PROBLEMS WITH PRINTING MONEY: DOES PRINTING MONEY CAUSE INFLATION?

Have you ever thought why our government just doesn’t print money and distribute it to people and make everyone rich?

And of course, if we want, we could also pay off the national debt.

If we print more money, prices will rise such that we’re no better off than we were before. In other words, we have to pay much higher for the same or even less number of goods.

Let’s suppose the government decides to print out loads of money and distribute an envelope of it to everyone.

What are people going to do with that money? Some will obviously save it, others will pay their mortgage, loans, and debt, and so on.

So is everyone going to be rich?

You won’t be the only one who runs out to buy the latest iPad to Walmart.

This creates a problem for Walmart.

Do they keep the price same and not have enough iPad to sell, or do they raise their prices? It’s obvious that they will raise the price. So if Walmart decides to raise prices, it causes system inflation, and it will devalue our dollar.

In other words, if you had a $ 1,000 in your pocket and you could purchase an iPad for it, you now have $ 2,000 in your pocket, but after Walmart raised the price, the same iPad will cost $ 2,000.

You can counter this argument by saying that Walmart can also produce iPads at the same rate and keep the same prices.

But producing an iPad isn’t as easy and quick as printing money. It will cost more labor, more material, wages to labor and an increase in per-unit costs.

And there could be a lot of people who are willing to pay more to get the iPad. Because they have a lot of money. And Walmart won’t have to think twice to raise the price.

Doubling the supply of money, while output remains the same, results in a price and inflation rate doubling by 100%.

When we say that we want more money, what we really say is that we want more wealth. If we all have more money, the problem is collectively we won’t be wealthier. Increasing the amount of money does nothing to increase the amount of wealth or the number of things in the world. Because the same number of people chase the same amount of things, we can’t be on average.

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U.S. National Debt: What does it mean to average American?

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Why can’t the U.S. government print more money and pay off their debt?