Why can't we print more money?

[Mytical]

Ok A) That person had a million, it just didn't appear from nowhere. Instead of them having it, now you have it. B) A million is a drop in the ocean. It seems like a lot to US, but to the USA economy it is not even equal to 1c. HOWEVER...

Lets take that million to the pumps (gas). Line up enough vehicles and start pumping gas until that million is gone (going to different gas stations as each ran out if needed). You don't think that would cause prices to raise (at least temporarily)? Supply and demand. Buy up enough of anything, the price raises. Heck that is evident with the stock market. No demand = prices drop. Demand = prices raise.

So yeah a couple of billion would not make much of a wave (or not for long), but then again a couple of billion wouldn't really make a dent in the deficit either. Trillions? Well..again you spend trillions the supply drops like a rock..and that causes prices to raise.

Now true, unemployment would drop..as more being bought means more people with jobs..but as prices rose it would be a moot point.

[Andara Bledin]

The basic gist is this:

You add money, and things go up for a short time and then they go back down, below where they started, and then they slowly equalize until they're right back where they were at the beginning.

The initial rise is great for whoever benefits from it, but the drop afterwards hits everybody, including them, and does far more damage than the rise at the start could ever counter. It's a net loss by the time everything settles.

^-.-^

[Jetfire]

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.
^-.-^

I was thinking more along the lines of secretly printing a billion dollars and never doing anything with it; locking it in a vault, not telling anyone it exists, not letting it get out into the wild. At most such a printing would have a very tiny blip from the cost of printing the bills in the first place.

Were it to get out into the wild, all bets are off of course. But a large sum of money that only a very few people know exist and won't let out, won't have any effect on the economy.

[Boozy]

But a large sum of money that only a very few people know exist and won't let out, won't have any effect on the economy.

No, of course not. Any printed sum of money not in circulation has no effect on the economy. It needn't be secretive at all.

The US Mint does this, sometimes -- print coins in advance and wait for the Fed to buy them. Until the Fed requests them, the coins aren't in circulation and have no effect on the economy. It isn't a secret that these coins exist.

[DrFaroohk]

lol and then something else I've never really gotten. The supply and demand thing.

I get that if something is RARE, it might cost more...but sometimes it seems like "it's rare because we made it rare". Like, there's PLENTY of oil out there. There's no shortage of oil. But the people in charge of the oil are like "Nope, I'm only letting you have a little cup of it every day!"

To me, it seems like if you have something that sells really fast, you would have a lower profit on it because you are making your money from the volume of sales instead of overpricing the product.

Guess that's why I'm not a banker.

[lordlundar]

Essentially, there's no way for the new money to be put into circulation and it still be kept secret. The more the money is circulated, the more people come across it and the less likely it's going to remain hidden. Questions get asked, answers get questioned and eventually it will get out. It's much the same reason why conspiracy theories fall apart. It's not possible to have conspiracies that large with no one finding out.

Then once the information gets leaked, the dollar value drops. It was actually a failure to understand that basic level of economics which destroyed Germany's economy after WW1. They kept printing money so much to try to kickstart their economy that they suffered from hyperinflation. To prevent that from happening especially now that the gold standard no longer exists, federal economies are extremely tightly monitored.

[Andara Bledin]

To me, it seems like if you have something that sells really fast, you would have a lower profit on it because you are making your money from the volume of sales instead of overpricing the product.

It depends on the demand.

They don't release more because doing so would destroy the price, then cause a shortage which would drive up the price. It would be very similar to dropping a ton of fresh money into the economy.

Look at the sport card market. Once upon a time, some cards were worth money. Then the speculators got involved and the card makers suddenly made a ton more cards than they had made originally. So the collectible value went out the window because there was a glut, and the collectors stopped collecting and since the value disappeared, the speculators left, too, meaning that the card makers had a massive surplus of cards whose value had tanked, so instead of making a ton of money, they lost a ton of money, and 30 years later, the entire market still hasn't recovered. And people didn't really learn a thing from it, because they did the same thing in the comic book industry less than a decade later.

^-.-^

[Rapscallion]

I think the really fundamental concept here is ratios.

People don't look at how much someone earns in monetary value - they look at it in relation to their own wealth or in relation to the cost of living. Let's face it, thirty years back everyone was on half the wage they are now (figures pulled out of a hat, but the concept works). A school janitor now may make what a teacher made back then (spurious example), but it's still half.

Likeways, print more money and make everyone twice as rich as they are now - they're still going to be the same in ratio.

Give a million dollars to everyone in the US and that's a flat rate that would skew ratios - single diigit millionaire's would have reason to complain, the poorer people would probably end up putting their newfound wealth into the pockets of those running industry (usually the single digit millionaires and the extremely wealthy), which is why those tax refunds to 'stimulate the economy' would have only stimulated the pockets of the wealthy in the long term. Sure, some employment will have come from it, and a better standard of living for those getting the money and spending it.

However, the problem for me comes in that I tend towards Darwinism, but also social justice. Part of me wants the wealth shared better, but the other part of me reckons that those who actually do create wealth should benefit for it. The system in the US is badly out of whack, with the super-rich going so far beyond the income levels of the average person it's unreal.

Getting onto a different argument, though.

Rapscallion

[Seshat]

Money is just tokens. Markers.

An economy is actually this:

Joe makes chairs.
Jane makes cloth.
Bill makes food.
Anne cuts hair.

Joe needs his hair cut, but Anne doesn't need a chair. Anne does, however, need cloth. So Joe gives Anne some tokens in exchange for the haircut, which she then gives to Jane in exchange for cloth.

Jane later uses those tokens to buy food from Bill, who later uses them to buy a chair from Joe.

And the tokens have gone the whole loop back to Joe.


Now, if we want to add more wealth to this little economy, Joe makes another chair, Jane makes more cloth, Bill makes more food, and Anne provides more haircutting services.

If we make them all more efficient at this - so producing more 'real wealth' without adding more tokens - the tokens increase in value because each token now represents a portion of a bigger 'real wealth' pie.


However, if we leave these four at the same level of efficiency - the same real wealth - but add more tokens, each token now represents a smaller portion of the pie. And thus, each token decreases in value.
That is what we call inflation.


You can expand the little story to a whole village, populating the village with farmers and miners and blacksmiths and so on, and play with adding or removing tokens, and increasing or decreasing how much of each resource (or service - eg Anne the hairdresser) is produced per unit time.

A country's economy is the same thing on a vast scale.

The world economy is the same thing on a scale so huge experts in macroeconomics (the specialisation for well, country or world-size economics) have as much trouble with it as meteorologists have with weather.

[Seshat]

I'll add another factor to this little village scenario I've used to explain economics.

Loss of wealth.

Anne's service only adds wealth for a short time - the duration of the haircut. Similarly, a restaurant adds wealth while it's functioning, while people are having meals.

Services are a brief wealth, and to be continuing wealth, they must be continually operating.

Goods - chairs, cloth, foodstuffs - are a longer term wealth.

Ah, but food only lasts a short time, you say! CORRECT!

As soon as the food has gone rotten, its wealth is reduced. It can become a lesser product - compost - or it can become a non-product. Garbage.

Similarly, the cloth and the chairs are wealth only until they wear out.

This is another way an economy can collapse. It stops producing new real wealth (goods and services) at a rate equal to or greater than the rate at which it loses real wealth.

Money is just tokens. What matters is the STUFF - and the services. If you really want to help your country's economy become stronger, make stuff, or provide services.

A surprising number of countries actually survive and/or thrive because of volunteer work; even though that work is not paid and barely accounted for in the money sense. So yes, even volunteer work improves your country's real wealth.



I hope this little two-post summary has clarified things.

[Nekojin]

I'll offer a real-world example of supply and demand, rarity, and how subtly adding more to an economy can, and will, be noticed eventually.

I collect Disney pins. A few years back, there was a limited edition set that was sold - only 50 sets were ever sold by Disney Corp. As such, each of the pins has a substantially higher value (due to rarity) than the raw cost of manufacturing them, or even the retail price that Disney sold them at. So when one of the pins - one pin out of the set, not the whole set - showed up on eBay, the price went sky-high. It was RARE, and highly coveted (being the best pin in the set, and a popular character).

Then a few days after the auction ended, another one showed up, and again, the price went pretty high - but not as high as the first one. Some people noticed the oddity of two such rare pins showing up, and elected not to bid, causing the final price to be somewhat lower - but not everyone saw the first auction, so it still went fairly high.

Then a week later, another. And then another. And then another. People who were paying attention got very suspicious. People who had won the auctions carefully examined the pins they had, others compared the auction pictures to the official Disney images, and others still compared the sellers to the previous buyers.

By the time a year had gone by, over 200 of the same pin had shown up and been sold, from a supposed pool of only 50 in existence. And the community, as a whole, had noticed, and decided that the pins were fakes, forgeries. The truth lay somewhere in between - the pins were neither forgeries nor authentic. They were what the pin community now calls scrappers - pins that were manufactured in the same factory that Disney's authentic pins come from, but were rejected for one reason or another. In this case, the speculation is that the factory ran off a production run of 1000, Disney picked the best 50, and the rest were slated to be destroyed - but never were.

I own one of these scrappers, and gave another to a friend. Now that it's known that scrappers exist, the market value for pretty much any Disney pin is near zero, unless it's either factory-sealed in its original packaging, or comes with a certificate of authenticity.

[Ginger Tea]

The movie Sahara had a similar issue, the few minted gold coins of the confederate army were worth way more than the gold itself is valued at per gram, yet finding the iron clad and making the boxes of gold coins public knowledge would automatically devalue all known collections into basic gold value only.

[protege]

Supply and demand...is exactly why my MGB will never be worth as much as a Ferrari. 400-series Ferraris aside, of course But seriously, with those cars, over a half-million were made, and they have a huge survival rate. Go to any old car show, and you'll see lines of MGBs. The reason so many have survived, is the low cost of purchase, and a healthy parts supply. Just about everything I need, is available within 2 days. That includes the smallest bolt, up to entire body shells.

Not so with a Ferrari. There's a huge amount of labor that goes into one of those cars. Expensive when new, meant that few people could afford them...which meant that survival of some of the earlier models is pretty low. Throw in the parts (and servicing) costing as much as a new Corolla...and you can see why those cars go for sky-high prices today.

But, some of the MG stuff is getting a bit on the expensive side. Many of the prewar models, are going for insane prices now. Mainly, because again, few were built, and many were used for racing over the past 80 years. Even some of the parts for the more-common models are getting expensive. For example, if something happens to the grille (a recessed type, only fitted to 1970-71s) on my car...I'm SOL. Low demand means that they're not being made now...which has caused prices of surviving items to skyrocket! I've seen them on Ebay going for about a grand. That's about 5 times what they originally sold for

It's not just cars either. I've seen some hobby items do that as well. Back in 1990, Morning Sun came out with Penn Central Power. That book, although flawed, was the only one detailing Penn Central's locomotive roster. It has info on the different classes, the roster numbers, etc. But, because PC wasn't exactly "cool" then, the book sold out...and was never reprinted. At the time, that book sold for about $50, which is par for the course.

Then people who wanted to model Penn Central...started growing. By 2000, those books were going for silly rates. I've seen them on Ebay, for *multiple* times what they originally cost in '90. In fact, I was looking for one of those books--when I saw one (still wrapped in plastic, I might add!) for less than $100, I pounced on it. Even as the price was rising, Morning Sun saw no reason to reprint the book...or even do a new one. That changed in '98, when they released their first new PC book in 8 years. Those sold, and so did the "PC In Color" series which came out later. When those started selling, the prices on PC Power, started returning to more realistic levels.

"Rarity" is usually what causes prices to change. That's why it bugs me to see things on Ebay described as "Rare." Uh, if the item is "rare" why are there 52 of them listed today?

[wolfie]

"Rarity" is usually what causes prices to change. That's why it bugs me to see things on Ebay described as "Rare." Uh, if the item is "rare" why are there 52 of them listed today?

Exactly - the only thing which can be legitimately described as "Rare" but still be available in large quantities is steak.