Every one of us, once in our lifetime, must reflect on the fact that why governments do not print enough money so that every problem that the country is facing can be elevated, such as poverty, poor economic condition, etc.
Why do governments not print extra money?
Normally people think that of government print more and more money than all the expenses of the country can have fulfilled, and the debts can be returned. But, in actual, there is no benefit of printing more than a certain amount of money.
Even it is an established fact that printing extra money than a certain amount is detrimental to the overall economy of a country. For instance, if the government starts to print more money than people will use this money to purchase goods and services. Also, they will start saving money to purchasegoods and services in the future. In this scenario, the price of the goods and services will alsostart to rise,and in the end, the situation will become the same as it used to be.
Not only incase of physical money that we use, but the cryptocurrencies also behave in the same way. The stock exchange and the walletinvestor type of organizations make us realize that it is not a wise thing to do.
Effects of Extra Money Printing on Economy
There are several different effects that extra money printing has on the currency of a country. The two most prominent ones are given below in detail. These are:
- Reduce the value of the currency
Printing extra then the required amount of money immediately leads towards the reduction in the value of a currency. It means that as the more money will be available, the rates of goods will increase and as a result, more money will have to spend on purchasing goods and items. This means that the currency of that country is no more valuable.
- Risk of Inflation
With the increase in the amount of money in circulation in a country, inflation is the immediate response in such situation. Inflation tells us that how much our money is powerful to purchase goods and services. As in case of printing extra money, the pricing starts to rise, and this is why the power of money starts to decline.
Is the decision of printing extra money wisely?
Well, not at all. There is no wisdom in printing extra money to get rid of the problem that a country is maybe facing. This is because of the extreme consequences that it has on the economy of that country. It is maybe done with the intention of making the condition better for the citizens of a country, while it is clear from the above information that it is nothing but a simple disaster for a nation to make such decision.
Despite knowing the facts and figures about printing extra money, many countries of the world have tried this option to get themselves out of debt and poverty, but in each and every case, the results proved to be disastrous for them. Therefore, it is never a good idea to make such stunts on such a big level.
Disclaimer: This is a guest post and it doesn’t represent the views of IWB.