Think that print more money It becomes richer, it is quite common, but it is not correct: printing too much money does not grow wealth, but it could rather cause inflation, which makes prices rise and reduces the purchasing power of people! There wealth of a country It is not only given by how much money there is in circulation, but also from quantity of goods and services Products: If there is more coin than what can be spent to buy real things, The value of the coin decreases.
What happens if you print more money: debt monetization
Printing new coin means, in this case, monetize the debta circumstance that takes place when a government needs money and instead of issuing government bonds and therefore financing themselves through a loan request, for example, to citizens (who buy a BTP), asks the central bank to print other money, therefore increasing the offerand to buy these securities herself, given that the Central Bank makes the banknote create the banknote from the State Mint and give it to the single state in exchange for a government bond, purchasing them in all respects.
Imagine we have tickets that give the right to an armchair at the cinema, but cinema has only 45 armchairs. If there were exactly 45 tickets in circulation, everyone would have their own guaranteed place and could enjoy the film without problems. But what would happen if the tickets were 100 instead? Having a ticket would no longer be enough to get an armchair, because the places would be less than the tickets sold. As a result, tickets would lose value, since there would be too many compared to the real availability of armchairs. The same principle applies to the currency. If the state status plus coin Compared to goods and services availableit is as if they were there Too many tickets for a few armchairs. In an ideal situation, the amount of money in circulation should be proportionate to the amount of goods and services that can be purchased. If, on the other hand, the circulating currency is excessive with respect to what can be purchased, its value decreases: there are too many “tickets” compared to the ability of “cinema”. This leads toinflationthat is, to an increase in prices, which reduces the purchasing power of the coin.
The danger of inflation
Inflation occurs when there is too many money in circulation compared to the assets available: many people want to buy a new car but there are not so many available for sale, and those that are there will be sold at a higher price, so someone among the many buyers will buy them. Let’s say that if the money increases but the assets do not increase, the value of the coin decreases. Situations like this certainly have a negative impact on the trust you have towards money and could therefore make the economy that is not very stable.
Can printing money help the economy?
In times of crisis, printing money to finance public spending, it can be one feasible solution how fast. This is the case of “Helicopter Money“Which owes its name to the image of a helicopter that drops banknotes from heaven, symbolizing the distribution of money to states to stimulate the economy. However, it is a temporary remedy: if the monetization of the debt continues too long, inflation risks becoming uncontrollable, the savings lose value and the entire economic system becomes unstable. In summary, we cannot print in the infinite. Rich: the coin is not a wealth in itself, but it is only a tool to exchange goods and services, print more money without an increase in production brings only inflation, reducing the value of the currency and damaging the economy. economic policies which can lead to productive investments and economic growth in the long run.
