Why do countries do not print new currency and pay for its own developement and other needs of its people ?

Question

All countries have their own currency, printing machines etc. Why they cannot print more currency and pay for all it needs eg. infrastructure developement, buying more oil, or any such thing so as to satisfy the needs of its people or even distribute it to people to buy their needs. Why it doesnt happen or cannot happen ? WHY ?

Answer 1

This gets back to that most basic of economic laws, the law of supply and demand. In short, the more money there is at any given time for any given situation, the less each unit of that money is worth. Here is an example.

Let's say that right now we have three people; you, me, and Mr. Bob. You have $100, I make and sell marbles for $1/marble, and Mr. Bob makes and sells hamburgers for $2/hamburger. Those prices all make sense right now, and Mr. Bob and I can sell all the hamburgers and marbles we can possibly make.

Now let's assume that the government starts printing a lot of money to fund whatever. Let's also assume that they print enough money so that exactly twice as many dollars are out there after they are done. Let's also assume that you have the same $100, I still sell marbles, and Mr. Bob still sells hamburgers. The question is, however, do we still sell them at the same price, and the answer is no.

Why? Because there is twice as much money out there for the same products, and we can't make any more of them (Remember that we were already making all that we could.). What actually happens is that as the supply of money increases in relation to the supply of marbles and hamburgers, the price of the marbles and hamburgers will go up.

Now let's assume that the price per marble goes up to $2/marble and the price per hamburger goes up tp $4/hamburger. Because there is twice as much money in the market, the relative cost of the marbles and hamburgers didn't really increase -- Unless, of course, you still only have $100 like we stated above. In that case you can only buy 1/2 as much as you could before. That's inflation, and it's why when there is inflation you need to get paid more in order to just stay at the same standard of living.

Now, you say, "That's not fair, because you and Mr. Bob are now making twice as much money as before!" Maybe, but probably not, because we would be in the same situation as you in that the things we need to buy in order to make marbles and hamburgers have also gone up in price. This starts a vicious circle where prices can spiral up and out of control. For this reason, countries work very hard to control inflation to within reasonable bounds (Usually 2-3% for developed countries.). If you're a developing country, it can be even more important because you want to attract foreign investors to invest money, build factories, or somehow bring money into your country. However, these same investors don't want to do that if there is high inflation, because high inflation actually *decreases* the value of money -- Remember that it now takes twice as much money to buy that marble or hamburger, which in effect means that each 1$ is now worth only 1/2 as much.

The end result is that the total supply of money is tightky controlled by the government so that the economy stays in control. There are many ways to control the supply of money besides printing it, of course, and the government uses all of them in various ways.

Regardos,

Answer 2

If a country decides to print more money in order to pay for all needs,it involve itself in the danger of inflation.If a country prints more currency it increases money supply in the economy,it means people r having money,by doing so it lowers the value of money.That's why no new currency are printed without a proper check of the economy,because if they do so it may cause Inflation and decrease in the standard of living.

Answer 3

Some countries do. This is why there are huge differences in international currency.

Countries who print more money to cover expenses usually have high inflation as you see in many South American countries. This causes a loss in world standing ( International monetary rates) and a shift in the value of the currency. In short, what good is a 2 zillion dollar bill, if it only buys a loaf of bread?

Answer 4

It increase inflation and decrease the value of the currency against other currencies

Answer 5

Because they have the United States to rely on. Why use their own resources when they can consume ours instead?

Answer 6

there are certain constraints and restrictions which prevent a country from doing so.