If money is manufactured?

Question

why don't they just make more it?

I have my own views, but lets hear yours, would this be good or bad in terms of democracy etc?

Answer 1

Iin the past a government could only manufacture money as long as it held the value of that money (i.e. gold reserves) in its possession. So the government was restricted in what it could issue.
However, the gold standard as it was known was then changed, and now you can just print more money as you need it. However, there is no real 'value' behind it. In fact, if you read a note it says "I promise to pay the bearer on deman £5 (or whatever) pound). Technically, in the past, you could go to a bank and ask the bank teller to exchange this piece of paper, which is a promissory note, for the equivalent value of gold that was held against it. So your money DID have some real value behind it. But now, if you tried to do the same, the teller would only give you another piece of paper and against, it is only a loan note from the government. There is no real substance behind it.
This is the basis of inflation, as the perceived value of money can run out of control because there is no real worth behind it.
For example, the goverment 'promises' twenty billion pounds worth of notes in the economy by means of these £5, £10 notes, etc., but it is holding only a fraction of the gold and goods against it, so the notes are really worthless.
Hope this explanation helps.

Answer 2

Yeah, this is a good idea in theory and seems good but money becomes worth less when there is more in circulation. Looking at historical times, the Germans did this in the mid 1930's which seemed to be a good idea for temporarily allowing people to think they had more money (and boosting morale) until the population figured out everything also cost more. In the end it became somewhat ridiculous and you can still find photos knocking around of people literally taking a wheelbarrow full of bundles of notes to buy a loaf of bread. Also there are many famous stories of people breaking into places like grocery stores, leaving the safes and taking more valuable things such as produce becuase the value of money was so low. In this case, although it did temporarily boost morale, keep the Nazis in favour for a short period, and allow them to pay off their war debts quicker (before people realised the currency was worthless and the exchange rates plummeted), it generally had a negative long term effect on the country and it's economic condition. It was only the other activities of the Nazi party that advanced the economic conditions, outweighing the negative effects of the money manufacturing.

Answer 3

Yes - the Federal Reserve do just print money as and when the government need it.

The Dollar is NOT linked to gold, or any other solid currency reserve. That's why there's inflation. Gold would have a more stable value.

The Fed can print money and re-balance the books at a later date. The truth is, the Dollar is only worth the value of the paper it's printed on!!

** NOTE ** - Don't listen to the answers claiming the Dollar or Pound is backed by gold - it's not.

Answer 4

When the Federal Reserve Board sets interests rates they are manufacturing more (when they lower rates) or less (when they raise rates). As such, we have been manufacturing more money than traditionally thought prudent throughout the Bush Presidency. Hence the inverted yield curve that Bernanke says is the new norm.

When the Fed holds rates lower than the international bond markets support at auction, the dollar loses value abroad.

That makes assets in the U.S. cheaper for foreigners to buy and it makes goods imported into the U.S. more expensive.

Responses to other posters:
America abandoned the gold standard in 1933.
The U.S. Treasury does not owe the national debt to the Federal Reserve Board. The national debt is owed to holders of Treasury Securities.

Answer 5

in the states the "federal" reserve was created by private banks and is owned by these banks ,they can print money any time they like and this is the reason for the mass devaluation of the dollar which effects the world economy . If you make money apear out of nowhere this sounds like a good dea yet in reality it is very harmful ,this is one of the reasons there economy is collapsing as we speak.

if we go back to basics you realise that cash is not worth te paper its printed on , in the start there was gold people used gold coins ,then people used receits for the gold as a kind of cash and kept there gold in the bank where the bankers were charging interest on it ,then eventually bank notes were created . so in affect the cash is a reciept for gold that doesnt exist any more .

in the start say there was a village and there was a man who was struck it big in gold or came into gold by trading wisely, the man made gold coins and lent everyone in that village a hundred coins at the cost of 5 gold coins of interest ,the 5% of gold coins didnt exist,. here inlies where the problem lies constant debt when in fact there were no gold coins to pay back as they were never made .

eventually because of fraud the government created there own bank notes and here we are today , if everyone tryed to take there money out of the bank tomorrorow there wouldnt be nearly enough money to give out because it doesnt exist.

odviously a very vast subject tryed to explain it as simple as possible , hope this helps.

Answer 6

A country cannot print more money unless they have the gold reserves to do so. On a British banknote, it states "I promise to pay the bearer on demand. this means that for every note in circulation, the gold reserves must be able to cover the value of them. If you print more than you have in reserves, then the notes become worthless.

Answer 7

They do. Every day. But money becomes worth less the more they make because of inflation. The more currency a country possesses the less it is worth.

Answer 8

there are some interesting theories regarding money. if you look at the u.s., the government is trillions of dollars in debt to the federal reserve (cue conspiracy theorists mistrust of banks).

if we didnt have gold to back money then we would end up like germany in the late 20's where a carton of milk cost millions.lol

Answer 9

money has absolutely no value.it is just a convenient way to barter what you have for what someone else has if you don't need it at the moment but will need it in the future. you can not manufacture it if you have nothing to barter.

Answer 10

The more they print the higher inflation becomes,
the less you can buy.....they need to have sound
fiscal policies which go hand in hand with good
governance, who wants a banana republic where
money has no value.......Sound fiscal policy is key....