how can a country go broke? can't the goverment simply print up more currency?

Answer 1

currency is just paper and coins. the economic state of the country gives it its value. for an example, say a country has a million dollars worth of material, and therefore prints up one million dollars in currency. even if they decide they need more money, and print up another million dollars, they still are only worth the original one million. instead of having two million dollars after the second print, they'd have two million dollar bills that where each worth half a dollar. you have to remember that currency on its own has absolutely no value. its just paper. the value is based on the governments ability to back it, which is limited, since there are only limited resources.

i'm sorry if this wasn't explained all that well

Answer 2

Many countries can simply print more money, but that results in devaluing the currency. That will keep the government in question from going broke, since it pays off any debts denominated in it's currency with worthless money. However, it has a lot of undesireable effects, as well, such as whiping out the savings of it's citizens, and destabilizing it's economy.

The US, however, does not have the option of simply printing more money - it can borrow all it wants, but it can't simply print it.

Answer 3

Printing excess currency simply causes greater inflation which de-values it even more. Case in point, when the soviet union collapsed, it took a wheel barrel full of money to by a loaf of bread. Modern currecny was devolped as more efficient way to spend the precious metals is was based on. Silver & Gold. It used to be the currency printed had to match the amount in reserves. Since this is no longer the case we have inflation.

Answer 4

First your money has to have value, if the country started to run the presses, the value of the currency would drop. Second, when the country buys something, the vendor or recipient wants cash, so once the Govt runs out they sell bonds. People buy those interest bearing bonds and expect a return one day. So if the people started to cash those bonds in and the government runs out of money...the government is bankrupt. Printing more money would push the value to the currency to a point where there is no value.

Answer 5

you know that is exactly why there are counterfeiters.

If a country follows a fractional-reserve banking regime, as virtually all countries do, not all of the money in circulation needs to be backed by other currencies, physical assets such as gold, or government assets. Instead, the country's currency is backed by the economic potential of the country and is based on government fiat, or decree. This perceived potential puts a theoretical limit on the amount of money a country can prudently create.

Answer 6

Yes they could. In fact, that's been tried. It leads to a situation referred to as "hyperinflation" such as what occurred in Germany before Hitler took power. The German government simply printed larger and larger valueless notes and crashed the economy. People with large amounts of money saved up in the bank for retirement were suddenly destitute when the price of bread went from 1 dollar to over 1 MILLION dollars (yes, it was that bad). This economic disaster enabled Hitler to come into power by promising to fix the economy, even though it came at a price that was later paid for by the whole world.

Answer 7

Do you have a checking account? The checks are merely paper without money in the bank. Floating money and revolving credits and bank games countries can do are risky. National debt like your over draft needs to be paid back some how or barter in trade agreements. Hope that helps. Have a nice day.

Answer 8

They can and then you have a situation similar to the hyperinflation of 1920's Germany. Currency without value is just that, worthless

Answer 9

its all in economics.... you print more, the value of money will drop. something like, with the same amount of goods available in the market, if you print more currency, the price of the goods will rise up as well. so the value of money will drop. its a vicious cycle...

hope it doesnt confuse you.lol

Answer 10

You can print all the money you want but if it's not backed by anything (ex. gold) then it's worthless. A country is truly rich by it's natural resources and exports.