Understanding how economies around the world work is important — not only because they impact you but because they impact everyone. There are many philosophies behind how to best run and grow an economy, but at the same time, there are some pretty universally-accepted practices that most agree should never be adopted. One such bad practice would be the assumption that printing more money will fix the economy and promote growth. Printing more money is bad for many reasons, but the main one is the more of something you have, the less overall each of that something is worth.
One of the main thoughts is that it is possible to print more money in order to pay down the national debt or to decrease the amount that has to be borrowed. The only real way to accomplish both of those things is to reduce spending, slow and then cut borrowing and raise taxes, so the excess revenue can be used to pay any debt.
In short, printing more money devalues the currency of that country. Printing more money at first thought might be seen to give more money to consumers for them to buy more. But giving more money to consumers through dumping more currency into circulation actually just drives up the price of items. If you wish to lower the cost of an item, follow the rules of supply and demand: the more demand there is for a product, the higher the price and vice versa.
An example of where printing more money went wrong was Germany after World War I, where their currency was so over inflated and worthless it was used as wallpaper. Germany was burdened with an immense amount of debt after the war, so they just printed more money to pay for it. In turn, you had to bring a wheelbarrow full of money to buy a loaf of bread.
When inflation goes from bad to worse, it is called hyperinflation. To understand what that can amount to, imagine your one dollar bill being a one hundred trillion dollar bill. Printing more money is important to replace the damaged bills and coins every year, but over doing it is almost always bad.
Printing more and more money is the reason why the minimum living wage, cost of goods and cost of services keep rising. The inflation caused by this excessive printing is why a dollar you earn today is worth more than one you earn tomorrow. If inflation was under control, gas and every other product would cost less, you wouldn’t have to rely so much on a 401k and everyone would be in a more economically stable environment.
If there is anything to take away from this article, it is that printing more money just increases the amount of money in circulation; it does not impact economic output in a positive way. More money in circulation does not lower costs; lower demand does, and when you have more money being printed, inflation will rise as your buying power shrinks.
If the goal in mind is to get rid of debt, specifically the national debt, then spending and borrowing has to be cut, and taxes mildly increased on some of the population. None of that is what anyone wants to hear, particularly because it seems like a negative. Long-term issues mostly require long-term solutions and will contain complexity. Something like printing more money may be simple, but it won’t work. We should never be scared of complexity as the world and its problems are filled with it.
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Evan Brooks is a third-year Business Management major with minors in Economics and Civic and Professional Leadership. EB916132@wcupa.edu