Friday, December 26, 2008

Why the Government can't just print money


Why the Government can't just print and pump

When pumping money back into the market the Federal Reserve can’t just print this money, and hand it out to anyone. If everyone was given half a million dollars, this would still leave everyone in the same position as they were in before. If I am selling the greatest hits of The Vanilla Ice and everyone has an increase in disposable income, I'm going to charge more for those magical beats because everyone can afford to pay. This increase in disposable income, due the half million dollars everyone got, would result in prices increasing across the board to reflect the new devalued buying power of the dollar. Furthermore, foreign investors would vanish since their holdings of your currency all of a sudden do not have the buying power that they did yesterday. If no one wants to buy your country's currency the money supply increases even more because holders of your currency want to get rid of it in fear of its further devaluation. When supply is greater than demand the market value has to readjust so as to come down to meet the demand. Since the US$ has not been backed by gold since August 15, 1971, the dollar is only worth something because someone else values it, if no one wants dollars because they feel that it will be worth less tomorrow than today, the dollar will not have anyone willing to pay today's market value for it but the anticipated decreased future value, this leads to inflation which leads to hyper inflation which leads to fucked and having a President like Zimbabwe's Robert Mugabe and 100,000% annual inflation, where your currency has an expiration date on it not a serial number, and a loaf of bread that cost 10 million Z$ at 9am in the morning and cost 10.1 million Z$ at 6pm in the very same day. So if some self proclaimed academic tree hugging anti globalization gypsy says "why don't the government just print money instead of stealing our taxes," slap them, and silent dead stair, maybe some heavy breathing until they say, "I'll get my coat".
Below is a link that explains money creation in greater depth http://en.wikipedia.org/wiki/Monetary_policy_of_the_USA#Money_creation

1 comment:

Casey said...

wow I understood what you wrote lol. Very interesting I am going to tell everyone now why the government can't just giveaway money. I am so smart!