Rich countries like USA and Britain also borrow money from other countries/organisations. Why do they do that? Why don't they instead print all the money that they want? Please answer in detail.
2006-12-16 19:14:32 · 7 answers · asked by arun m 1 in Social Science ➔ Economics
Well, if you had more printed currency than you had commodity of worth to back it up, your currence would be worth 0.
The US dollar is backed by gold, meaning you could 'trade in' a dollar on a certain amount of gold and it would be considered an equal trade. If you printed more dollars than you had gold you would be driving down the value of your dollar (requiring more spent for the same value) until it was worthless.
2006-12-16 19:18:00 · answer #1 · answered by Star 5 · 0⤊ 0⤋
Currency is essentially a promissory note which is insured by something physically valuable, like gold. Ever hear of Fort Knox? Rather then "Federal Reserve Note", US bills used to say "Silver Certificate" or "Gold Certificate" top-and-center, and you could actually trade your bills in for an equal value of precious metal. Anyway, the US dollar used to be fully backed by government deposits, but now is only covered about 30%, meaning we've already done just what you asked about, to some extent. It's been tried at other times, as well. The Confederacy printed their own bills during the civil war, but it was considered so valueless that it took an armload of money to buy even the simplest things. Multiplying currency and thus devaluing it would just bring about a matching inflation of costs and prices.
2006-12-16 19:25:20 · answer #2 · answered by Geoff S. 3 · 0⤊ 0⤋
The amount of currency that a country prints out is based on the amount of gold they have. Money just represents the gold reserve the country has. If they print out all the money that they want the currency's worth will fall.
2006-12-16 19:24:30 · answer #3 · answered by stellar 2 · 0⤊ 0⤋
The U.S. Treasury seems to have had the same idea my friend.
The U.S. is the biggest debtor on the planet. Printing money with nothing to back it to the tune of TRILLIONS of dollars.
China has enough of our debt to equal a pile of $1000 bills over 60 miles high. Think about that.
There will come a time very soon when a U.S. dollar will not be worth any more than a Peso does today.
2006-12-16 19:18:39 · answer #4 · answered by Rockvillerich 5 · 0⤊ 0⤋
There must be a budget or specific amount to be spent or else, the money will be valueless and has no regard. People will not have much regard for money as such.
2006-12-16 19:54:52 · answer #5 · answered by joe 3 · 0⤊ 0⤋
because that would devalue the dollar...pretty soon a dollar wouldn't be worth more than a peso.
2006-12-16 19:16:44 · answer #6 · answered by a heart so big 6 · 0⤊ 0⤋
Because it causes hyperinflation.
2006-12-17 06:00:36 · answer #7 · answered by Anonymous · 0⤊ 0⤋