How come the U.S. can't just print out money for everyone?

Question

I know there is a logical explanation for this but I have always wondered, the U.S. has a way of printing out money so how come they just don't print out money to help people who are really poor for example the homeless. Or how come we don't print out money to give to foreign countries who have children dying of hunger.

Answer 1

because that would cause inflation and the dollar would become worthless

Answer 2

It looks like a lot of people are on basically the right track. One thing that I didn't see in the answers I read (I skimmed most of them) is that currency is simply a fixed medium of exchange. The amount of money paid for a certain good or service divided by the total money supply should be representative of the proportion of utility (basically a measure of happiness or usefulness) represented by an item divided by the total sum of utility provided by all possible goods and services. I know this seems like a pretty abstract concept, but it is the most basic reason why there would be massive inflation if the government were to simply print as much money as it possibly could. For a historical perspective, and a bit of higher-level reason why that would be a bad idea look into Germany after WWI

Answer 3

The government does print out money ... this is the cause of inflation. The recently deceased Nobel Prize Laureate Milton Friedman proved this in his award winning research.

Let's look at this from a practical perspective. Why not have the U.S. govt. send everyone One Million Dollars on January 1st each year? Everyone would be a millionaire, and therefore, everyone would be 'wealthy'. Except for one problem, No One Would Choose To Work! Therefore, there would be No Food, No electricity, No gasoline, No cars, No clothing, No teachers, No firefighters, No police, No doctors, etc. In other words, we would all be POOR!

Money is just a piece of paper. It merely represents a certain value - a certain amount of work. Give it away and it loses all of its value.

Best wishes and good luck.

Answer 4

That's a good question. The reason for this is that a country can only print enough money to back up their federal reserves. Think of it like this, when you write a personal check to anyone, you have to make sure you can cover it by having enough money in the bank. If you print more money than you can back up, you get something called inflation. This means that the dollar will be worth less than it is now. This recently happened in Ecuador. The local currency there used to be the Sucre. It became so worthless that even to buy a pack of gum cost you over $10,000 Sucres. So, they just did away with the Sucre and now they use American Dollars......hope that answers your question.

Answer 5

Well lets say we did pump out millions of dollars, and gave it to the poor! Millions of millions of dollars. What would happen.
Well first lets look at what money is.. Money or currency is an agreed upon substance/ paper used in exchange for goods and services. Money isn't just printed paper, it's value is based on the fact that everyone agrees upon it's ability to be used for goods and services. So the value of all the goods and services done equals the amount of money spent on those goods and services. So if the government just prints off more and more money and gives it to poor people.
1. people would no longer agree that that money can be exchanged for goods and services, becuase that money wasn't exchanged for a good or a service.
2. All the money that everyone else has looses value.

Answer 6

Because then the money would be, esentially, worthless.

There has to be something of value 'behind' the money. It used to be gold or silver, but now it is pretty much everything in the US ecomony that 'backs' up the currency. When the economy grows (the gross domestic product), the Fed can order more money from the mint. Otherwise, if the mint just starts printing more money the supply of money would go up, with the demand for money staying the same (from the economy) and the 'price' of money would drop -- a dollar would be worth less.

Another word for that is, 'inflation'.

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Answer 7

Very simple. The amount of goods out there -- on grocery shelves and car lots -- is relatively fixed. Suppose that the Fed printed a whole bunch of money and distributed it randomly or even sent it only to poor people.....

All those recipients would try to go out and buy the same goods -- groceries and cars, in my example above. What would happen... the price of all those things would go through the roof. We would be left off where we started, but the price of everything would be much higher.

Answer 8

As another way of explaining what several people above are saying -- new money creation must be tied to the real productive capacity of the economy. If there is a large increase in money but not a large increase in the ability to make goods and services, then too much money chases too few goods, resulting in hyperinflation and the undermining of the currency.

It's a little appreciated fact that our current system of creating money, which is based on banks making loans to people, is a clever way of tying money creation to real productivity so as to help avoid this problem.

Also most people politically don't favor giving free money to those in need, because that distorts incentives and just makes then needy, dependent, and unproductive.

Answer 9

Because printing money won't create more food.
It will just create inflation.

Money is valuable only b/c you can buy stuff with it.
Printing more money w/o making more stuff reduces value of money, i.e increases prices and hurts those with savings and salaried jobs.

So printing money to help poor is like a tax, except it also jacks up interest rates, discourages long-term investment & innovation, weakens the dollar echange rate.

Answer 10

Look up the Asian Financial crisis in the late 1990's (Thailand and the baht). Similarities will occur with too much money pumped into an economy.

Answer 11

its called currency destruction . If the US federal reserve just printed off quantities of money its value would tank, and it would be useless.