Demi’s Basic Business Questions: Why Can’t We Just Print More Money?
Money makes the world go round. The converse is also true. Lack of money can make the world stop. This is the reality for many – their worlds are at a standstill because of a lack of money. Because of poverty.
Ending poverty is one of the United Nations’ Sustainable Development Goals to be achieved by 2030. According to the UN, 700 million people live in extreme poverty. Sometimes, grave situations like these cause business newbies like myself to ask the question, “Why can’t we just print more money?”. Unfortunately the solution is not that simple.
Printing more money may be a possible quick fix, but it is only sustainable temporarily. Printing more money can make poor countries even poorer in the long run.
Money is worth the value we give it. If people didn’t believe money to be valuable and accept it in exchange for goods and services, it would simply be like another piece of paper.
Inflation refers to a general increase in the price level of goods and services. This can be caused by increased money in circulation or by people’s incomes rising. The more money readily available, the easier it is to buy things and the more people will want to buy things. Businesses are profit driven and will increase their prices as people can now afford to pay more while not increasing their supply . This is the law of demand – as price increases, demand decreases. More money does not mean less problems, more money simply translates to higher prices.
We are not the only ones who have flirted with this idea of printing more money in order to increase the standard of living. In order to fulfill the payment of reparations after the war that had made them poor, Germany in 1922 printed money. On the surface it seemed like an excellent idea. In reality, however, they could not have been more wrong. This led to hyper inflation, meaning prices were so inconceivably high that money became next to worthless. It was not uncommon for people to use their money to burn fires.
Poverty is a pressing issue and it is imperative that we continue to generate solutions on how to tackle it. Unfortunately, money printing is not the one for us today.
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Yours in Learning,