Why can't we print more money?

[DrFaroohk]

Before you answer that with some socio-economic thing I won't understand, here me out:

At some level of government, someone has access to all the money printing stuff going on. So get like your top secret team of money printing guys, tell them to print off an extra 40 billion dollars, and don't tell anyone about it.

Then, again with this awesome team of top-secret money printers, you just start going out and spending it. Wouldn't that boost the economy a bit? And no one knows, so it's not like they can devalue our dollar just because there's more of them. It's all a big secret!

Why can't that work? Obviously if it did, we'd have done it.

[Gravekeeper]

You answered your own question, really. It *would* devalue the dollar. If there are more dollars around, they are worth less and the price of goods and services rises as a result. Its pretty simple. -.-

Printing more money lowers the collective value of all of the money you already had so prices go up as a result. AKA inflation. Doing it in super secret may delay the onset or rate, but it won't negate it at all.

[Boozy]

When a country's central bank puts more money into circulation, the banks are glutted with cheap money - basically, money given to them at zero or close to zero interest. They are then able to loan cash more freely at cheaper rates to businesses and individuals. The banks will do this because they want as many customers as possible. This is what keeps interest rates low.

When interest rates are low, people and businesses get loans and buy things. The demand for these things drive prices up. It doesn't matter if anyone knows how much money is actually in circulation. This is the "invisible hand" that is always being referred to.

[DrFaroohk]

Yes, but that involves people KNOWING this extra money has been printed.

I don't even know how much money exists in printed bills but surely there's so many it's not like someone can just be looking at a report and think "Hmmm...there weren't this many 1's floating around last year."

Why would it be so hard to keep secret?

[Andara Bledin]

Why can't that work?

Read up on a little Civil War history if you want to know what happens when you just print a bunch of money to have more bills in circulation.

Article on paper money at the Federal Reserve

^-.-^

[Boozy]

Yes, but that involves people KNOWING this extra money has been printed.
<snip>
Why would it be so hard to keep secret?

No, you still don't understand.

First of all, when more money is put into the economy, it's not necessarily printed. That's the job of the US Mint. They don't control supply of all money, just paper and coin copies, according to need. Most money is not "printed" these days.

Second, no one needs to know how much money in total is in circulation for inflation/deflation to occur. To behave in a manner conducive to inflation, one need only be aware that they feel flush. Businesses and individuals with a lot of money/cheap credit spend more. Spending more drives up the demand of goods, which drives inflation. Understand?

[HYHYBT]

Oh, go search Youtube for a Duck Tales episode on self-duplicating money.

[Nyoibo]

Banks do it all the time.

Ok yes I'm being cynical, but I'm also to tired to go into more detail now, tonight, when I'm drunk I shall expound.

[protege]

No, you still don't understand.

First of all, when more money is put into the economy, it's not necessarily printed. That's the job of the US Mint. They don't control supply of all money, just paper and coin copies, according to need. Most money is not "printed" these days.

Yep, controlling the money supply what the Federal Reserve does. By buying or selling securities, the Fed can put more money into circulation (by that, I mean it's more readily available to make loans...which causes interest rates to fall) or subtracting money from circulation (tends to drive rates up). What this also does, is that it causes the value of the dollar to fluctuate. The Fed does this, in an attempt to keep inflation under control.

All that printing more money would do...would simply devalue the dollar further...and make inflation worse! Eventually, the dollar wouldn't be worth the paper it's printed on.

And yes, that's happened before--Germany in the 1920s, which gave rise to the Nazis and WWII. What happened, was that unlike France, which used an income tax to pay for WWI...the Germans chose to borrow. At the time, Germany was also paying war reparations. While the mark was falling in value...the German government kept on printing more...which, combined with strikes (by then, reparations recipients had insisted on coal or other goods of equal value)...drove inflation higher, which ended up wrecking their economy. Something that the Nazis were able to capitalize on, and we all know what happened...

[Jetfire]

And if you print money and no one knows it exists, then it has no effect.

Beyond that, the Central banks don't 'print' currency any more, or at least not a significant amount of it. They instead deal with digits on a computer, increasing or decreasing this number as needed. Then a core group of banks and other players draw from this number (or put back into this number) as needed to handle their own needs for the rest of the country. (loans, etc...)

The main thing to remember though, is that it all comes down to that number in the end. And you can't secretly increase or decrease that number without people realizing it has been changed.

[bara]

All the above... and the fact that we are actually borrowing the money from the federal reserve bank. At interest.

[Mytical]

It is the same reason counterfeiting is very bad for the economy. When you are a counterfeiter, you do not want anybody to know there is 'extra money' running around...so they don't exactly advertise that they are pumping these extra bills into the economy. Yet, counterfeiting does hurt the economy. Goes to reason that legal printing of extra money would still be just as bad.

In order to catch up right now, the government would have to stop spending on anything else, and just pay on what we owe. Which is not feasible. Interest alone is more then the GDP I believe at this point. We're throwing good money after bad..and with no way to stop the hemorrhaging.

[Andara Bledin]

And if you print money and no one knows it exists, then it has no effect.

That's like saying if you bury your head in the sand and don't see the tidal wave coming, it won't hurt you.

Plus, the only way for nobody to know the money existed would be to keep it locked up. Once it's in the wild, people know it exists, even if they don't know what it is or what it means; it still will effect the economy.

Seriously, go back to the link I posted and do some reading. The Union printed up a ton of counterfeit Confederate money and destroyed their economy to the point where people would only barter for goods or would use Union money. Counterfeiters do much less damage at once due to the larger pool they're pissing in, but over time the effect is the same.

^-.-^

[DrFaroohk]

I'll take your word for it, it's just one of those things that doesn't fit into my head.


Like if someone just secretly gave me a million dollars and said "Shhh, spend it but don't tell anyone." How is that going to become like a big economic factor? So I'd run down to the store, I'd spend al ittle more than usual, and they have more money, maybe they can hire some extra help, etc...and it could spread. I just can't seem to figure out at what point people are like "Holy shit we're doing good, time to devalue the dollar and double the price of everything and terminate all my employees!"

[Ginger Tea]

I was thinking of posting a what if on a million dollars yesterday (before the german economy post that is)
Say every American with a bank account woke up one morning with $10k in it, free money, not going to be taken back as it was deposited in error.

You and I could do alot with 10k, but when everybody has 10k, it seems less than special and as stated above, could cause basic goods to increase in price.

Your secret lottery idea to give one random stranger a cool tax free mil, well how many would just sit on that money and not inject it into the economy?
I would probably sit on alot of it and invest a bit, but spend it like it's going out of fashion? probably not.

That 1.6k underpayment I posted about, if they had not taken back half in 'overpayments', which I can only find corresponding to days when I worked 6 or more hours overtime over the weekend, as I did not know I was entitled to it till it came out via co workers bitching about not getting it, I saw it as 'free money' and the £530 after tax I got off the remainder was money I didn't have the night before, but that ended up going into my savings account as I owed myself money.
Many students when faced with 10k of 'free money' might pay off their student debts than go on a spending spree, granted its the sensible option, but it doesn't go into shops.
Say I got the whole ammount first time (or convince them of the mistake and get the rest back) I would have aprox £1200 after tax, the £300 they took out was more per £ than my normal monthly wage with overtime, that would not go to HMV on a DVD splurge, much as I would like to, nope savings account, once that big hole looks smaller, then I can start looking at big ticket items again like a new PC and a HDTV to go with it.