Facts and Issues on Money Printing

Money is almost always scarce, so why then does the government not print some more? Yes, printing money is what the government does, but it just cannot print and print bills or notes as much as everyone would need.

You may not realise it, but you really cannot become wealthier if there were a lot of money around. Economic principles say that if there were more money, prices would rise and the people would be in no better position had there been less money.

Say for example, the economy produces 10 million pounds worth of merchandise (1 million widgets at 10 pounds each). If the government doubled money supply, the people would have twice as much financial resources, too. They would have more money to buy widgets, but there are only a million of them available. So suppliers would naturally raise prices to match the demand. The most probable outcome would then be 1 million books sold at 20 pounds each. In other words, the increase in gross domestic product or GDP is merely an illusion, not something that results in actual economic progress.

Excessive growth in money supply would lead to inflation or hyperinflation. Benefits and wages would then increase along with government spending. Although inflation has both positive and negative effects on the economy, the negative far outweighs the positive. There will be a decrease in the real value of monetary assets, inhibitions to investment and saving, shortages of goods, and the like. With more money, the people will have to pay more as commodities become costlier.

So now you understand that printing more money does not enhance the economy in any way. What you need to do is to use money wisely.