Sometimes it seems that solving financial problems is quite simple at the state level. You just need to turn on the printing press and print a sufficient number of bills. But why can't the government print a lot of money and give it to people? Is it the greed of the rulers, or are there other reasons? The word “inflation” immediately comes to mind, that is, an increase in the price level for absolutely everything, because money in this case actually loses its real value.
Inflation
If a product is purchased and a certain amount of money is given for it, then an increase in the number of notes will not lead to an increase in the number of goods. As a result, a unit of goods will account for more money, the price rises and inflation begins.
However, there is another side to inflation, and in such cases the question really becomes: "Why can not the state print a lot of money?" If the country is experiencing a period of recession with a decrease in production capacity and an increase in the number of unemployed, then a small demand will lead to the opposite situation. Enterprises will increase their output, the number of unemployed will decrease. In such periods, inflation is practically not noticeable and a soft monetary policy makes it possible to smooth out the economic recession in the country.
What is money, and when did it appear?
Why can't the state print a lot of money? First of all, money is also a product, which is a certain equivalent to the cost of services and goods. But money can fulfill its function only with the direct participation of people who determine the value of these goods and services.
Money appeared at the moment when surplus goods began to appear in people. At first, their function was performed by goods in high demand, such as salt. Then, after a person learned to process metals, coins appeared.
It is believed that as early as the 7th-7th centuries BC, money already existed in China. The term "money" itself appeared in ancient Rome, where a mint was opened during the reign of Caesar.
Paper money first appeared in China, too, but much later, around the 9th century AD.
Today, money is a debt obligation that is issued to the population by the state. In turn, the organization that prints money takes a pledge from the state of precious metals as collateral for debt obligations.
Snap to gold
There is a mistaken opinion regarding the question of why the state cannot print a lot of money so that everyone has enough, and it consists in the fact that the amount of money supposedly should not exceed the amount of gold reserves. In fact, not a single currency in the world is backed up by gold reserves. Although the gold reserves more than once became the cause of the economic crisis. This happened during the Great Depression (1929-1939). Then an interesting situation occurred: a limited supply of gold led to a shortage of money and as a result of deflation, most enterprises went bankrupt, and people simply lost their jobs.
And in Spain in the XVI century the opposite situation occurred. In those years, the country was almost “littered” with gold and silver, as Spanish researchers actively discovered new lands and robbed the local population (Peru, Mexico). As a result, prices in the country rose almost 4 times, because the money supply was much more than goods.
Modern monetary system
Why can't the state print a lot of money? Perhaps this is a financial pyramid? In fact, the modern economy does not involve reinforcing the money supply with precious metals; this practice is a thing of the past.
An example is the United States. At some point in time, the Central Bank transferred the right to print money in private hands. And now the Federal Reserve is simply lending printed money to the US government. Today, the state has external debt of more than $ 14 trillion, that is, every US citizen already owes $ 54 thousand. It is clear that talking about his return is not even worth it. And we can say that there are all the signs of a financial pyramid. But the most important thing is not even this, but that the dollar is a world currency. Therefore, if the dollar collapses, it will undermine the economies of many countries.
Or maybe there are not enough goods?
Why can't the government print a lot of money to get enough? Maybe there are not enough goods and services in the country. There is logic here. However, until people began to use money, it was quite difficult to exchange goods for those that are needed by a particular buyer. That is, one needs apples, the other pears, the third meat and only the fourth also need apples and so on. For a deal to happen, it is necessary that all these people gather in one place and exchange the goods they need, but this happens very rarely. Therefore, money performs its full function, being a reflection of the value of the goods and a means of simplifying exchange operations.
Naturally, if the quantity of goods increases, then there will be more money. But in practice, not everything is so simple. After all, a hundred rubles can take part in exchange transactions more than once. In addition, the rate of turnover of the currency is very important. Therefore, even if there are more goods and services, there will still not be more money.
Or maybe the IMF is to blame?
Why can't the state print a lot of money? Perhaps the IMF’s charter provides for restrictions? By the way, Russia is a member of this organization. Indeed, once such a restriction existed, but today this item is excluded from the charter of the fund. Now each state independently determines the exchange rate regime. However, some countries still adhere to the currency committee regime. For example, the Hong Kong dollar is directly pegged to the US dollar.
Or maybe all the money in the financial sector?
Why can't the government print a lot of money and give it away? Maybe they all "settle" in the banking system, but they never reach people?
Indeed, the additional issue is hardly noticeable for an ordinary citizen or even for a large enterprise. Money goes to the banking sector, which, in turn, increases lending to the real sector. As a result, increased liquidity in the banking sector leads to cheaper loans and, accordingly, increased demand for services and goods, and turnover is growing.
Now we will spend everything, and our children will repay debts
Some people are sure that if you now provide a lot of currency for use, then these debts will have to be given to their children. That is why the state cannot print a lot of money. In fact, money and debt are two completely different things. If you take a glass of sugar from a neighbor and pledge to return it the next day, then it is a debt, but not money. And if we buy a glass of sugar in the store, paying money, then no debt arises. As a result, it turns out that no debt appears for the purchase in the store and the money does not disappear anywhere, they simply transfer to another "owner". This means that it is impossible to spend all the money that is in circulation. But this happens at the household level.
If the country takes a loan in order to pay its current expenses, then the situation is already different. Yes, indeed, in twenty years the budgetary burden of debt obligations can fall on the shoulders of children in the form of increased taxes. But this situation is not directly related to money, but to the monetary policy of a particular state.