why not print more money

‘WHY NOT JUST PRINT MORE MONEY’

In today’s world money is deemed as one of the most important part of our life . As we know every person need products and services in their life , so the money serves as the means to buy products ,services ,comfort goods that facilitate our life.

Money or(pelf) let us live a comfortable, reasonable and self-sufficient life so that we can buy our daily necassities and take care of people around us.

In the nutshell ,we can say that as long as we are living money fulfill our basic needs ,giving us comfort and luxury.

· What is money?

A money is any object that is generally accepted as a payment of “goods and services” , repayment of debts in a given country. The main function of money is distinguished as a medium of exchange , a unit of account ,a store of value; any kind of object that fulfill all these function serves as a money.

References -:

www.wiki.answers.com

Www. wikipedia.com

Some important aspects of money

· Why Money have value

Money doesn't have any inherent value. It is simply pieces of paper or numbers in a ledger. A car has value because it can help you get where you need to go. Water has a value because it has a use; if you don’t drink enough of it you will die. Unless you enjoy looking at pictures of deceased national heroes, money has no more use than any other piece of paper.

It didn't always work this way. In the past money was in the form of coins, generally composed of precious metals such as gold and silver. The value of the coins was roughly based on the value of the metals they contained, because you could always melt the coins down and use the metal for other purposes. Until a few decades ago paper money in different countries was based on the gold standard or silver standard or some combination of the two. This meant that you could take some paper money to the government, who would exchange it for some gold or some silver based on an exchange rate set by the government.

· What is fiat money?

Many governments now issue what is known as fiat currency, which means the money is accepted within the borders of that country . If you want to do business in the United States for instance, you must accept the dollar as payment for "all debts, public and private." You can accept other currencies as well, but you cannot refuse to be paid in dollars.

· How Money is issued?

Money is based on the gold standard and silver standard ,and combination of these two .To issue money, the government prints it and distributes it through its banking system. The federal reserve, or central bank, basically lends the government money and charges an interest rate for the service.

A central bank, reserve bank, or monetary authority is a banking institution granted the exclusive privilege to lend a government its currency. Like a normal commercial bank, a central bank charges interest on the loans made to borrowers.

· What is inflation?

Inflation is the process in which money loses it's value. This happens for various reasons. One of which is the a government prints too much money, usually to pay off debts very quickly without regards to the future.

EFFECTS OF MORE SUPPLY OF MONEY

In short prices will go up after a drastic increase in the money supply because:

1) If people have more money, they’ll divert some of that money to spending. Retailers will be forced to raise prices, or run out of product.

2) Retailers who run out of product will try to replenish it. Producers face the same dilemma of retailers that they will either have to raise prices, or face shortages because they do not have the capacity to create extra product and they cannot find labor at rates which are low enough to justify the extra production.

· What would be the aftermath of printing more money?

If we print more money, prices will rise such that we’re no better off than we were before. To see why, we’ll suppose this isn’t true, and that prices will not increase much when we drastically increase the money supply. Consider the case of the United States. Let’s suppose the United States decides to increase the money supply by mailing every man, woman, and child an envelope full of money. What would people do with that money? Some of that money will be saved, some might go toward paying off debt like mortgages and credit cards, but most of it will be spent.

If I would have more money , I would first purchase playstation for myself ,not even I folks of my age would do same , and sony would run out of his product because there is more demand for product ; to compensate that what would company do they would the “worth” of product and situation again would be akin as earlier it was. so we would have massive inflation, and our money is devalued.

Similarly , Wages are essentially prices; an hourly wage is the price a person charges for an hour of labor. It will be impossible for hourly wages to stay at their current levels. Some of the added labor may come through employees working overtime. This clearly has added costs, and workers are not likely to be as productive if they’re working twelve hours a day than if they’re working 8. So company need to hire more workers for more production this in turn again causes more inflation and reduces money value.

So , we can say that inflation is caused by four factors. These four factors are:

· The supply of money goes up.

· The supply of goods goes down.

· Demand for money goes down.

· Demand for goods goes up

Conclusion

This gets us to why drastically increasing the money supply on the surface seems like a good idea. When we say we’d like more money, what we’re really saying is we’d like more wealth. The problem is if we all have more money,collectively we’re not going to be any more wealthy. Increasing the amount of money does nothing to increasing the amount of wealth or more plainly the amount of stuff in the world. Since the same number of people are chasing the same amount of stuff, we cannot on average be wealthier than we were before.

SUBMITTED TO-: GURUDEEPAK SIR

SUBMITTED BY-: VIKAS CHOUHAN