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Discussion Boards => Off-Topic => Topic started by: syorker82 on January 03, 2013, 04:48:31 pm
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There is so much in the media about the government paying their bills. Aren't they the ones that print the money? Why won't they just print more of the stuff???? Or do you have the answer?
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This is taken from "http://web.mit.edu/krugman/www/deflator.html"
True, a country committed to a fixed exchange rate cannot freely print money even if it is faced with deflation; that is why deflation in Hong Kong or Brazil are not particularly troubling from a theoretical (as opposed to practical) point of view. But large economies with freely floating exchange rates - like Japan, or euroland, or the United States - are free to expand the money supply as much as they like. So they should find deflation easy to prevent.
But it has become clear from Japan's experience that it isn't that easy after all. Why?
2. The liquidity trap
According to the textbooks, the aggregate demand curve derives its slope from the impact of the price level on the real money supply. The standard linkage runs like this: A lower price level leads to a higher level of M/P, which leads to a lower interest rate, which leads to higher investment and hence to greater aggregate spending. Since the linkage runs through M/P, then, the curve can always be shifted up simply by increasing M. (To forestall any confusion, think of M as the monetary base rather than some broader aggregate). And since it is easy to increase M, it is easy to shift AD up.
But suppose that some link in the chain is broken - suppose, in particular, that beyond some point an increase in M/P doesn't lead to higher spending. The most likely reason this would happen is that the interest rate is already near zero, and hence cannot be driven any lower. Then it is still true that an increase in M shifts the AD curve up - but it may not shift it to the right.
Apparently, printing money has been tried with floating currencies, and has failed.
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Mostly cause the only reason our paper and coin money has any value is cause there is gold behind it somewhere. It's much easier carrying around a paper bill than a gold brick. I believe that's the big issue with counterfeiting, but I don't know for sure.
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Printing more money leads to inflation. The more dollars there are the more things start to cost.
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;D Hi!!! The goverment is suppose to have the gold to back up th paper money, I'm not really sure they really do ???
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i agree print more money
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Good question.... :dontknow: I know it has something to do with gold... LOL! I'm going to Google it cause now I want to know why... :thumbsup:
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Putting more money into circulation inevitably decreases the value of that currency, caused by inflation. :BangHead: :BangHead: :BangHead:
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Good Question! Thanks for the lengthy reply above, I now know the answer. I have seriously been wondering this for so long, it makes so much sense now!
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Money is only as good as the paper it is printed on. It is the gold that the treasury has that backs the paper that makes it worth anything. Printing more money doesnt create more gold to back it.
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You pose an interesting question. Why don't they really? They spend what they want to spend when they get ready to spend it so I think they already do that but only if its for them and suits them. They don't do it for the little guy who is out there without a job or food or maybe even a roof over their head. And forgive my ignorance but all that economics stuff is just a game, sorry I think its the stuff you step in if you walk through a cow field barefoot lol.
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As I understand it we are no longer on a gold standard so that is not part of the equation for printing money. The value comes from what the treasury department assigns to the amount of money it wants in circulation decided by the various members of the federal reserve.
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Thank you all so much for your input!!!! You all have given great insight to this but the BIG WISH is that maybe one day the government would. :wave:
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Money is only as good as the paper it is printed on. It is the gold that the treasury has that backs the paper that makes it worth anything. Printing more money doesnt create more gold to back it.
Paper money is no longer backed by gold. The gold standard was abandoned back in 1971.
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Money is only as good as the paper it is printed on. It is the gold that the treasury has that backs the paper that makes it worth anything. Printing more money doesnt create more gold to back it.
Paper money is no longer backed by gold. The gold standard was abandoned back in 1971.
You are correct of course, but I still think of it that way. I think they HAD to abandon the gold standard bc they didnt have enough gold to back the printed paper! I know it is actually a complex formula related to a country's imports and exports, but my brain just can't wrap itself around that.
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This is a very good question. I look forward to reading more about this. I think it is because there is probably nothing to back up that paper money. I am just guessing.
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I too had heard the government doesn't print more money due to the inflation issues. Kudos to the other members for posting the information to make it more clear, but I wish we could print more money too. I'm sure every country would if they could, but then that wouldn't work as due to the aforementioned inflation. And no one wants to be ruined by inflation. Just remember post World War II Germany and Zimbabwe of today. America may not be where it was financially in years past, but I'm thankful we are in the midst of that kind of inflation. I hope Zimbabwe recovers though.
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It would be nice if they could just print more.
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like the others said inflation would happen. our GDP
(gross domestic product) has a bigger determining factor in the value of our currency. basically if we as a country aren't doing well, then our currency value decreases.
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Printing money doesn't create value, and value is what is actually traded in the marketplace. Money is suppose to represent value, and value can only be truly created through a mix of cleverness and effort. Value is what determines demand (what is valuable for people) and thus we someone can supply that demand (which is where we get production).
Printing money doesn't create value.
Value creates production.
Thus printing money doesn't create production.
And this is fundamentally why we shouldn't print money, because it doesn't produce anything. You could argue money itself has demand since it is suppose to represent value and so it actually has value, but like all things this demand is limited. Sure, for now everyone wants money. But once everyone in the United States owns a million dollars will they see the same value in just one dollar as they did when they owned only a thousand? Unlike other things, the demand for money could easily be met and everyone could have all the money they want. The paradox here is that once we fulfill this need then the money becomes useless because its lots its ability to represent value. Its value is directly propositional to its supply.
Say someone wants bread so they won't starve. Each piece of bread is seen as precious and so it is well protected. If they where suddenly handed 100 loaves of bread, they would eat till they get full and wouldn't care if someone comes up to them and takes just one slice. Their perception of value for that one slice of bread changed with availability. Inflation results from this change. In order to get the same value for something that they previously traded for 3 slices of bread, they must now get 6 slices or else it isn't worth it to them to trade at all since people are just giving them bread. If it rained bread from the sky, they probably wouldn't bother to trade for it at all. This is called hyperinflaton where what was previously traded with becomes useless.
In this case it would actually be good, since no one would have to go hungry. But in reality, the money we use has very little value since it cannot be eaten.
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I always thought you have to back the paper with something, usually gold. In the past, the first paper money or notes, where issued by banks, you would deposit your precious metals and they will issue you a paper money, with the "face value" of such belongings. Instead of you carrying around all your precious belongings, you would then be carrying the paper money. Therefore, all paper money was backed by real valued tangibles. Same philosophy still applies.
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There is so much in the media about the government paying their bills. Aren't they the ones that print the money? Why won't they just print more of the stuff???? Or do you have the answer?
That's a very naive view of how it all works. They CAN'T just "print more of the stuff"; money represents work, and if no one worked for those dollars, they are meaningless. There would be consequences more complicated than you can imagine.
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Inflation
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they need to STOP printing "so much money".
That's how we got INTO this MESS.
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"The Web OF Debt" is a very good book I recently read.
If you really want clear answers and want to understand what has been happening, I highly recommend this for you.
We all would like to know the truth.
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Printing more money leads to inflation. The more dollars there are the more things start to cost.
Right....we can't just print more money or it makes everything worth less. If printing money was the solution, the problem would be fixed now!
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I always wondered the same thing we make money why can't we just print more
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I thought that's what they did for the "bailout".... didn't bail anybody I know out.
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When you don't have the backing for the money you want to print what good is it. They just need to quit spending so much. When will Obama admit that you can't spend your way out of debt. Man if we kept spending when we didn't have the money guess where we would be.
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Printing more money leads to inflation. The more dollars there are the more things start to cost.
Right....we can't just print more money or it makes everything worth less. If printing money was the solution, the problem would be fixed now!
Technically, everyone else will still be worth the same. You're still in the mindset that the value of goods is solely based on its monetary value. Instead, its the money itself becoming worth less in relation to things of real use to human beings.
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They've been printing money at record numbers over the last few years. Which is why the value of the dollar is lower than other countries we use to be ahead of before.