Ever wonder why the Government won't just print more money?

[syorker82]

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?

[TimCookAppleCEO]

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. 

[demaina]

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.

[alina6]

Printing more money leads to inflation. The more dollars there are the more things start to cost.

[micky606]

  Hi!!! The goverment is suppose to have the gold to back up th paper money, I'm not really sure they really do

[kountrypeach80]

i agree print more money

[katie322]

Good question....   I know it has something to do with gold... LOL! I'm going to Google it cause now I want to know why...

[dkanofsky]

Putting more money into circulation inevitably decreases the value of that currency, caused by inflation.   

[Daynamariee1981]

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!

[sgluckadoo]

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.

[debidoo]

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.

[smithjcsdfw]

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.

[syorker82]

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.   

[hawkeye3210]

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.

[sgluckadoo]

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.