Categories
Uncategorized

Why don’t they just print the money?

During a break, I was talking to some students about the country’s economy, and I made the statement that our economic situation is unsustainable because we as a nation spend $2 for every $1 we get in taxes. The student asked me why the government needs to borrow, and why can’t they just print the money.

I used this as an analogy:

Let’s say that I give everyone in the country ten million dollars. Would that get rid of poverty? No. This is why: no one will go to work in the morning, because we are all rich. The problem is that no one will be there to make food, stock the stores, deliver goods, or staff the power plants and hospitals.

How can I buy food that I need to survive, if no one grows, delivers, or sells any? At that point, since there is a large supply of money, but a small supply of food, no one will sell me their sandwich for a dollar. After all, each person has ten million dollars, but only a couple of sandwiches.

At this point, the only way to talk someone into selling a sandwich would be to offer them $100,000 for a sandwich, because the supply of money is too large for the supply of sandwiches.

That is what the unrestricted printing of money causes inflation. The more money you insert into the economy, the more inflation you get. I think he gets it now.

They aren’t stupid, they are just ignorant.