If a country is poor, why can't the government order their mints to make more money?

Answer 1

The answer is complicated.

Basically, a dollar bill is not real money - it is an IOU. It has no value other than people who have them know it will be honoured by the government.

Imagine you had $100 in your savings account, and you gave 100 friends an IOU for $1 each. If each of those 100 friends all came and wanted to cash in their IOUs you would have enough money to pay them all.

Now imagine you had $100 and you gave out 200 IOUs for $1 each. If they all came and wanted their money - you would not have enough to pay them - therefore, you would have to give them all 50cents each.

As you can see - printing money (or IOUs) does not make you better off - it simply dilutes what real money you have.

The more paper money that is printed, the more that national assets are diluted (such as the Gold Reserve and the balance of trade).

Therefore, printing more paper money does not really solve the problem - it simple dilutes the country's real wealth.

Sorry - I am an economist by training and it is a very difficult concept to explain, but I hope the answer gives some indication.

Answer 2

I love this question I ask it to my father when I was 12. If you really though about it you would realize why it can never work a country can only become wealthy my how efficiently it produces goods and services GNP.

I will try to simplify the explanation. Lets say the government wants everyone to make a great living so they set the minimum wage @ $20.00hr well everyone with skills who were making close to that or more will demand an increase also, why? to compensate for the wages between the unskilled worker and the skilled worker also to compensate for the tremendous price increases needed to pay the unskilled worker.

So the net gain would be 0 for $20.00hr worker after a short period.

Answer 3

Because their amount of wealth can't be built just by printing it.

Put simply, if a nation has a net worth of $100 million, and it prints 100 million dollars in currency, each one has a trade value of $1.

If the government prints an additional 100 million to put into circulation, the value of each one on the world market drops to 50c each, and the total net worth of the company has gone unchanged.

(In the real world, it would take a short time before this happens. The place you'll see it is in your own markets. The price of bread will jump from $1 per loaf to $2 per loaf. Everyone has twice as much money as before, and now they're all willing to pay twice as much for the bread.)

Answer 4

I'm not sure if you are being serious here, but there is that 'little' thing called inflation that burns up an economy faster than any other thing. And inflation is fueled by there being too much money in circulation. That is why strict government limits are placed on the amount of money in circulation at any one time.

Answer 5

Having a lot more paper money wouldn't make a poor country less poor. It would, however, make their money have less value and less buying power. For a country to truly improve economically there is a much bigger picture.

Answer 6

Because money is backed by the government, and its assets and/or reputation - the government has a total "value" in the marketplace.

If you print more money, that total value does not increase.

But each unit of money becomes worth less and less.

Inflation!

Answer 7

Joseph is right, and the term for it is inflation. Our government occasionally prints too much money as well, and our prices go up because of it.

Answer 8

I think it has to do with tangible assets being present. Making money cannot exist in the absence of real assets like gold or oil to back it up.

Answer 9

The value of that money would decrease rapidly. It would mean that you would need more just to stay at that same amount. Adding water to milk doesn't give you more milk.

Answer 10

because the money would not be worth the paper it is printed on unless it is tied to something like gold. Money has to be backed by something substantial to make it worth anything. Just printing money does not make it worth anything....something has to make it valuable..