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Why a country can't print money as much as they want?

 
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Hi Fellas,
Why the heck that a poor countries can not print money as much as they want? And they can exchange them with other foreign countries. Huh? What is wrong there? Any idea about it?
 
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Because money would become worthless if you just printed unlimited amounts of it.

But sometimes it happens, for reasons that I don't understand. This week the European Central Bank has started printing € 1.100.000.000.000 to "stimulate the economy". At the moment you already get almost no interest when you have money on your savings account here (less than 1%) and this will only make the interest that banks give you even lower - banks don't want to borrow your money and pay you interest if they can just get new money for free.
 
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Because that would lead to hyperinflation, as it did in the Weimar Republic in the 1920s.
 
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The Bank of England 'printed' a whole bunch of new money a few years ago and they called it Quantitative Easing. I still don't get how it works, but they have a video snip on their site that tries to explain it: Bank of England: Quantitative Easing
 
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chris webster wrote:Because that would lead to hyperinflation, as it did in the Weimar Republic in the 1920s.



This is actually an interesting history. The inflation was so vast that paper money became almost useless - almost, because people were using the bills for other purposes as ie. wallpapers or for cheap house warming. Over time people started doing barter trade.



100,000,000,000,000 Mark note from 1924


Burning money to warm home:


Money wallpapers:
 
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Jude Niroshan wrote:
Why the heck that a poor countries can not print money as much as they want? And they can exchange them with other foreign countries. Huh? What is wrong there? Any idea about it?



To directly answer the question ... to exchange money, it is done on the FX market. And the exchange rate is calculated by a combination of supply and demand, along with a lot of other factors determined by financial institutions (who supposed are experts). Printing a lot of money isn't going to make a country "rich". The market will adjust for it -- and likely over adjust for it, as it may be an indication of something being wrong.

It also may make it very difficult to do international business, as the money is unstable. This will kill international investment, which of course, will lead to job lost, along with a lot of other things (such as lower the demand on the FX market) that will make the poor country even poorer.

Henry
 
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Adam Scheller wrote:[...people were using the bills for other purposes as ie. wallpapers or for cheap house warming.


Based on my experience, I think that's how most defence projects work as well. it's the only way to explain how much money they get through!
 
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Jude Niroshan wrote:Why the heck that a poor countries can not print money as much as they want? And they can exchange them with other foreign countries. Huh? What is wrong there? Any idea about it?



Here is a good modern example of massive money creation: http://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe

 
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Henry, the best example of what you have mentioned is the exchange between US dollar and yen. Japan is well known for helping keeping the exchange rates on the levels that make their export profitable for other countries.
 
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Adam Scheller wrote: . . . Here is a good modern example of massive money creation . . .

Does the mosquito on the notes represent bleeding the country dry?
 
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Adam Scheller wrote:Henry, the best example of what you have mentioned is the exchange between US dollar and yen. Japan is well known for helping keeping the exchange rates on the levels that make their export profitable for other countries.



Yeah, I accidentally deleted that post (not completely sure how though) ... so here is the excerpt from that post..

Also note that inflation isn't always a bad thing. And having a high exchange rate isn't always a good thing either.

For example, the exchange rate between the US Dollar and the Euro has gotten almost equal. This is, of course, likely caused by all the Austerity stuff that is going on in Europe. This is great for shopping in Europe. My US dollars can buy a lot more. Stuff outside of the US is much cheaper, and hence, US companies that does international trade have lower costs for goods.

On the other hand, exports will suffer -- US goods are now much more expensive. It is still the same price in terms of US dollars, but it is now much more expensive to get the dollars to purchase the goods.



Henry
 
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Now i see... Incident that happened from 2007 - 2008 in Zimbabwe. Lesson to learn for other countries. So, does this mean that US government is actually controlling the money spread, all over the world?
 
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Jude Niroshan wrote: . . . does this mean that US government is actually controlling the money spread, all over the world?

Highly unlikely. World economics are so complex that nobody has any proper control over it. A Government can try to control money supply in its own country, but even that does not always work.
 
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This is pretty good.
http://en.wikipedia.org/wiki/International_monetary_systems
 
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Campbell Ritchie wrote:

Jude Niroshan wrote: . . . does this mean that US government is actually controlling the money spread, all over the world?

Highly unlikely. World economics are so complex that nobody has any proper control over it. A Government can try to control money supply in its own country, but even that does not always work.



I would be interested to know why the OP thinks that it is the United States dollar is the main international monetary type. How about the Euro? which is used in most of the countries in Europe? You would think that that currency is bigger.

Henry
 
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The dollar used to be. But you have to go back to the 60s and 70s to remember when it was.
 
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