take an extreme example:  Let's pretend that every person in your country was suddenly handed 2 million dollars from the government.  Well, everyone would be a millionaire, right?  So, the next day, you go down to McDonald's to get breakfast.  You pull up.  The store is closed.  After all, the guy that works the drive thru is now a millionaire.  He doesn't want to sling fast food.  You notice that alot of bussinesses are closed...because none of thier employees came to work.

Fast forward to one week later:  The McDonalds has now reopened.  In order to hire people, it had to raise the wages.  The drive thru guy is now making $100,000 per year.  It's the only way McDonald's could get anyone to come to work.  Of course, a cup of coffe now costs $10.  McDonald's has to make up for the extra costs, after all.  And, since you are a millionaire, you don't mind paying this.

However, you soon learn that ALL the bussinesses have had to raise thier prices.  Bread costs $50 a loaf.  A haircut costs $300.  Etc, etc, etc....

This is how inflation works.  At the end of the day, it's all relative.  You can print more money, but a doctor will always make more than a dishwasher...no matter how much money you print.

Answer 4

Because the money that they create has a certain value.  If they create too much money, prices go up because the value of the money is tied to other currencies.  When prices go up the value of the money diminishes, this is called inflation.  Think about it like this: if there were only five dollars in a country and you had four of those dollars you would be the richest person and the value of each dollar would be very high.  Now if the government printed 5,000 dollars you would no longer be the richest person and the value of each of your dollars would be worth a lot less.  Products will be inexpensive when there are only 5 dollars because how can they sell a product that no one can buy.  Now when the government creates money, prices go up because now more people can afford to purchase and the companies are seeking to maximize their profits by offering a product at a certain price where supply and demand intersect creating maximum utilization of profit.  So  if a government printed money, just because it printed money doesn't mean that they will become rich because the value of that money diminishes and now 5,005 dollars, would be worth the same thing as the 5 dollars, nothing changes and prices just adjust.  The poor will still not be able to afford the products that they couldn't afford when there was only 5 dollars.

Answer 5

Lol. it's been done.

let's just say if a country creates money you'll need a pick up truck to buy from a vending machine.

Answer 6

Poor countries cant supply too many money since it will only lead to higher inflation.

Answer 7

If poor countries do it- more money will be available, accordingly demand for goods and services that money can buy will increase.  Increase in demand will increase prices of those goods and services  resulting to INFLATION.  Though money will increase in terms of quantity, its value decreases as effect of inflation.

Answer 8

The US is rich and does this everyday. It's called the Federal Reserve. And it's making our dollar c**p. Watch "Fiat Empire" on Google free video online. This will give you the understanding you need for your question.

Answer 9

They have the World Bank to do that for them.

Answer 10

They can and do.  The problem is that the unit of money that they use then loses value.  There is a total value of the goods and services available from a country.  One way to determine the value of a currency is to divide the value in some international standard currency of all the goods and services available in a country by the amount of local currency in circulation.  When there is more money created the ratio described above reduces in value.  This reduction in the value a currency is called inflation.  In some cases the change in value is driven at an extraordinarily rapid rate.  Such cases are call hyperinflation.  In any case the country does not gain the ability to purchase any additional things from outside the country.

Answer 11

Money is a symbol of work.  Printing extra currency doesn't increase the total amount of work represented -- it simply divides it into smaller pieces.  Read about the German inflation of 1922.

Answer 12

I think Clark K has said everything, let me also say, that the problem with these so called poor countries, is not the lack of money, it is the lack of a good government. People education is the best resource of any country.

Answer 13

because if you print more money the value of the currency will drop dramatically. just like germany after world war 1.

Answer 14

Because it causes inflation and devaluation of their currency.  Its not a wise idea.  Look at Zimbabwe, they've printed so much money that prices have become so high (money becomes pretty worthless so things are expensive) and a lot people in  Zimbabwe are poor.

Germany also did a similar thing.  They printed more money about 80 or 70 years ago.  That was not a helpful choice.  Their currency lowered in the value....and prices went up a lot b/c Mark (currency) was worth less.