In this work we will address the problem of printing too much money. For non-experts this would not seem like a problem at all. But the truth is that having too much money is just as big a problem as having too little. Economists have been studying this phenomenon for some time and have discovered that the issue is more complicated than it might seem at first glance. There have been cases where nations have resorted to printing money to save their economy, but the results have not been even close to what they intended. There is much more to this case than simple examples, but by analyzing these specific scenarios we will be able to shed light on the general concept. We will also try to achieve this through the use of information regarding this topic and raw data. We hope that after reading this article, you will be equipped with the knowledge necessary to understand and think critically about this issue. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay Before money, the method by which people exchanged goods and services with each other was called barter. It consisted of exchanging one good for another good. It was a simple system but had many limitations that prevented it from remaining the system of choice when it came to trading. This is where money comes in. It is believed to have been first used in China during the Song Dynasty, hoping to offer the convenience that barter could not provide. The advantage of money is that it can serve as a medium of exchange, a store of value, and a unit of account. Money can take many forms, but the most common money that we all know is called fiat money. Fiat money is an object that has no value in itself, but gets its value, usually from the government. In order for money to be used, however, it must be manufactured in some way. This process, however, is a little more complicated than simply printing paper with a number on it, as we'll see shortly. Now that we've covered the basics of money, let's look at things in a little more detail. There are two ways in which money is manufactured. They have legal tender (narrow currency or monetary base) and bank money (broad currency). Legal tender is made up of all coins and banknotes circulating in the nation. It is the currency that has been standardized by the government and hence the name “legal tender”. This is referred to as M0 (varies by country). This type of money makes up only 3% of the total amount of money. Bank money (also known as demand deposits or M1/M2), on the other hand, makes up the remaining 97% of the total amount of money in the nation. . However, this is not physical money that you can touch and hold in your hand but it is electronic money that is created through loans in second-tier banks. To control the amount of money created by banks, a country's Central Bank uses various monetary policies. Now that we have a more detailed understanding of money creation, we are one step closer to understanding the risks of printing as well. a lot of money. The next phenomenon we need to understand is called inflation. Inflation can be defined as an increase in the price of goods and services over a period of time. When prices rise, purchasing power decreases and therefore the value of money decreases. To measure a country's inflation, the inflation rate is used. Inflation can bring benefits as well as harm to the economy. Some benefits of inflation are less savings and investments, scarcity of goods, etc. However, it could also have positive effects such as positive interest rates, reduced unemployment, etc. With inflation out of the way, we areready to get to the heart of the problem. the question: why printing too much money is bad for the economy. The money is used to purchase products; it is equivalent to their value, in other words. This does not mean, however, that the increase in the quantity of money will be reflected in an increase in the number of products. Money will be abundant while the number of goods will remain the same. In theory, we have a lot of money and therefore can afford to buy almost anything. This defeats the purpose of money, being a “luxury” that you can exchange. To return to "equilibrium" prices will also have to rise, causing inflation. So the situation has not only not improved, but has actually worsened. The quantity of money increased, the number of goods did not, prices increased and the value of money decreased. This last consequence is the most "fatal" for the economy because it is very difficult to go back. The worst part is that this is a self-reinforcing cycle; once started, it is very difficult to stop and restore the currency's previous value. The connection between money supply and price level can be shown using this formula: MV=PY where M = Money supply, V = Money velocity, P = Price level, Y = national income. If we take V and Y constant, then an increase in M ​​will cause an increase in P. Before World War I, the German mark had an exchange rate with the US dollar of 4.2 to one. In 1923 the rate was 4.2 trillion to one. During the First World War, the German government decided to print money to invest in the military sector. They planned to pay off debts by demanding payment from the defeated allies. But things didn't go as planned when Germany lost the war and found itself with even more debt under the Treaty of Versailles. Inflation grew slowly at first, then rose from just 2,000 marks in 1922 to more than one million in a later period. time span of a few months. The Germans lived in miserable conditions, while the government continually printed worthless money. To collect payments, workers had to use bags, suitcases and even wheelbarrows to transport the money. Some people even decided to use barter as a method of exchange. Hyperinflation was finally brought to an end in 1923 when the government switched to the new currency, the rentenmark. They decided to maintain the old exchange rate of 4.2 rent marks for one US dollar. Although the German people managed to overcome hyperinflation, its blow was long-lasting and sustained radicalism for years to come. I've always wondered why we didn't just print more money. This way people could afford more goods and services and therefore be happier. But as I learned more about the topic, I understood the underlying problems with printing more money. If the government decided to print money, for whatever reason, it would only affect the money supply. With their newly acquired money, people would like to buy everything they can get their hands on. This would push the market to produce more goods and services. In most cases this is not feasible, so companies and manufacturers will be left with the only option to increase prices. Everything from raw materials, to wages, to machinery costs to the finished product itself, will be more expensive. What we got was more money, higher prices, and none of the goods and services we thought we almost had. So instead of making things better, the government has made them even worse. I think the key is to have a constant money supply, only with small fluctuations when needed. The problem is not printing money, but printing TOO much money. This is one of those cases where it seems too good to.